Purchasing power

Let’s say you’re a corporate fast-tracker aspiring to reach the top of your company. You’ve got your eye on that corner office, and you know that to get there you must show a history of success in running key areas of the company.
So you map out a career path that takes you through plum assignments in operations, sales and marketing, and opportunities to manage strategic projects and startups.
Then comes the bad news: You’ve been "promoted" to run the company’s purchasing department. Your reaction would probably range from "I’m done for" to "Who’s mad at me?"
A few years ago, one of the consultants in our firm was dating a woman named Kristen who decided it was a good time for him to meet her parents. By coincidence, Kristen’s father was a purchasing agent. During dinner, her father, sizing up our associate as a prospective son-in-law, asked him what he did for a living. Our associate explained his work in the sales consulting field, and Kristen attempted to add to the discussion, "Yeah, dad, he teaches salespeople how to go around people like you."
Our associate promptly grabbed the check and is now happily married to Megan.
In this column and in our work with clients, we have steadfastly exhorted salespeople not to sell to purchasing agents. We also advise salespeople to check the career paths of the executives to whom they are selling, and if the executive has spent a long time in purchasing, to be skeptical about the true level of influence that executive really holds.
The white-haired salesperson schmoozing the white-haired purchasing agent has become the textbook picture of selling’s old, outdated paradigm.
Indeed, when it comes to innovation, about the only change that the purchasing profession can claim in generations was a name change – entirely cosmetic – from "purchasing" to "procurement."
Strategic purchasing no longer an oxymoron
However, powerful and significant changes are afoot. For the first time ever, in a handful of companies, the purchasing job is being transformed from a corporate dead end to a true strategic function. Salespeople need to understand that change. They also need to be able to discern when it’s happening for real in one of their accounts and when it’s mere window dressing.
The most far-thinking companies are adopting a world view of strategic purchasing. Once the ultimate business oxymoron, strategic purchasing gives new clout to the purchasing operation. For example, General Motors’ president, Richard Wagoner, was promoted to his current position from the automaker’s procurement division. Increasingly, a stint in purchasing has become, for many companies, a mandatory stop en route to the top, not a sidetrack to corporate oblivion.
Progressively managed corporations are shifting their purchasing philosophy away from a narrow focus on unit price and toward one that examines the total cost of ownership. Corporate Express Corp., an office supplier and one of the first to capitalize on this trend, observed way back in its 1997 annual report, "Each time a large company purchases $100 worth of non-production goods, it spends an additional $150 to cover the costs of ordering, processing and delivering those goods."
Or as Lee Iacocca wryly put it, "Americans love a bargain, and they’ll pay any sum of money to get one."
Smart-thinking companies are beginning to understand the truth of his words, and a few are moving away from their perennial practice of hammering suppliers to shave pennies off the purchase price, a relatively small component of the total cost of ownership.
Impact on salespeople
What does all this mean for your company’s salespeople? First, they must size up the company they’re selling to. Has it embraced the new philosophy of purchasing, or is it just speaking the language? Do company personnel speak in more current vocabulary, using terms like "supply chain management," "strategic procurement" and "total cost of ownership?"
Second, and more importantly, they must look at the company’s all-important organizational decisions. Do the people in senior positions have any background in purchasing? Even more important, what is the background of the person assigned to run the purchasing function?
Show us someone with a successful record as, say, vice president of manufacturing, who is now in charge of purchasing, and we’ll show you a company that takes the new strategic procurement paradigm seriously.
Jerry Stapleton and Nancy McKeon are with Stapleton Resources LLC, a Waukesha-based sales force effectiveness practice. They can be reached at (262) 524-8099 or on the Web at www.stapletonresources.com.
October 29, 2004, Small Business Times, Milwaukee, WI