THE ROLE OF PURCHASING IN THE F&F INDUSTRY

I have spent the best part of 20 years in procurement roles, from clerical up to Sr. Manager, in different industries; health, industrial chemicals, food, animal nutrition, automotive and Flavours & Fragrances in 2 different spans of time; there are always constants in the way the operational procurement is done, and I believe some of those can be extrapolated across industries.

 

After having a few successful experiences in other industries, when I was given the opportunity to be back in the industry, after thorough family-wide consideration and having my head in how things used to work years before, I came back to it … let me tell you what I found. A few changes in suppliers, some new, some larger, some merged and other no more in the business, as expected industry changes, evolves; What about the big players, still the same big players with the people making them great still in the team; Sales and technical people still around, some of them had moved to other  companies but still within the F&F world, I find there is little attrition of parties moving to other industries.

But again, this is all perception at surface level, when going deeper there is a different story; the world is changing, and the way big users are running the business to secure sustainable business. Therefore, I concluded that there are 2 types of approaches companies are taking with regards to the role of purchasing:

 

1.

The classical, in which the procurement team will be given target, a number to deliver savings; in this case Purchasing department has a more tactical role, with very little autonomy and room of manoeuvre, buyers will be prompted to deliver a savings objective while moving within inventory bands.

There is a very weak approach to supplier development and Supplier Relationship Management, and as a consequence other areas (Operations, Sales, General Management) end up “owning” the relationship and undermining the role purchasing and shifting the balance of power to the supplier in some cases and in others removing the “breathing space” for them.

This approach is very valid for small companies that don´t have the need to develop such relationships and can source most of their materials from traders/distributors; therefore, the need of a more strategic purchasing function is not high. The big problem is when middle to large size companies will set high goals and expectations but operate with a mindset and structure of a small one. Lack of consistency between the expectations and the plan.

 

2.

The second case is where the company understands that the supply market and environment separates strategic procurement from replenishment and empowers the procurement team to develop sustainable sources of supply, that will guarantee the success of the business. Here the relationship with the suppliers is transparent and open, all the cards are on the table from the beginning.

In some cases, the company will compromise to help the supplier and, in some cases, will work the other way, always under a mutual understanding of the future benefit of the relationship.

Here the role of Purchasing department will be more about securing material availability for key projects and products over time; the goals will shift from savings based on purchase price to profit contributions under the concept of Total Cost of Ownership. Visits to suppliers, understanding their production process and constrains, helping solve them if necessary. In this scenario purchasing has a more relevant and impactful role in making sure the company delivers the targets.

 

With environmental change, the introductions of new technology, more than ever tight regulations; I am sure that things will continue to change, and new challenges will be faced, and we all will have to evolve and adapt to stay relevant in the industry.

 

1 Comment

  1. Miromele Miromele says:

    Hello Luis! Thank You to Your contribution!