Strategic Sourcing and Commodity Teams - Part 1 - A "Force Multiplier"

Much has been written lately about companies using Stategic Sourcing, and the term Commodity team is often thrown around as if every one understands the concept. So let's step back a minute and discuss Commodity Teams and how they can be an integral part of a Strategic Sourcing plan within a company. One term that I've often used to describe Commodity teams is a military term, "force multiplier."

According to wikipedia, "Force multiplication, refers to a combination of attributes or advantages which make a given force more effective than another force of comparable size. A force multiplier refers to a factor that dramatically increases (hence "multiplies") the effectiveness of an item or group." Let's face it, the analogy that business is war is apt, but we need to make sure that we take the fight to our competition, not on our suppliers or internal funtional silos.

In 1999, Motorola Network Infrastructure Group's Strategic Sourcing orgainization, then lead by Trevor Munden, instituted commodity teams across a wide range of commodities, and it paid handsome dividends. The teams typically consisted of a Commodity Manager (who had responsibility for the commercial aspects of the supplier relationship), Supplier Development Engineers (who owned the technical relationship with the suppliers), Development Engineers (both Mechanical and Electrical, who represented the interests of the programs that they were assigned to work on), Buyers (who placed purchase orders and expidited shipments), and Supplier Quality Engineers (who owned the quality portion of the supplier interface).

These teams usually brought dozens of years experience to bear, and discussed current suppliers, future technology needs, industry trends, etc. The 1-2 hours spent every two weeks acted as a force multiplier in the regard that it aligned the needs of cost, quality, delivery and technology, and ensured that the team was all rowing in the same direction. When these team meetings aligned the needs of engineering with the needs of the strategic sourcing organization, they discovered lead to two key benefits:

1. Buy-in from all departments involved - this eliminated the perception that "sourcing is forcing us to use XYZ supplier just to save a few bucks," as well as its counterpart, "the engineers just want to use this supplier because they always used them, and the sales rep takes them out to lunch a lot."

2. It presented a consistent message to the suppliers. No longer could a supplier work in secret with engineering to get designed in without being brought to the table at a commodity team meeting. Suppliers benefitted by getting consistent messages regarding schedule, price and design expectations.

More on this later....