Q. What are the most significant changes seen in supply chain management in the past 20 years?
The most significant change is the move from adversarial relationships to collaborative relationships with suppliers due to the Total Cost of Ownership TCO movement. Also the major breakthrough of MRP II, and purchasing certification programs where purchasing professionals went back to school. They’ve really taken out the amateurs in the field.
Q. What would you say sets your book apart from other supply chain books?
In a word, Detail. Our Statement of Work SOW, which is engineering and checklist oriented along with our work on specifications details and pricing and cost analysis are unique. Our chapter on New Product Development will be of interest to engineers. And due to our experience, the level of detail on purchasing equipment differentiates us from other textbooks.
Q. What are the pros and cons when making a decision to centralize purchasing authority?
By far the advantages of i) consolidation of volume, ii) standardization and iii) the development of common specifications as opposed to custom specs, outweigh any disadvantages to central purchasing authority. However, local purchasing agents will always claim cheaper local sourcing. And you can’t dismiss the politics of local support. We need to nurture those local relationships as much as possible.
Q. When a company is practicing concurrent engineering, what steps can they take to ensure smooth integration between engineering and purchasing?
There is a fortune to be made with cross functional teams that include design engineering, purchasing, materials, and often suppliers when a company embraces this practice.
Q. What information is needed from engineering and purchasing in a concurrent engineering situation?
You must get appropriate specification input from suppliers, tooling providers and anyone else who is involved in providing resources. You also have to ensure that materials are not controlled by monopolists.
Q. What’s the difference between transactional, collaborative, and strategic alliances, and when are each appropriate?
Transactional relationships describe arms-length relationships. They may be appropriate when a potential supplier possesses economic power that it’s willing to employ over its customers.
The key difference in collaborative relationships is the awareness of the interdependence of cooperation. This approach is appropriate when there is recognition of the benefits of a more codependent relationship, but adequate human resources are not available.
The fundamental difference in strategic alliances is the presence of trust. These relationships may be appropriate if one supplier is head and shoulders above the rest in terms of value.
Q. What are the major inputs needed in a “Make or Buy” decision?
It’s not just about cost considerations. You also have to consider production facility limitations, volume requirements, and design secrecy. The “make” decision is usually weaker than the “buy” decision due to the unknowns in the make costs.
Q. What problems can an engineering change management system alleviate?
Better initial engineering and change management will save big bucks in reduced waste and unusable inventories, but the change management system has to be controlled. We have seen unnecessary weekly changes considerably driving up prices.
Q. What role should purchasing play in supplier/part validations?
Purchasing should act as coordinators between the user and supplier to make sure quality gets information more effectively. Honda is a prime example of how quick response teams set up to handle suppler problem assist in keeping their suppliers healthy.
Q. How can strong supplier commitments be nurtured from individual suppliers when multiple sourcing is utilized?
Most firms now use one prime and one backup unless unique tooling with high setup costs are an issue. This is a vast improvement over the traditional method of just adding new suppliers.
Q. Referring to recent issues with overseas product safety, how should safety and regulatory compliance risks be managed when using global sourcing?
Experience has shown us that overseas and sometime in the states, companies will show you the “perfect facility” hiding the actual facility where volume is to be run. The actual facilities, procedures and controls need to be uncovered.
Q. What are the author’s experiences in purchasing?
Richard is Professor Emeritus of Marketing and Logistics at California State University, Fresno. His industrial experience includes Market Research Analyst, Manager of Sales, Production and Material Control Director, and consulting work with many Fortune 500 companies.
David is Professor Emeritus of Supply Management at the University of San Diego. Dr. Burt began his career as a Procurement Officer in the Air Force including working on the F-15 and B-1 programs. His consulting work with companies of all sizes has been in the area of procurement operations
Sheila is Assistant Professor of Business, Math, and Technology at Cuyahoga Community College in Cleveland, Oh. Ms. Percavage has over 15 years of purchasing and operations. She is a certified Purchasing Manager and serves on the Board of Directors of the Purchasing Management Association of Cleveland, Oh. and is a member of the Institute of Supply Management.
Q. Who are the target audiences for your book?
Target audiences include: Purchasing Agents, Design Engineers, Inventory and Production Control, and Logistics professional, as well as Project managers.
This interview was conducted by Bob Simmons, who currently teaches Industrial Engineering Technology at Northwestern State University. He holds degrees in Mechanical and Manufacturing Systems Engineering. He holds a six sigma black belt certification, and is actively involved in the Institute of Industrial Engineers; American Society for Engineering Education; American Society for Quality; and the Production and Operations Management Society.