Here is why procurement should not be reactive but proactive
At larger OEMs procurement is designing a template for strategic and collaborative sourcing:
- Manage the supply base. Evaluate and select suppliers based on collaboration with design teams
- Managing the supply base includes, evaluating new technologies and products from key supply partners
- Recommend new suppliers to engineering teams
- Focus on total cost of ownership
The role of electronics purchasers in design varies depending on the size of the OEM, the types of product the company designs and manufactures, and how dependent the OEM is on key suppliers for new technologies. Buyers at some small to medium-size companies may have no role at all in design.
Others may have a small role and deal with suppliers in the design stage concerning cost issues. But at leading-edge electronics OEMs, the buyer’s role has evolved to be more strategic and often includes helping to select suppliers, technologies, and parts. They work closely with design teams and help decide which suppliers are the best supply-chain solution choices for a product being designed.
Large electronics OEMs often use purchasing engineers (PEs) in new product development. As the title implies, purchasing engineers have technical degrees and may work in the OEM’s research and development department or in design centers. Some are on new-product development teams and have multifaceted roles.
Some PEs are used to make sure cost targets for product being designed are met. A purchasing engineer may help reduce material costs by steering designers to suppliers that an OEM is already doing business with if the supplier has the right technology for the new design. Using suppliers that the OEM is already buying from allows the OEM to place more business with the supplier and secure lower prices because of larger purchasing volumes.
In other cases, the PE may recommend new suppliers that can build parts at a lower cost than suppliers that the OEM is currently using.
A PE may also review a bill of material (BOM) and suggest ways to reduce the size and cost of the BOM by integrating functionality into fewer parts. For instance if a DRAM and flash chip could be integrated into a single package, it would reduce cost, component count, and board space.
Besides focusing on cost, a PE may suggest a new supplier that has developed a new technology that the OEM can use for future products. The purchasing engineer may also work with suppliers to review technology roadmaps and discuss trends that could impact future designs such as memory IC density, process technology transitions, semiconductor packaging, system-on-chip technology, and power consumption, among other issues.
In some instances, purchasing is involved in transformational decisions for design. At some OEMs, purchasing has helped determine which design and development work can be outsourced and which suppliers have the capabilities to perform the work.
Such involvement in design is indicative of how purchasing at some companies has become more strategic. The idea is that procurement should not be reactive, but more proactive if it is to have a meaningful impact on design and sourcing decisions and help companies meet strategic business goals.
By James Carbone in Global Purchasing