From Buyer to Leader for Extended Development (LED)
By Bernard GRACIA, EIPM Dean & Director
After having dried up the supplier market by reducing the number of first class players in order to be better served with a smaller TCO, the buyer must contribute to the sustainable economic recovery of its ecosystem – and not only by aiming at the company’s margins improvement. In few words: a big gap.
In 1976, I was amongst the founders of the MAI (Institute of Industrial Procurement Management) in Bordeaux. The first purchasing training courses in France weren’t meant to teach how to buy better, but rather how to buy less, how to use less (design to cost, risk analysis, etc…). These were certainly the reasons for which the French Purchasing culture was different from the rest of the world.
In 1990, EIPM (the European Institute of Purchasing Management) was created. At that time, European Companies struggling with consolidated strategies started reflecting on a common purchasing strategy at a European level. Consuming less wasn’t the main focus anymore, but aligning to a real purchasing culture, common to different European branches, in order to reduce costs while consolidating purchasing.
LCC and TCO – an explosive union
From 2000, EIPM has developed its International branches (China, Brazil, India…) to support its clients who were no longer buying exclusively in Europe, but buying and producing globally – paying less (LCC – Life Cycle Costing) and better serving the Company’s commercial expansion strategy throughout the world.
Those different stages have also led to market consolidation, both geographically and by sectors. The world was shrinking, working 24/24 hours, 365 days a year, with fewer players. The goal was to reduce the number of first class suppliers to be better served with a smaller TCO (Total Cost of Ownership) by reducing the administrative costs. By adopting those practices, popular back then, purchasing has dried up the supplier market, leading to today’s efforts to restore those sources. Those particularities make that, today, supply chain actors compete with each other, often facing bottlenecks on the first or second levels!
By analysing the past 30 years, it is important to point out that purchasing hasn’t made much of a revolution. We could say that today we don’t work deeper, but wider! If we use today the same techniques and practices that we used 30 years ago, we can certainly find today more companies which are sensitive to the strategic impact of these methods.
How this function should evolve?
Today, the buyer is not only buying a service, a product or a solution. He is buying a supplier relationship. Within a global context, the buyer becomes, indeed, the interface between the internal business partners (who should no longer be considered internal customers) and the external business partners (who are more than suppliers).
He will ensure the integration between internal and external in order to contribute to value creation. He will therefore become the LED (leader for extended development). His role will be to align the purchasing strategy to the company’s strategy:
- The buyer will invest in innovation to support the differentiation strategy of the company – he will then contribute to better sales – and therefore to profit.
- The buyer will negotiate prices and capacity to support the market share strategy of the company – he will then contribute to more sales.
More than ever, in order to contribute to value creation, the LED must lean on some of the external business partners and be recognised by them as the customer of choice, to whom the technology and capacity will be attributed to in priority. To develop this type of relationship, the LED must be:
- A salesperson capable of enhancing the value of his company and not only a technical specialist who buys;
- A leader of a cross functional team and not only a simple manager;
- An entrepreneur who dares to take risks and also deals with them;
- A communicator who convinces the different partners, and not only to negotiate.
Those skills are needed to support the development of new relationships with suppliers.
Those skills have, by the way, tremendously evolved if compared to what the first generations of buyers were seeking to develop. At that time, they essentially needed to prove they were capable of building a purchasing culture and developing purchasing techniques. Purchasing needed recognition by attracting new talents.
Developing a sustainable ecosystem
Today the expected skills have change, as the role of the buyer evolves. The LED contributes to a sustainable Economic Renaissance of its Ecosystem and not only to the improvement of the company profit. Indeed, as already started in the USA, the buyer will have a societal role by implementing within his near ecosystem the businesses he previously deployed in low-cost areas. By locally concentrating his purchases – not necessarily for a lower cost, but for a bigger value to his company (those suppliers may also be clients) – the LED allows industrial or service sectors to redeploy and reborn!
Those are the human, ethic, social, humility and justice values that will allow the LED to be recognised within his ecosystem (internal and external) in order to, all together, create Value.
The development of a sustainable Ecosystem can only be attained when the same values are shared between its different members – internal and external partners.
The creation of Value stands on the sharing of common Values. That’s why, for EIPM, tomorrow’s motto for Purchasing and LED will be: “Values for Value”.
This article was published on the Nov-Dec 2015 edition of the Italian magazine The Procurement. Subscribe at http://www.theprocurement.it/
