PURCHASING IN THE MANUFACTURING INDUSTRY

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The Nature of the Work

The manufacturing industry is one of the largest employers of purchasing professionals and offers the best opportunity to earn high salaries. Manufacturing is also 99 percent private sector activity and, therefore, uses the entire spectrum of purchasing policies and systems. Companies range in size from small one or two person sole proprietorships to giant international corporations employing hundreds of thousands of employees and manufacturing a multitude of products in many locations. The size of the products can range from tiny fasteners to giant airplanes or vehicles. The manufacturing industry was the first to begin to professionalize the purchasing function and recognize it as an essential part of the production process. As in some other industries, the manufacturing industry is gradually replacing the term purchasing with materials management recognizing that the responsibilities go far beyond that of just buying the products or services.

In the manufacturing context, purchasing or materials management involves planning, scheduling, organizing, and controlling the flow of materials, products, and services in and out of the organization.



Departments contained within purchasing or materials management may include needs assessment and planning, purchasing research, purchasing, receiving and inspection, expediting, traffic or transportation, and disposal/reclamation. In some companies, quality control reports to the head of purchasing. There are two trends in purchasing technology and procedures that are, at this point, most evident in manufacturing but obviously will be important in other industry classifications. First, the trend toward negotiated long-term supplier contracts, sometimes called win-win agreements, involves the acceptance of a supplier as a quasi-partner in the production process. This type of agreement requires an extraordinary exchange of information, including long-term plans, financial status, and other data, that either side would usually consider confidential.

The other trend involves the use of complex tracking systems that identify the location and status of incoming materials or products and compare the data with the original delivery projections. This information is extremely important for companies using just-in-time inventory systems because, if the shipment is behind schedule, the company can either make production adjustments or change to an alternate transportation method. There is little doubt that, as tracking systems become more sophisticated and available, companies in all industries will use them in their specifications and transportation systems. Those of you who are considering a purchasing career are advised to keep up to date on both of these trends because they will impact your effectiveness in the future.

It was previously noted that the manufacturing industry uses every type of purchasing system available because the choice of systems is a matter of company policy. There is, however, an exception to that rule. Very often, contracts with the federal government include mandatory bidding requirements and other affirmative action criteria or instructions. Since these requirements are based on federal statutes, they are not negotiable.

The choice of procurement system in nongovernment contracts depends on the product or service being purchased, the size of the purchase, the number of potential suppliers, and the overall condition of the market. If the needed product is of a highly specialized nature, then the buyer's primary concern is finding a supplier or source, not the application of any particular buying method. In fact, several buyers interviewed for this chapter mentioned that finding a sufficient number of potential suppliers to ensure competitive pricing was their most pressing responsibility.

At the higher levels of purchasing management, managers are usually concerned with the development of effective internal systems involving source evaluation, expediting, quote and bid procedures, market forecasting, documenting and tracking charge backs, and transportation. In large companies, these systems are highly structured and organized because of the number of divisions, departments, groups, sections, and projects involved. Because of the complexity of the systems in manufacturing, a few major colleges and universities have developed purchasing, transportation and operations departments within their business schools that offer majors or concentrations at the bachelor's, master's and, in some cases, doctoral levels. These programs were originally directed at the manufacturing industry, although, at this point, the curriculum is expanding to offer a more comprehensive approach to purchasing.

ENTRY REQUIREMENTS AND QUALIFICATIONS

There is no one answer to the question regarding which is more important: product knowledge or expertise in systems. There are so many different types of products and companies that it is impossible to name a general requirement that applies to all situations. It is safe to say that some product knowledge is necessary in all cases, and this knowledge can be gained by experience or by being placed in a formal training program. Increasingly, however, entry-level positions require a bachelor's degree in business, preferably with a major in purchasing (worth two to four thousand dollars more in beginning salary), indicating that basic systems theory is very important in the manufacturing industry.

Entry-level positions exist in practically every department at the assistant or complex clerical level and, in larger companies, in special formal training programs. As far as formal education requirements are concerned, the amount of formal training seems to depend upon the amount of product knowledge required. The positions requiring in-depth technical knowledge value related work experience more than formal education. The amount of product knowledge required also depends on the amount of technical assistance available.

What are the recruiters for the manufacturing industry looking for? They are looking for someone with a diverse background who understands the total picture of production, someone who is inquisitive and outgoing, good with oral and written communications, well organized, a good listener, a team player, who has high ethical standards, the ability to relate to a variety of people ranging from engineering to sales, who is not ego-driven, and, as in most other industries, someone who can think in terms of scenarios.

WORKING CONDITIONS

The work environment varies from small, cramped offices to modem spacious suites, not unexpected considering the variety of manufacturing facilities nationwide. The compensation ranges from average to the highest in the purchasing field. College graduates with a major in purchasing may receive from $32,000 to $65,000 per year with excellent benefits. Job stability and security, however, vary. The manufacturing segment of our economy has been involved in a series of adjustments during the past three decades because of advances in technology and increasing foreign competition.

Consequently, some segments have dis appeared, others have had to diversify, while others have experienced tremendous growth. These up-and-down, in-and-out cycles obviously affect job stability and security. Purchasing, however, does enjoy the reputation of being one of the stable careers in the manufacturing industry. Promotion or advancement opportunities are good to excellent depending upon the segment. You should look at the prospects of any segment of manufacturing that you are considering for employment.

Opportunities for continuing education, seminars, and workshops in the industry are excellent. Large manufacturing companies are usually major players in sponsoring these educational activities and are also strong supporters of professional associations. They actively encourage their employees to obtain professional certifications.
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