August 2022 Strategic Cost Reduction Roundtables
Two Purchasing Executive roundtables were conducted focusing on the actions companies are taking to improve buyer skills. Highlights of the roundtable discussion are summarized below.
- Vice President of Purchasing for a supplier of automotive sunroofs shared that they emphasize having buyers learn how cost drivers are created through the manufacturing process from commodity experts from their engineering team. They plan to conduct formal training before the years ends, focusing on developing an analytical understanding of costs.
- Director of Strategic Sourcing for a food ingredients manufacturer shared that their company has almost tripled in size over the past 10 years, and the purchasing function is under-developed at this point. They are focusing on improving buyer knowledge material feedstock costs by tapping into supplier knowledge, and are developing should-cost models to enable buyers to respond constructively to supplier price increases. They commented that suppliers do not provide cost breakdowns in their industry.
- Strategic Sourcing Director of a hand tool manufacturer shared that they have no formal training programs for new buyers, but rely on training from the legal team on contracts and an informal apprenticeship program that guides new buyers through difficult projects. Buyers are provided with contract templates and consult with legal if needed.
- Director of Indirect Program of a lift truck manufacturer shared that they put all new buyers through a “Cost 101” course that teaches them how to understand and leverage should-costs over 8+ hours of instruction. They’ve established a should-cost team to assist buyers with cost models and have strategic commodity leaders who select suppliers and conduct high-level negotiations. They rely on legal to sign off on all contracts.
- Procurement Director of a propone supplier shared that they have a protégé program for new buyers to partner with more experienced buyers, and have identify buyer development in the senior buyers’ performance goals. They are also putting their purchasing team through APD’s Commodity Leadership program to achieve more cost transparency with suppliers and ensure a consistent approach.