The Corporate Battle
The central and local teams simply have different points of view for the same matter: who shall be responsible to define the rules for the game? Usually in movies, there's a dark side and a good hero who is occupied with saving the world, the money, and the day.
The Classic Movie
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
Central Engineering vs Local Industrialization Team
Central Logistics vs Local Logistics Team
Central Controlling vs Local Plant
The Movie Scenario
Usually in the movies, the scenario is simple. There is a dark side and a good hero (with some moral dilemma) who is occupied all the time with the below actions:
Saving the world (the company)
Saving the lady (the money)
Saving the day or something (the effort)
The Four Acts of Corporate Drama
1. Classical Statements (Prelude)
Gemba is the plant and Central doesn't know what is happening on the 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 import duties I have to pay were not taken into 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 suppliers as well as by plants
Only one voice towards the suppliers is best; negotiation power is most effective and terms are same for everybody
There is a risk of unfair practices and conflicts of interest
3. The Battle
Usually decided before it starts and rarely reaches the point where it's more than a frustration expressed over a glass of wine during a team building event.
4. The Final
Most of the time 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?
The Documentary Approach
A mature solution for adult companies
There is a clear set of objectives for Central Purchasing to localize/regionalize as many materials as possible without adding more cost (like validation) or at least with a return on investment less than a year and with a clear target of reducing the 'total cost on hand'.
The ready to localize/regionalize commodities are commonly reviewed and the strategy is discussed with the local teams from the relevant plants at least once per year.
The local team is involved in the process and takes the lead to define local, specific needs (for example, the returnable process and/or 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 for nominating the evaluation functions to assess the capability of new selected suppliers (can be external partners as well). The process is transparent for all involved parties and results are communicated timely in a structured way.
Local team is responsible for MOQ, SPS, INCOTERMS, and specifications preparation. Central Team is in charge of preparing the negotiation protocol and evaluating the financial impact. The main elements of the protocol (contract) are transparently and timely communicated to the local team.
The Central team presents every time, at the budget exercise, the expected price evolution and global market trend specific per commodity to the local team.
A joint cost reduction commitment is planned taking into consideration all efforts central and local (including the supplier's). Specific 'IN PLANT' (where gemba is) meetings with Central, Local and the supplier are held where the best improvement ideas are discussed and applied.
Warning!
The above documentary is suitable only for adult companies.
Next: Packaging, the last frontier...
