Transformation in purchasing function

Filed in archive Research on May 22, 2008

Many companies treat purchasing function as backwater as McKinsey says and don't assign the best talent to it. However, this function is of great importance and if we look closely, in many industries goods and raw materials make more than 50 percent of the final cost.

The company recently published a report, (a figure from the report is shown below) which shows how a European company made more than 100 million Euros of saving by transforming its purchsing in less than 1 year.





The company did this by creating more than 50 cross-functional purchasing teams organized around spending categories. According to McKinsey "Led by purchasers and including key people from engineering, manufacturing, and marketing, the teams worked on developing products and optimizing processes, not just on purchasing in the narrow sense. Beyond the immediate financial gains, this approach helped to counter the confusion that ensues when one group focuses on costs while another tries to innovate".

I liked the idea of multiple improvement teams in purchasing department. I think it's especially helpful because you put purchasing people s part of the team. What do you think?