3.3 Introduction
The cost of a thing is the amount of life I am willing to give up to pay for it.
—Jon Hansen, in Good Debt, Bad Debt
You've heard the phrase, "Shop Till You Drop." It has appeared in many forms—e.g., Shop till you drop . . . It just makes sense—on bumper stickers, greetings cards, and handbags. Shop Till You Drop was also the name of a long-running (1991-2005) TV game show that aired on the Family and Lifetime cable networks. No doubt, the phrase is catchy. And, for some people, the phrase may ring true. However, for many of us, we would rather save our time and our money than go shopping—just for the fun of it. This is one reason e-commerce is growing so quickly. The reality is that we shop to fulfill needs. We buy bananas to eat for lunch, gasoline so we can get to work, and chocolate to make our sweetheart smile.
Shopping Till You Drop makes even less sense for the supply management professional. Companies don't buy things for the fun of it. They buy things to support operations so they can meet customers' needs. Purchased items are what economists call a The indirect demand for something that has value based on other goods that can be “derived” or made from it; that is, it is an input into another good.; that is, purchased items are a The term used to describe the inputs that are used to produce of goods or services. Typical factors of production include land, labor, capital and energy. used to create value. As a purchasing professional, you buy the things other people in your organization need so they can do their jobs. For example, you might acquire a stamping press for use on an assembly line, cheese to make gourmet sourdough pizzas, or laundry services to keep a hospital operating. You work with colleagues in marketing, R&D, and production to create great value for the external customer. If you provide a better value than rival firms, you win the customer's purchase—and maybe her loyalty!
What does this mean for you? Two points stand out.
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Your Colleagues Are Your Customers. As a purchasing professional, you need to recognize that you work for other people in your firm. You need to pay just as much attention to understanding and meeting their needs as your firm pays to satisfying external customers.
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You Must Structure Operations to Create Outstanding Value. As a supply professional, you need to organize your activities and efforts to maximize value creation. For example, you need to leverage your resources (e.g., dollar spend, expertise, time) to reduce the costs or improve the quality of purchased goods and services—and thus your company's competitiveness.