Basics of Purchasing - Why Purchasing?

Marjo Turunen

2 Dec 202012:32

Summary

TLDRIn this engaging discussion, the host interviews Sana, a seasoned purchasing expert with 20 years at Young and a decade at Walmart. Sana shares her passion for the field, emphasizing the continuous potential for development in purchasing. She highlights the evolution from operational to strategic purchasing, focusing on total cost of ownership and risk management. Sana stresses the importance of education, noting a shift towards hiring educated professionals in purchasing. She illustrates how understanding purchasing's value can benefit various company roles, not just purchasers, and the significance of internal collaboration. The conversation underscores purchasing's critical role in business strategy and competitiveness.

Takeaways

🌟 Sanna has a rich background in purchasing, with 20 years at Young and 10 years at Walmart, highlighting her expertise in the field.
📚 Sanna's motivation in purchasing stems from the potential for development and the excitement of meeting new purchasing teams and their challenges.
🚀 Purchasing has evolved from an operational role to a strategic one, focusing not just on transactions but also on total costs, risk management, and creating value for customers.
💼 The education and development of purchasing professionals have become more important, with an increase in educated individuals in the field over the past decades.
🏢 There's a significant need for further education in purchasing, especially in smaller companies, to enhance competitiveness and professional development.
🌐 Sanna emphasizes the importance of internal collaboration, suggesting that understanding purchasing can benefit various departments, not just the purchasing team.
💡 Purchasing can bring value to a company by looking beyond immediate costs and considering the total cost of ownership, which includes all expenses related to the acquisition and use of a product.
🔍 The total cost of ownership is crucial for making informed decisions that affect the entire business, not just the purchasing department.
🛍️ Purchasing is not just about finding the best price; it's about understanding the full financial impact of business decisions, including make or buy decisions.
🌐 Sanna encourages cross-departmental communication and understanding, such as involving sales managers in purchasing discussions to align business strategies.

Q & A

What is the background of Sana, the guest speaker in the discussion?
-Sana is a teacher at Young and has been working there for 20 years. Prior to that, she worked at Walmart in various purchasing positions for 10 years.
How does Sana stay inspired and motivated in the field of purchasing?
-Sana finds inspiration in meeting new companies and purchasing teams, as she sees the potential for development in purchasing management and business development through purchasing.
What has changed in the field of purchasing over the years according to Sana?
-Purchasing has evolved from being an operational part of businesses to a more organized, managed, and strategic aspect. It now involves considering total costs, risk management, and creating value for customers.
Why is purchasing education still necessary despite the advancements in the field?
-Purchasing education remains necessary because there are still many professionals in the field without proper education, and companies, especially smaller ones, are increasingly hiring educated individuals to develop their purchasing capabilities.
How does Sana convince smaller companies of the value that purchasing can bring to their business?
-Sana educates and works with smaller companies to help them see the whole business as their playing ground, encouraging internal collaboration and a broader understanding of how purchasing can contribute to overall business success.
What is the significance of 'total cost of ownership' in purchasing?
-Total cost of ownership is significant because it shifts the focus from just the purchasing price to the entire cost structure, including costs associated with ownership, which helps in making more informed and strategic decisions.
How does understanding total cost of ownership impact business decisions?
-Understanding total cost of ownership helps in making strategic decisions such as the make or buy decision, which can set the stage for the purchasing department's success and the overall business's financial health.
What is the role of purchasing in creating value for customers?
-Purchasing plays a role in creating value for customers by collaborating with other departments like sales and R&D to understand market needs and offer products or services that meet those needs more effectively.
Why is it important for professionals in other departments to understand the value of purchasing?
-Understanding the value of purchasing is important for professionals in other departments because it fosters internal collaboration and allows them to work together more effectively to improve business processes and outcomes.
What advice does Sana give to those interested in pursuing a career in purchasing?
-Sana advises those interested in purchasing to pursue education in the field and to stay open to learning and development, as there is still a significant need for professionals with purchasing expertise.

Outlines

00:00

📚 Introduction to Purchasing and Its Importance

The video script begins with an introduction to a discussion on purchasing, featuring a conversation with a colleague named Sana. Sana is a teacher with 20 years of experience at Young and previously worked at Walmart in various purchasing roles. The host expresses interest in Sana's long-standing involvement in purchasing and seeks to understand what motivates her to stay inspired in the field. Sana shares her excitement about meeting new companies and the potential for development in purchasing, emphasizing the importance of enhancing both individual competence and business competitiveness.

05:01

🚀 Evolution and Education in the Purchasing Field

Sana reflects on the evolution of purchasing over the past decade, noting the transition from an operational to a strategic function within businesses. She discusses the increasing importance of education in purchasing, highlighting the need for further education even after 30 years of experience in the field. Sana observes a disparity between large corporations with advanced purchasing management and smaller companies that still operate on a more basic level. She emphasizes the potential for growth and the necessity for professionals to drive competitiveness at both the company and national levels.

