1.2 Introduction

Have any of the following scenarios happened to you?

• You grabbed a cookie for a late-night snack, opened the refrigerator door, and discovered that you were out of milk.

• You awoke early in the morning, stepped on your high-tech scale, and discovered the battery was dead. You reached in the drawer for a replacement, but you couldn't find one.

• You were working on a DIY (do-it-yourself) project and broke the Phillips-head bit in your drill. You went to replace it, and—you guessed it—you didn't have any.

We may not have described your exact experience, but you get the idea. Somewhere, sometime, you needed something and didn't have it. Someone (maybe you) had not bought enough of something (e.g., gasoline, toothpaste, M&Ms, etc.). The result: You couldn't get the "job" done. Without the right stuff, your life is disrupted.

So whose job is it to buy the right stuff to keep your company running smoothly, including the stuff needed to build products and deliver services? Take a moment to think about this. Now, the answer: It's the purchasing professional's job.

Perhaps you’re thinking, “Is purchasing really a profession? Don’t we all buy things every day?” The answer to both questions is, "Yes." You are thus familiar with what a purchasing professional does. However, purchasing and supply management, also known as procurement, is more complex and important than just buying things. Purchasing professionals are commodity experts, work closely with almost every function within the company, and are responsible for managing all of a firm’s buyer-supplier relationships. Did you know, for example, that a typical manufacturer spends about 55% of each sales dollar on purchased inputs?1 Consider the following:

• Procter & Gamble spends tens of billions of dollars each year on purchases made from raw material suppliers, service providers, and capital equipment makers.

• Intel uses thousands of suppliers to source their direct materials.

• Deere invites suppliers to help design its next-generation tractors. In fact, if you walk into a Deere design center, more than half of the first ten designers you speak with will be supplier engineers.

• Honda sends industrial and process engineers to help suppliers build new skills. By helping suppliers improve their own processes, Honda has become a customer of choice for many highly capable suppliers.

The bottom line: purchasing is a big deal. It is a competitive weapon that can make or break your firm’s ability to win in the marketplace.

When purchasing and supply management works well, your company acquires the best resources—goods and services—available worldwide so you can compete on cost, quality, and innovation. As a supply professional, what does this mean for you? It means that for you to succeed, you really do need to become an expert in the following areas:

1. Resources: You need to know everything about what you are buying. For example, you need to be able to answer these questions: Where is it made? What do trends look like? Is supply available? Are any new technologies emerging? What are the risks?

2. Suppliers: You also need to know who (i.e., which suppliers) can meet your buying needs.

3. Processes: You need to know the purchasing process inside and out. However, you also need to understand production processes and other processes used to create value by your firm and suppliers.

4. Technologies: You need to know how new technologies can help you re-design the purchasing process and how they can help you work better with suppliers and internal customers.

As you develop expertise in these areas, you can build a world-class supply organization that uses state-of-the-art processes to acquire the best resources.