In the first post in this series (inspired by Paul Teague's column on the subject), I provided some backdrop on why procurement and supply chain organizations often have a less than stellar experience working together. In his column, Paul suggests that "Procurement/engineering collaboration requires both sides to open their minds," and I could not agree more. But what's the best way to get a crowbar between the two organizations without causing any damage? I'd argue there are a few good places to start. I'll share one idea in today's post, and offer up some more suggestions in posts later this week and next.
Perhaps the best place to start the discussion is human resources, or talent angle. At FreeMarkets, we introduced a ragtag group of engineers into the sourcing process by creating an official hybrid engineering/procurement role: market making engineer (MME). In the book Designing and Managing the Supply Chain: Concepts, Strategies, and Case Studies authored by David Simchi-Levi, Philip Kaminsky, and Edith Simchi-Levi, the authors quote David Becker from FreeMarkets, who notes that for the direct materials sourcing process, "our market-making staff work as a cross-functional team ... a market-making engineer ... performs detailed part and drawing analyses to ensure drawings are correct and suppliers obtain complete, consistent technical information." Of course in the FreeMarkets context, the role of the MME was very limited given that in 99% of cases, our charter was just to run a strategic sourcing event or reverse auction. Even in these cases, the MME proved an essential role in a direct materials context.
Paul suggests that some companies have expanded on the concept of an embedded sourcing engineer. For example, "Some, like Harley-Davidson, have created the position of procurement engineer, hiring technical professionals and embedding them into procurement organizations." I argue that simply introducing a full-time engineer into the sourcing and supplier management process on the procurement team is not enough, especially when it comes to going after higher-value areas than just sourcing to existing specification. For example, in the packaging area, the combination of packaging engineers and sourcing teams (and suppliers) can often present creative solutions that reduce costs, and often environmental footprints as well.
In a paper I wrote on the subject, I suggested that there are numerous potential bases for true joint engineering and procurement collaboration in the area. Consider, "Moving from steel to aluminum or switching from glass to plastic ... or making lightweight decisions that not only reduce material costs but reduce the overall supply chain and environmental impact as well. Take the case of a food provider who switches to a thinner gauge of plastic casing for a bottled beverage. This not only reduces packaging production costs, but also lowers transportation costs as well."
"Other types of changes at this stage might revolve around improving the overall recyclability or recycled content of packaging, particularly around molded plastics. Companies may also wish to consider the types of bold packaging moves that require the input of sales and marketing. For example, one CPG organization changed the shape of its packaging from a circular appearance to a rectangular size to reduce material use and supply chain/logistics/transportation costs (such an effort for even a middle market organization can reduce the number of truckloads required on an annual basis by hundreds or even thousands). Other types of running approaches might involve value-added programs that go beyond looking at just the actual unit costs or design changes. Scrap programs, for example, not only help the environment, but can generate a rebate from the supplier (not to mention allowing suppliers to recapture value as well)."
Stay tuned as we continue to investigate this subject.