A new strategic role for purchasing: business partner for value(s) creation Olaf de Hemmer Gudme Olaf de Hemmer Gudme is Consultant based at Marly le roi, France. A fter years of "strategic irrelevance" (Ramsay, 2001), is purchasing becoming the most important function for the future of a company? If marketing holds the future of sales, R&D the future of products and technologies, IT the future of processes and communication, now that Operations are extensively outsourced, purchasing holds the key to future spending, so future profits. It is then not surprising that Apple's CEO Tim Cook was responsible for outsourcing the majority of its manufacturing to its major Chinese supplier Foxconn, shared with its major competitors. Purchasing is not the most important function in a company. None stands alone: they are all interdepending, and an efficient collaboration is the only key to future (and presently) company success. The hot topics in purchasing are currently "how to become a business partner?", creating value, sustainable purchasing, contributing to innovation [. . .] while continuing mastering (well, reducing) costs. So the role of purchasing obviously has evolved! Has it really? What then is this role? How could it include a "strategic" role? What about "value creation"? The purchaser's role: reducing cost(s), but strategically The role of a purchaser is and will be about external cost reduction with suppliers. But the spend in a category is not only about "how much?": the unit cost, managed by sourcing, competition and negotiation with suppliers. It is also about "how many?": quantities purchased have to be managed by demand management, with the internal users. And "What?": specifications require redesign to cost with users and engineering! But the purchasing cost is not the only cost to the company. For a professional equipment, a professional purchaser should take into account its operational costs (operators needed, energy consumption, scrap rate), maintenance costs, decommissioning costs or reselling revenues. This means working not only with the requests of the engineers who designed or specified the equipment but also with other actors in the company: operations, maintenance, etc. Other functions in the company have other KPIs: employees' security, environment impact, products quality, or cash situation: these "costs" also have to be included in the selection criteria by the purchaser, even if they are not easily translatable into short term financial terms. Professional equipment is purchased not only to keep costs to a minimum (it would be cheaper not to buy it!) but also to allow revenue for the company, through the production of goods and services to the clients. So the purchaser is also - at least indirectly - in charge of securing this revenue, through the quality and delays aspects of the supply chain DOI 10.1108/SD-11-2016-0160 VOL. 33 NO. 2 2017, pp. 27-29, Emerald Publishing Limited, ISSN 0258-0543 STRATEGIC DIRECTION PAGE 27 management. Securing future revenues is also linked to improving innovations delivered to the company by its suppliers. So a professional purchaser should manage not only unit costs but also all financial, environmental and social costs and revenues across the whole life cycle of the item purchased, leveraged with a real "purchasing strategy": managing suppliers so that they contribute in every aspect to the success of the company strategy! Value(s) creation: a systemic approach Value analysis, a method to avoid the purchase of unnecessary items or performances, was invented in the 1950s by Lawrence D. Miles, GE purchasing engineer. Value engineering (VE) has since been adapted for product design and applied to manufacturing processes, organizations, etc. Value management now allows to use the same mindset to solve management issues. The success is continuing: President Obama renewed in 2013 the obligation for USA administrations to use VE on public projects and expenditures[1]. These value methods take their originality and efficiency from a definition of the "value" of a solution: Value(s) need(s) satisfaction/cost(s). The value(s) mindset can be used to improve any solution by applying three key points: 1. "What for?" the solution: allowing to know the real needs; 2. "What is enough?" to fulfill these needs, allowing to avoid unnecessary spending; and 3. "Work with the stakeholders" those who know the real needs (users, etc.), are involved in the actual solution (operators, suppliers etc.) and those who know about the other possible solutions (e.g. suppliers in other industries facing the same needs). Even if the "what for?" question seems obvious, value management specialists know from more than 35 years of practice that it is not that simple to ask, and even less to answer: everyone facing a problem is used to asking for a solution, not to expressing needs. This is because we are only trained to scientific reasoning, developed from Ren Descartes "Discours de la Mthode". The Cartesian reasoning is based on "causality" understanding the world from cause/effects relations. And forbids the use of the question "what for?", which in the eighteenth century would cause conflicts with the spiritual leaders [. . .]. Hopefully, scientists having difficulties using this Cartesian thinking in their specific field (biology, cybernetic, etc.) have developed another way of thinking: the "system thinking", where the understanding of things is based on "teleology" goal/means relations (Von Bertalanffy, 1968; Le Moigne, 1994). In system thinking, the goal of something is determined by its relations with its external environment: a living cell cannot be understood by its components, but its relations with other cells and external fluids, together building organs and allowing the emergence of life! Systemic thinking is a real revolution: it allows to combine "causality" with "teleology", rational thinking with purpose, meaning, long seen as too subjective to be rigorously managed. It should come as no surprise that a large number of management methods were developed around these value/system principles with great success: Blue Ocean strategy, Business Model canvas, Value management, Lean, CSR, commons management, Shared Value, Eco-design, etc. Value creation by purchasing Let us apply this systemic approach to purchasing and model a company to highlight the relations of purchasing with other elements and stakeholders (Figure 1). This simplified view highlights multiple roles for purchasers, linked to different internal and external stakeholders and leading to different KPIs at long, mid and short term, and of course (see the ties) to different soft skills and tools. As every person in a company[2], a purchaser's PAGE 28 STRATEGIC DIRECTION VOL. 33 NO. 2 2017 goal is to create value(s) for its stakeholders: deliver what they need to fulfill their own roles and objectives, at minimal cost(s) and get from them what (s)he needs to achieve its objectives. Is every purchaser in your company aware of what his stakeholders need? Are they are satisfied with purchasing's contribution? What should be done to improve this? Do they know they also have to create value for the company suppliers? If so, purchasing has become a real business partner for value(s) creation (de Hemmer Gudme, 2016).

(Total marks 10) Answer questions from this part after reading related article you have downloaded. Title of the article: A new strategic role for purchasing: business partner for value(s) creation.

3. (7 marks) When a purchaser purchases a professional equipment following the requests of the engineers who designed or specified the equipment, s(he) needs to work with multiple actors in the company. Who are these actors? State reasons of working with other actors of the company in this type of situation.

4. (3 marks) By reading the article, how can you explain in concise form, what do you understand by "value creation part of a purchaser's job." You can reflect to the materials that we discussed in class in addition to the materials discussed in the article.