In Practice

Making the Transition to Strategic Purchasing

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This article contends that companies' traditional approach to purchasing misses the function's significant potential to add value by driving innovation and superior long-term cost performance. As a former senior vice president of technical purchasing for BMW, the author oversaw the transformation of the department's mission from functional to strategic, and he offers insights about the transformation. Strategic purchasing, he says, can only be effective if the purchasing department constantly expands and updates its technical knowledge to preserve credibility with both suppliers and internal departments. Toward that end, BMW's purchasing agents spent up to 20% of their time training — in everything from foreign languages to technical know-how to contract law. In addition, BMW began to hire industry experts and train them as buyers who had as much in-depth knowledge as the suppliers with whom they would be dealing.

The author describes how BMW associates become involved at the early concept stage of product development, often suggesting how certain design features will affect the technical equipment at the factory or the level of investment that will be required to execute the design. They also suggest what types of materials, components and systems best meet end-user requirements.

Horst-Henning Wolf was senior vice president of technical purchasing for Bayerische Motoren Werke AG in Munich, Germany, from 1994 to 2004, and is a senior lecturer in engineering at the Technical University of Munich. Contact the author at horst-henning.wolf@tum.de.

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