Material Management is to manage the purchase objects with certain classification to obtain better scale advantages and bargaining power. For example, coordinate the purchasing strategies of each division, select the best suppliers and alternative suppliers at the company level, and negotiate and cooperate with suppliers based on the volume of the entire company.

The benefits of Material management are self-evident, but we must be aware of its cross-departmental, cross-product line and cross-business characteristics. With complex organizations and products, the Material strategies formulated by purchasing department are always useless and impractical

For example, the purchasing manager selects large companies as preferred suppliers for mass production capacity considerations. The design department prefers to find small companies ,owing  the time limit for new product development is too tight, small companies are “small and easy to turn around”, with flexible delivery and fast speed. Of course, purchasing can transfer the business to prestigious suppliers during massive production, but this will fall into a vicious circle of eliminating suppliers (purchasing-led) and looking for new suppliers (design-led) again and again. Not to mention the high cost, some products have to continue to use the suppliers selected by the design due to restrictions such as process flow, so the number of suppliers begins to expand, and the management cost and complexity of the purchasing department increase

Therefore, the design department is a key department in the product strategy. So are production, R&D, and marketing. Product strategy must take into account their actual needs and gain their unanimous approval. In North America, many companies that do a good job in procurement use a multifunctional group approach to manage products. For example, a procurement manager, a design engineer, and a production manager form a team responsible for formulating and implementing the product strategy for motors. This group is the Material team (some companies call it the “Supplier Action Team ( SAT ). Such a team is often led by procurement, but it does not necessarily have to be led by procurement. As long as the responsibilities and roles are clearly defined, people from any department can lead. For example, in a product group that the author participated in, the person in charge was a senior designer. He understood the technical requirements, production process, and supplier distribution of the product very well, and was the best leader of the product group. This also requires that the goals and KPIs of the product group be stated in his performance goals to ensure that he leads the product group from a multi-departmental perspective. This is premised on the approval of the senior management of the design department (because without the approval of the senior management of the design department, we cannot add the corresponding KPI to the annual goals of the engineers).

Regardless of whether the procurement object is simple or not, or how complicated the formulation process is, the main issues of Material strategy are the following: Which suppliers to do business with? What is the quota of each supplier? Which suppliers to look for when developing new products? The qualified supplier list and supplier access system are one of the core outputs of Material strategy. Without the cooperation of internal departments, supplier access will become a piece of waste paper. One way to get internal departments to cooperate is to let them participate in decision-making. In this way, the supplier list and supplier access system determined by everyone will have more credibility and easier to implement. As the management department of suppliers, procurement should have a systematic method to ensure that these systems are jointly followed. When I manage suppliers, I will regularly review the orders of new products to see which suppliers are awarded. For example, a non-preferred supplier gets a lot of new product orders through a personal relationship with a buyer; some engineers like to use small suppliers they are familiar with. After understanding the reasons, this buyer finally left (of course there are other reasons). The engineers made them realize that the suppliers on the qualified list can also meet their price and delivery requirements, so there is no need to continue to use other suppliers. For production-oriented enterprises, it is necessary to grasp the design stage, otherwise the Material strategy will fail.

The supplier strategy formulated by multiple departments can withstand the test of practice and challenges. In a company, different departments often have different goals. Only when everyone agrees on the same strategy, understands the possible negative effects of this strategy, and takes “calculated risks”, when the real challenge comes, the affected departments will not resist the implementation of the strategy. For example. Purchasing formulates its own Material strategy and decides to eliminate supplier A and switch to supplier B. If this elimination process is carried out smoothly, if there is a material shortage and downtime, the production department will probably overreact and escalate the complaint, and the procurement will never have peace. However, if the production department is also one of the makers of this decision, their reaction will naturally be different. People can understand the long-term benefits of the strategy. However, in order to achieve long-term benefits, it must mean some short-term sacrifices. The formulation and coordination of multiple departments can also make everyone aware of potential problems and think about countermeasures as soon as possible. Collective wisdom is naturally more effective than only procurement decision

This also explains why some companies, such as IBM, have a dedicated Material Council. This way of operation seems slow, and it often takes a year or two to make a decision. But once a decision is made, it is much easier to implement. In fact, in large companies, slow is fast. Steady and slow is often more effective than rushing for quick results. Take Material strategy as an example. Purchasing can come up with it alone. It is fast, but after a year or two, it still faces the same old problems because other departments do not cooperate and the strategy cannot be implemented. The tragedy of procurement is that it rushes for success and comes up with one strategy after another, but due to lack of internal and external recognition, it fails all the time.