The Role Of Procurement In Corporate Survival

So is Procurement a strategic function, or just carrying out orders?

On the Spend Matters blog, Jason Busch is asking ‘what will it take to turn Detroit purchasing around’. He features an article by John Campi, former CPO at Chrysler, in which poor supplier relations are acknowledged – and blamed on culture and complexity.

John’s points are not unreasonable. He suggests that Japanese competitors have innately more collaborative approaches and that they always involve suppliers from the earliest stages of design. He also highlights ways that they simplify manufacturing and move optionality to the customer interface. But neither of those points is new news – the Japanese approach has been well understood for years. It was always open to the US manufacturers to change their ways.

Essentially, this strikes me as a traditional ‘not my fault’ article. Were the heads of procurement at the major manufacturers really oblivious to the impacts that their company’s behavior was having on supplier performance and loyalty? Since so many of those concerns were aired publicly over recent years, I cannot believe this was the case.

I would make three observations on this story.

1) I could see no evidence that Procurement in the major US auto manufacturers was seriously attemtping to change the behavior of their staff. The complaints from IACCM members never changed; they felt they were battered, bruised and abused by their dealings with the industry.

2) Even internally, there was strong pushback on Procurement behavior. Groups that understood the value of supplier relationships tried to minimize their dealings with the Procurement function.

3) So we can only assume that either a) Procurement behaved as it did because that was the only way they knew how to behave and their leadership failed to address the need for change; or b) the CPO in the major auto companies was in fact powerless to infuence change and had no meaningful input or influence on corporate strategy.

Once more, I think the real point here is the warning it should be sending out to those in many other companies where Procurement continues to beat up its suppliers.  Simply writing about how important Procurement is, about how strategic their role has become, will not alter the truth. A strategic role is something we earn by driving positive change in the business. For Procurement, this means rising above the transactional focus on savings and challenging the behaviors and methods that damage trading relationships and erode the loyalty of suppliers.

If the US auto industry is to survive, someone must become a champion for the supply base and understand economic value in relationships has to be mutual for them to work.