Executive Briefings

Consolidating Supply Management at Corporate Can Be Counterproductive If Factory Purchasing Slighted

A rationale often used in support of a more centralized corporate purchasing function is the need for a company to project "One Face to the Supplier".

When a corporation comprises multiple factories there are business reasons for ensuring that interaction between them and common suppliers is aligned properly with corporate goals. There is also a need to ensure that common suppliers work with all company factories in a consistent, mutually beneficial manner. The rub, however, comes down to the question of the roles and responsibilities that corporate takes on vs. those that remain the purview of the operating units. This issue often becomes a point of major controversy within many corporations.

Consolidating control of supply management decisions at corporate can be counter-productive, especially when that group promotes itself as the company’s exclusive One Face to the Supplier entity, de-emphasizing the role of factory purchasing. This tends to set the tone of factory procurement being somehow subservient to corporate along the lines of an “elite vs. menial” mind-set. Words matter. Those who champion the prominence of a centralized supply management function typically characterize corporate jobs as being strategic compared to factory ones—which are tactical—when, in fact, the only advantage a corporate function can really point to is consolidated company requirements.

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When a corporation comprises multiple factories there are business reasons for ensuring that interaction between them and common suppliers is aligned properly with corporate goals. There is also a need to ensure that common suppliers work with all company factories in a consistent, mutually beneficial manner. The rub, however, comes down to the question of the roles and responsibilities that corporate takes on vs. those that remain the purview of the operating units. This issue often becomes a point of major controversy within many corporations.

Consolidating control of supply management decisions at corporate can be counter-productive, especially when that group promotes itself as the company’s exclusive One Face to the Supplier entity, de-emphasizing the role of factory purchasing. This tends to set the tone of factory procurement being somehow subservient to corporate along the lines of an “elite vs. menial” mind-set. Words matter. Those who champion the prominence of a centralized supply management function typically characterize corporate jobs as being strategic compared to factory ones—which are tactical—when, in fact, the only advantage a corporate function can really point to is consolidated company requirements.

Read Full Article