Electronics Purchasing Needs To Be Both Strategic and Tactical
by James Carbone
It is sometimes said that purchasing at OEMs and electronics manufacturing services (EMS) providers has evolved from being a tactical function to a strategic one.
In fact, there has always been a tactical and strategic side to purchasing and many large electronics companies have both strategic and tactical buyers, while smaller companies have purchasers who handle both functions.
Strategic buyers, especially at large OEMs, develop long-term sourcing strategies for their companies. They decide how many suppliers their companies should have for various electronics commodities and select suppliers for those components. OEM strategic buyers also evaluate the capabilities of potential new suppliers, develop supply-base risk-management strategies to guarantee continuity of supply, and work with engineers and new product development efforts because 70% to 80% of the cost of a new product is development and design. Some strategic buyers also scout out new suppliers that may be developing technologies that could be used in new products.
Strategic purchasers take a long-term approach to sourcing, focus on lowest total cost of ownership, and work to develop longstanding alliances with key suppliers. Besides collaborating with design teams, strategic purchasers also work with suppliers to identify mutual opportunities to reduce cost of a product, rather than just demanding that the supplier cut the price of components. They also share cost information with suppliers.
In negotiating with suppliers, the goal is not to obtain the lowest possible price for parts, but to reach a mutually beneficial win-win solution that is advantageous to the buyer’s company and the supplier.
The idea of strategic purchasing is to balance the short- term, immediate needs of the company with the long-term goals of the organization. At the same time, strategic buyers will work with suppliers to make sure the requirements of customers are met and there is continuous improvement in product quality, delivery, and cost.
On the other hand, tactical buyers are not concerned with the long-term goals of the enterprise, but with day-to-day purchasing functions such as sending out requests for quotes, requests for proposals, placing purchasing orders, and expediting those orders. They handle more of the transactional activity, which at most large companies has become automated through the use of MRP and ERP software programs.