10:02

💡 The Value of Purchasing and Total Cost of Ownership

The conversation shifts to the value that purchasing can bring to a company. Sana uses her experience educating a Finnish company to illustrate how purchasing education can lead to a broader business perspective, encouraging collaboration across departments. She stresses the importance of understanding the total cost of ownership, moving beyond just the purchase price to consider the full scope of costs associated with a product or service. Sana argues that this holistic approach is crucial for the success of the business and that it should be central to the decision-making process in organizations.

Mindmap

Keywords

💡Purchasing

Purchasing refers to the process by which companies acquire goods and services. In the video, purchasing is highlighted as a critical function that has evolved from a purely operational role to a strategic one, impacting the company's competitiveness and overall business strategy. The discussion emphasizes the importance of professional development in purchasing to drive business growth and efficiency.

💡Strategic Purchasing

Strategic Purchasing is the approach where purchasing decisions are made with long-term business objectives in mind, rather than just focusing on immediate transactions. The video underscores the shift from operational purchasing to a more strategic focus, where considerations like total cost of ownership and risk management are paramount. This shift is exemplified by the evolution of purchasing roles within companies.

💡Total Cost of Ownership (TCO)

Total Cost of Ownership is a financial estimate that includes all the expenses associated with the purchase, operation, and disposal of an asset. In the context of the video, TCO is important because it moves the focus from just the purchase price to a broader view of costs that a company incurs over the entire lifecycle of a product or service. This concept is crucial for making informed purchasing decisions that align with the company's financial health and strategic goals.

💡Global Sourcing

Global Sourcing involves the process of procuring goods and services from suppliers around the world. The video mentions global sourcing teams, indicating the国际化 of purchasing functions and the need for a global perspective to find the best suppliers and manage supply chains effectively.

💡Competence Development

Competence Development refers to the process of enhancing an individual's or a team's skills and knowledge. In the video, the importance of developing the competence of purchasing professionals is discussed as a means to increase the competitiveness of businesses. This involves continuous education and training to keep up with the changing landscape of purchasing.

💡Risk Management

Risk Management is the identification, assessment, and prioritization of risks followed by coordinated efforts to minimize, monitor, and control the probability or impact of unfortunate events. The video touches on risk management as an integral part of strategic purchasing, where purchasing professionals must consider potential risks associated with suppliers and the supply chain.

💡Value Creation

Value Creation is the process of generating benefits or positive outcomes that increase the worth of a product, service, or company to its customers. In the video, the concept is discussed in the context of how purchasing can contribute to a company's value by managing costs effectively and ensuring the quality of supplies, which in turn can lead to increased customer satisfaction and sales.

💡Internal Collaboration

Internal Collaboration is the process of working together within different departments or teams within an organization to achieve common goals. The video emphasizes the importance of internal collaboration, particularly between purchasing and other departments like sales and R&D, to align strategies and leverage collective knowledge to enhance the business's overall performance.

💡Education and Training

Education and Training are essential for developing the skills and knowledge necessary for professional roles. The video discusses the importance of ongoing education in purchasing, highlighting the need for professionals to stay updated with the latest trends and best practices to contribute effectively to the strategic direction of their companies.

💡Operational Purchasing

Operational Purchasing refers to the day-to-day activities involved in buying goods and services to support a company's operations. The video contrasts operational purchasing with strategic purchasing, indicating a historical shift from a focus on transactional activities to a more holistic and strategic approach that considers the broader implications for the business.

💡Supply Chain

Supply Chain is the network of organizations, people, activities, information, and resources involved in moving a product or service from supplier to customer. The video implies the importance of managing the supply chain effectively, which is a key responsibility of purchasing professionals, to ensure the availability of materials and the efficiency of the entire production and delivery process.

Highlights

Introduction of the discussion topic: the importance of purchasing in business.

Sama's introduction: a teacher with 20 years at Young and prior experience at Walmart.

Sama's motivation in purchasing: the potential for development and meeting new teams.

The evolution of purchasing from an operational to a strategic business function.

The increasing education and professionalism in the field of purchasing.

The ongoing need for purchasing education despite advancements.

The variety in purchasing practices across different company sizes.

The potential for educated purchasing professionals to impact business competitiveness.

Sama's experience educating a Finnish company to expand their purchasing team's perspective.

The importance of internal collaboration for business development.

Encouragement for cross-departmental understanding of purchasing's value.

The concept of Total Cost of Ownership (TCO) and its significance in purchasing decisions.

The shift from focusing solely on price to considering the total cost of ownership.

The impact of make or buy decisions on the purchasing function and total cost of ownership.

The necessity of TCO in ensuring the success of the whole business.

Conclusion and appreciation for the discussion on the importance of purchasing.