One size does not fit all.

While many positive results have been achieved over the last 10 years or so as U.S. manufacturers made the transition from "purchasing" to "procurement," there have been some important negative consequences, as well. The negative impact of this transition on the North American metalcasting industry is well known, but is not the subject of this column. Instead, this column is about the self inflicted negative consequences suffered by the OEMs themselves.

At issue here is the "one size fits all" approach to casting procurement that virtually all OEMs have instituted over the last decade. As best I can figure, this approach is rooted in the widely held, but profoundly incorrect, assumptions that virtually all castings and metalcasting facilities are alike, and that castings are "dumb metal"--in other words, that all castings are commodities.

Based on these incorrect assumptions, OEM procurement departments have been crammed full of business-oriented purchasing agents who possess strong negotiating skills but little knowledge of the products they are charged with buying and only scant awareness of the requirements of the internal manufacturing processes they are responsible for supplying. Similarly, procurement has assumed new and unprecedented prominence in OEM business strategy and management and has been endowed with a new level of influence and autonomy. Thus, today's procurement departments are often estranged from both their supplier base and the manufacturing organizations they are supposed to be supporting, to the detriment of both cost and competitiveness.

An executive at a prominent machining company summed this phenomenon up well (and colorfully) when he told me recently, "The biggest threat facing us today is the growing ignorance about castings in U.S. manufacturing, and this is due to the fact that accountants are calling the shots instead of manufacturers."

Three important changes would go a long way toward undoing the damage OEMs have caused themselves through use of the dominant, one-dimensional, "one size fits all" approach to procurement. These are:

1. End the practice of judging purchasing agents' job performance based on the amount by which prices have declined.

While file current approach is easy to understand and administer, it is perhaps the root of all evil when it comes to total cost and manufacturing competitiveness. Instead, the ability to contribute to a lowest total cost operation should be the measure of procurement success. Of course, total cost refers not only to procurement costs but also to quality costs, warranty costs, switching costs and so on.

2. Treat commodity castings like dumb metal, but treat engineered castings like the technically complex and knowledge-intensive products they are. OEM procurement departments need to stop treating all metal castings alike. Instead, commodity castings need to be identified as such and sourced globally at one of the lowest total cost producers. This is the role today's crop of young MBA procurement-types are perfectly suited for. On the other hand, the vast majority of today's procurement staff is well out of its depth when it comes to what might be called "specialty castings." Specialty castings are absolutely not commodities, and when they are treated this way, serious damage to OEM manufacturing effectiveness is often the result. These castings also need to be identified as such, and sourced locally at a facility skilled at delivering the particular set of values the OEM needs. To be clear, specialty castings are those that are highly challenging to produce, leadtime-intensive, extremely low volume, extremely large, or any one of a score of other value-based attributes.

3. Implement a multi-dimensional approach to procurement. Suppliers of specialty castings need to be selected and managed by a procurement staff that is technically competent, metalcasting facility-savvy, and manufacturing- (and quality) friendly. Facilities have straggled mightily over the years to rum procurement neophytes into smarter buyers, but they cannot do it alone, especially considering that the average purchasing agent is on me job for less than one year. One such approach that has worked well in the past is that of the cross-functional procurement team, which is comprised of individuals with diverse functional backgrounds (procurement, quality, manufacturing, engineering, etc.) who can champion and effectively blend both plant and headquarters perspectives. Another somewhat less-effective approach to sourcing specialty castings is that of a technical buyer. This alternative is less-desirable because it trades the current one-dimensional approach for another, albeit more effective, one.

As this column has always maintained, metalcasting CEOs need to play a meaningful role in the sales and account development process. In that light, it is absolutely appropriate for these CEOs to advocate for changes in customer policy of the type described here. It is in the facility's economic interests for them to do so, and, more importantly, it is in the Customers' interests, too. In fact, it is only within the unique CEO-to-CEO relationship that issues of this nature can be effectively discussed and debated, and that movement toward high-level policy change can be initiated.

Dan Marcus, TDC Consulting Inc., Amherst, Wisconsin