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Material Handling Purchasing & Engineering Disconnect is Wasting Money!

ISD Automation Blog
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There is a long standing interest in the dynamics of organizational buying and how and why the process can have such a significant impact on profitable operations. The battle between purchasing directives and engineering objectives is often a focus of the conflict.  Both groups share the common goal of improving the efficiency of company operations with a target of increased profitability, however their blueprints for achieving this objective sometimes seem at odds.

Why the disconnect?  It often stems from performance metrics for each group.  Purchasing is rewarded for saving money on a specific purchase or during a fiscal year.  Engineering is rewarded for creating high performance systems or solutions that will lead to profitability for several fiscal years.  Consequently, custom designed and highly engineered solutions are often treated by many purchasing departments as a collection of commodity items or, in some cases, the entire system is viewed as one large commodity item.  The multitude of potential nuances in a system usually make commodity purchasing an unsuccessful tactic for the company.  The commodity approach to buying can negatively impact the success of the project due to change orders that increase system cost or because of reduced overall functionality.  In either case, management didn't get what was wanted or needed.

Reconnecting

Sometimes, the conflict between purchasing and engineering is created by strong personalities who believe that their mandate is more important than someone else’s mandate.  More often than not, however, the conflict is created by more mundane factors.  In the early 1960s, researchers in this critical aspect of company operations and management determined that conflicts specific to purchasing decisions were often due to: engineering writing project specifications in terms of brand names; not giving purchasing sufficient lead time to make intelligent buying choices and; by purchasing personnel making it difficult for potential suppliers to contact project engineers for clarifications.

While these factors may still contribute to purchasing/engineering conflicts, clearly a major roadblock to no-conflict buying are fuzzy specifications that make it difficult to compare product offerings from different vendors.  The primary reason why this happens is that engineering personnel don’t run through system hardware, functionality and expectations step by step and, from that analysis, develop bulletproof specifications with a detailed bid submittal document. 

A New Approach

To help offset this problem and assure systems integration goes as budgeted and planned, try this approach:

  1. Run through the system hardware, functionality and expectations with one or more of the vendors prior to finalizing the specifications.  Use their feedback to perfect the specifications. 
  2. Communicate changes to all vendors and insist on compliance.
  3. Require a detailed bid submittal document requiring vendors to acknowledge specification compliance or clearly state exceptions.
  4. Make purchasing AND engineering responsible (via their performance measurements) for overall system cost and functionality - including charge backs.  Too often purchasing has no responsibility for charge backs or system changes due to funding. 
  5. Grade the past performance of systems integrators for your organization or use feedback of other companies they have done work for and include factors such as:
    • Ease of working together
    • System performance
    • Communications
    • Adherence to deadlines
    • Does the systems integrator/vendor throw out a number to get the job (low bid) and then change order the project to meet "anticipated but unspecified" performance or features (at the same or higher cost than the other bids)?
    • Total Project cost and ROI
       

This isn’t as intimidating a task as it might seem.  Establish an informal and unofficial partnership with a systems integrator.  Experts from these organizations can work with project engineers to help them avoid traditional pitfalls in systems specifications.  Without being product specific, they can consult on what are appropriate goal-meeting specifications and offer suggestions on how to write clear and concise purchase order requests.

It is important that organizations align their department’s goals, expectations and compensation to receive the best end result and to use systems integrators and vendors who don't rely on low balling bids to win the order.

 

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