Twenty years ago, I made the decision to set up a company focused on what drew me to purchasing in the first place. Understanding cost and collaborating with suppliers.
Twenty years prior to that I had decided to enter purchasing, a profession I had not even considered until I interviewed with Ford Motor Company while completing my MBA. It was Ford’s focus on cost and collaboration that drew me to the industry. And yes, for those of you who are doing the math that was 1984.
At the risk of being diagnosed with narcissistic personality disorder I want to spend some time reflecting on an unplanned career of 40 years and some of the major lessons I learned along the way. Somewhere in that journey I was introduced to The Lessons of Experience1 a book that puts forth that careers are molded by significant events and the lessons learned from them. Over the course of 40 years, there have been many significant events. Today, I want to focus on 3 of the most influential on my career and how we incorporate that lessons in what we do today at Advanced Purchasing Dynamics.
At the time I joined Ford they were concerned about a five-to-six-fold quality disparity with the Japanese vehicle manufacturers. To close the quality gap, Ford needed to drastically reduce the number of suppliers in their supply chain and work closely with the remaining to improve quality. With fewer suppliers competing for new business, Ford buyers would have to have better cost analysis skills. My newly minted MBA and production experience seemed like a natural fit.
Experience 1: A boring assignment in Purchasing Administration
Lesson 1: Any darn fool can make something complex; it takes a genius to make something simple. — Albert Einstein
My first supervisor at Ford was Eddie Maxie who I also worked for a bit later in my career. My job was as an administrator in the administrative section of purchasing. If it sounds boring, it was. However, in the section we had frequent assignments for and therefore exposure with the Purchasing Directors.
Eddie’s advice in preparing for meetings with the Directors was to make the complex seem simple. According to Eddie, the worst outcomes of meetings with Directors occurred when they were presented with information in a way that confused them. When meeting with Directors the following guidelines were followed:
- Summarize what you presented during the last meeting
- Summarize what you are going to review with them in this meeting and any decisions or support you will be requesting
- Provide the most relevant detail but not all of the detail
- Summarize what you have reviewed and ask for decisions or support
- Ask what they would like to see in the next meeting
The 3 Purchasing Directors we were working for had a myriad of issues they were dealing with on a daily basis and would therefore occasionally lose track of the assignments. We never had contentious meetings with the Directors because we were following this simple process.
To this day when doing work with customers we follow the guidelines learned in 1984.
Experience 2: Quality issue shuts down production of new vehicle
Lesson 2: “You get fired faster for buying at too low a price than too high of a price.” Eddie Maxie
In 1986 Ford was about to begin production of the Taurus, a groundbreaking vehicle that was critical to Ford’s future success. I moved to a desk where I had responsibility for shock absorbers and struts because a buyer was retiring. He had done a great job in coordinating sourcing by involving all the stakeholders and gaining consensus to source to a supplier that met all identified requirements.
Then, the sourcing team was overruled by executive leadership who allowed a supplier that was dismissed by the team to match pricing even though their cost structure could not support the pricing.
A major quality problem occurred resulting in shutting down Taurus production in two plants. Resolving the problem and restarting production was the number 1 priority in the company. The resolution involved designing and sourcing a new sub-component and filling the pipeline with new product. All of this was accomplished in two and one-half days with the help of a fleet of DC-3’s shuttling components from Detroit to Alabama to Chicago on an hourly schedule.
In the end, sourcing was returned to the supplier the team had identified. No one was fired, but the cost of sourcing at too low a price was extremely high.
Helping customers strategically source is a key service at Advanced Purchasing Dynamics.
One of the first steps of our process is understanding all customer cross-functional requirements and the development of an Ideal Supplier Profile; capabilities suppliers will need to meet the requirements. The profile is condensed with all the stakeholders and used to determine which suppliers will be allowed to provide proposals and to guide supplier selection.
Experience 3: Working in Ford of Europe
Lesson 3: Building negotiation power
In the 1980’s Ford, GM and Chrysler combined 75% US market share gave buyers considerable power in supplier negotiations. The fact that Ford was drastically reducing its supply base provided even more power.
I experienced considerable negotiation shock when I was transferred to Europe in 1986 where the largest market share was held by VW at 13% and there was a multitude of manufactures with 10-13% market share.
In the US suppliers almost always wanted to deal with Ford; in Europe it was often a take it or leave it proposition with suppliers making the decision. However, I learned that the power dynamics were not static and as a buyer I could improve them by engaging the suppliers to understand how they decided which customers received their latest technology and best pricing. I would then take steps to align Ford better. Some examples:
- Setting up technical reviews for suppliers who believed they were being ignored by Ford Engineering.
- Helping suppliers resolve quality or production issues with plants.
- Providing recognition and helping them promote their accomplishments.
Power in buy/sell is determined by a number of factors. In Advanced Purchasing Dynamics negotiation courses we help buyers and sellers understand how to assess and improve company, commodity personnel and issue power.
If you have read this far hopefully you have gained something from these experiential learnings, and I have not come off as too narcissistic. After 40 years I have some more experiences that I have not shared. Let me know if you would like to hear more. Additionally, I hope to keep have experiences that shape my career.