Procurement and Engineering: Skipping the Marriage Counselor and Prolonging the Honeymoon (Part 3)

In the first two posts in this series (Part 1 and Part 2), I shared a handful of ideas -- and set the backdrop -- for how procurement and engineering can work more closely together (offering examples in the packaging/engineer category area that such joint collaboration enables). Yet I firmly believe that simply embedding engineers in procurement, a suggestion I made in my last post, is not enough. It is essential to foster collaboration between the functions rather than taking talent from one and placing it officially in the other (the same is true of finance and procurement collaboration as well, mind you). But when it comes to getting both groups to work more closely together in an attempt to jointly remove cost from the spend equation -- or reducing C02 footprints, eliminating the use of banned/hazardous substances, etc. -- what are the best ways of achieving such goals?

I think that the best place to start is in spending -- and ideally engineering -- data itself. In this regard, there is no substitute for a spend analysis application that gets into line-item level information, ideally combining and enriching basic general ledger, payment information, p-card details, etc. with both systems and qualitative supplier performance management insights from the business (e.g., on-time delivery, defect rates, service level adherence, KPIs, etc.) Insight into this basic and critical data in one place can provide a shared lingua franca for procurement to collaborate with engineering on basic spending decisions. Taking this a level further, companies such as Endeca and Co-Exprise enable procurement organizations tackling direct materials categories to begin to analyze and act on engineering information in the context of spend analysis and sourcing, respectively. In theses contexts, engineering data, such as part attribute information (e.g., the amount of copper used in a part or bill of material, the 2D or 3D cad drawing, etc.) become elements of a supplier RFI/RFQ -- or simply internal collaboration between procurement and engineering.

Outside of looking at data through both spend analysis and more advanced application capabilities, another idea that I've seen work to help drive procurement and engineering collaboration is to mandate cost take out goals that go beyond reducing supplier margins. In other words, a CPO might challenge his team in categories such as molded parts, castings, fabrications, forgings, etc. to examine ways of reducing costs without cutting into supplier margins. The methods involved might include materials substitution, part standardization/redesign or other techniques. But all require the input and collaboration of both procurement and engineering. And without engineering as an equal partner in such an initiative from the get-go, it's highly unlikely that the organization will successfully implement the ultimate savings that result (identifying savings is something else entirely -- and it does not matter in the least).

Jason Busch

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