This battle is not the epic drama from the recent movie Star Wars but you can sense the ‘frustration’ behind the scene in most of the big corporations. The plot is a simple one – the central and the local team have simply different point of view for the same matter: who shall be responsible to define the rules for the game….
Classical, all time movie, is the Central Purchasing Vs Local Procurement where the film set is in the supply chain and the main actors are suppliers and the local Procurement team….
Other equally celebrity movies are :
Usually in the movies / not all the time / the scenarios is simple.There is a dark side and a good hero / hero team (with some moral dilemma) / who is occupied all the time with the below actions (work)::
1 Saving the world (the company)
2 Saving the lady (the money)
3 Saving the day or something …. (the effort)
Local vs Central is focusing more on saving the day, some time the lady and rarely the world, but the roles (good vs evil) is not all the time clearly defined and some time vary from one actor to another one. (which is the good side to be ? ) This is the reason I try to create a simple guide for this epic battle so everybody can follow the plot and judge in the end what is the best scenario to play and when.
1. Classical statements (prelude)
Gemba is the plant and Central do not know what is happening on local plant
We are responsible for many plants and this is the main reason why we simply can’t have time for details, overview is needed
2. Arguments (before the battle)
Total Cost on Hand is high and the lead time is too long – high risk of obsolescence
The MOQ is not what I need , is too big to hold so much inventory …
The taxes and the import duties I have to pay was not took in account ….
The standard package size is not suitable for my internal logistics process …
We achieve the best price only by leveraging the volume worldwide
Standards have to be applied all over the companies and respected by the suppliers as well as by the plants
Only One voice towards the supplies, is the best , in this way the negotiation power is the most effective and the terms are the same for everybody
There is a risk of unfair practices and ….
3. The battle
Usually is decided before it starts and rarely reach the point where is more than a frustration expressed over a glass of wine during a team building event.
4. The final
Most of the time is predictable / from the beginning / – this is not a good movie :((
Can it be different ? Can we change the movie from a teenage action game to a more adult documentary ? What is to gain in this case?
So, let’s play the same movie in a documentary style :
There is a clear set of objective for the Central Purchasing to localise / regionalize / as many as possible materials without adding more cost (like validation…) or at least with an return of investment less than a year and with a clear target of reducing the “total cost on hand” .
The ready to localise / regionalize / commodities are commonly reviewed and the strategy is discussed with the local teams from the relevant plants at least once / year.
The local team is involved in process and is taking the lead to define local, specific needs (for ex the returnable process and or the labeling requirements….)
There is a clear commitment about finding new and good suppliers and evaluating them based on commonly agreed principles. Central Team is responsible to nominate the evaluation functions to assess the capability of the new selected suppliers (can be externals partners as well). The process is transparent for all the involved parties and the result are communicated timely, in structured way, at central and local relevant levels.
Local team is responsible for the MOQ, SPS, INCOTERMS, specifications preparation. Central Team is in charge to prepare the negotiation protocol and evaluate the financial impact.
The main elements of the protocol (contract) are transparently and timely communicated to the local team.
The Central team present every time, at the budget exercise, the expected price evolution and the global market trend specific per commodities to the local team
A joint cost reduction commitment is planned taking in consideration all the efforts central and local (including the supplier’s ) Specific “IN PLANT” (where gemba is) meetings with the Central, Local and the supplier are held where the best improvements ideas are discussed and applied. Every success is celebrated and shared in the organization with a short lesson learned.
The above documentary is suitable only for adult companies.
Packaging, the last frontier…