Global Scramble for Goods Gives Corporate Buyers a Lift

By TIMOTHY AEPPEL

LYON, France — Once lowly bureaucrats, purchasing managers are shifting onto the front lines.

Robert Ward is one of them.

He is in charge of purchasing for Manitowoc Co., one of the world’s biggest crane makers. His job is to ensure an unbroken flow of parts and materials from around the globe, hunting industrial tires in China and scouring the Midwest for giant bearings. And he has broad discretion over Manitowoc’s operations to make sure critical supplies aren’t held up.

“Buyers are the ones with the checkbook — and there’s a huge power in that,” says Mr. Ward.

Recently, he was in France, agitated, and meeting with two Polish suppliers who weren’t delivering all of the metal chassis they had promised to Manitowoc’s big crane factory in Germany. No chassis mean no cranes.

The president of one of the suppliers — who had just driven 16 hours from Poland to meet with Mr. Ward and other managers — announced unexpectedly that deliveries could actually slow further in coming months.

“I have a lot of angry customers, because I have not been able to deliver cranes,” said Mr. Ward, gazing at the Pole over the top of his half-glasses.

His interpreter began translating — then stopped and asked, “Did you say ‘angry’ or ‘hungry?’ ”

“Both,” snapped Mr. Ward.

Mr. Ward is one of a new breed of purchasing gurus who have become a hot commodity in recent years. As more companies globalize and outsource production, they need a top-level point person who can manage these complex relationships, navigate various foreign cultures and be willing to travel constantly.

Purchasing offices were once corporate backwaters, filled with people who didn’t dream of advancing to the top rungs of their organizations. Many buyers saw themselves as industrial bureaucrats, filing purchase orders with the same short list of familiar, mostly nearby suppliers. When possible, they avoided the complex process of assessing potential new suppliers, especially those overseas.

Top buyers today need different skills and often have higher aspirations. Sometimes they’re engineers or others with operating experience that gives them more intimate knowledge of how their company’s products are made.

Tim Kelly, for instance, is now chief operating officer at Sermatech International Co., in Pottstown, Pa., a maker of industrial coatings. He got his start in manufacturing at General Motors Corp. and eventually worked his way into purchasing at GM and elsewhere.

• What’s New: Corporate buyers are taking on higher-profile roles, consolidating buying across companies and dealing directly with suppliers to win lower prices and better service.

• The Background: The surge in outsourcing and globalization in recent years means companies need to manage a complex web of supplier relationships. • The Bottom Line: Companies with effective purchasing managers stand a better chance of keeping costs low and avoiding supply bottlenecks.

Mr. Kelly’s approach is iconoclastic. He often moves buyers out onto the shop floor where parts are being used, so they get a first-hand sense of what is important to the people who use those items, or assigns them to suppliers, to help the suppliers improve their own processes and thereby reduce costs.

“When we’re sourcing a part, we want to know the process of making it as well — or better — than the person we’re going to see,” he says.

Alcoa Inc., International Business Machines Corp., and Sara Lee Corp. have all created chief purchasing officer positions, often reporting directly to the chief executive or chief operating officers.

Today’s transformation in buying was made possible by a technological breakthrough more than a decade ago, when companies began installing computer systems that record their every transaction.

This often revealed startling weaknesses. For instance, many companies found that different divisions — or even different offices down the hall from one another — were sometimes paying different prices for the same product bought from outside suppliers.

Purchasing managers play a role as highly effective cost cutters, though that part of their job has some surprising nuance. To be sure, buyers save companies huge amounts by trolling the world for new, lower-cost sources, and this is certainly a big reason for their growing stature at many multinationals. But in an era of scarce commodities and the risks of disruptions to supply lines posed by terrorist attacks or striking dockworkers, they also have to make sure they pick dependable sources — which might mean choosing the more expensive source just to assure no disruptions.

Nothing is worse for a buyer’s reputation than throwing business to a low-ball supplier who then has trouble delivering.

Mr. Ward has had his share of problems. For example, he has been working recently with a new supplier in China to develop it as a low-cost alternative for a U.S.-made part used in Manitowoc’s refrigeration equipment, called a “copper accumulator.”

“The supplier told us he was UL qualified,” says Mr. Ward, referring to the Underwriters Laboratories certification that is often required on manufactured goods. Manitowoc did its own due diligence, conducting engineering and quality studies of samples sent by the Chinese outfit and visiting the supplier’s factory in China.

But on a recent trip, the supplier admitted to Mr. Ward he wasn’t UL approved after all. “So now we’re back to square one.”

In another case, he thought he had found a good low-cost Chinese supplier for the electric horns used on cranes. Horns are a very basic item and finding a cheaper source than the company’s current U.S. supplier seemed like it would be a no-brainer, he says. But, he has tested two shipments of samples thus far — and the horns keep failing Manitowoc’s quality tests.

“This is another case where the project has to start all over again — we’ll go out to a list of suppliers and see who was next best on the list,” he says. “This has gone on for six or seven months, and I hate to think about what it cost us in engineering time, testing.”

Mr. Ward says he wound up in purchasing almost by accident. His first job out of college, as a management trainee at Mobil Oil Corp., involved some aspects of purchasing. He then worked in purchasing at a series of defense contractors, including the big Bath Iron Works shipyard in Maine, and most recently at SPX Corp., a maker of industrial gear based in Charlotte, N.C. Along the way, he spent 26 years in the Marine Reserves. “Being in the military teaches you a heck of a lot about how to get the right stuff to the right place so you can do your business,” says Mr. Ward, who served as a company commander in the first Gulf War.

Before Mr. Ward came to Manitowoc, the company had purchasing bosses for each of its three divisions — refrigeration equipment, shipbuilding and cranes — but nobody responsible for the overall strategic direction of their buying. Buying small lots of materials for myriad divisions of the company meant missing out on the leverage it could have gained with large purchases — meaning it wasn’t getting the best prices or service.

As the company began outsourcing more of its parts from all over the world, it realized it needed someone in charge of buying who could roam the company’s 41 facilities in 14 countries, trouble-shoot the most daunting problems, and help train buyers in the various locations on how to do strategic buying.

“The thing you have to realize is that if you’re going to buy so much from outside the company, you’d better be very good at it,” says Glen Tellock, Manitowoc’s chief executive, noting that in the crane business alone the percentage of the total cost of products made up of outsourced components has doubled to 60% in the past decade. “If you’re not good at buying in today’s world, it’s a big competitive disadvantage.”

Mr. Tellock says it’s crucial to have someone like Mr. Ward, who reports to him, guiding the system. And it helps, he adds, that he comes from outside the company — and the industry — since he brings new ideas. That was critical because the crane business is Manitowoc’s most global, and also the one that has faced the biggest problems with suppliers.

With a global construction and infrastructure boom under way, Manitowoc, with annual sales of about $3 billion, has been rushing to expand output. Recently, though, the pace of this buildup has been slowed because of a bottleneck in Europe. Mr. Ward has to break it.

His recent trip to the company’s European headquarters, nestled in a leafy suburb of the French city of Lyon, was prompted in large part by continuing delays in deliveries of key chassis parts to its German factory from suppliers in Poland. The parts are built to Manitowoc’s precise specifications and can’t be easily bought somewhere else.

Sitting in a conference room with a half-dozen of Manitowoc’s Europe-based purchasing managers and one of the Polish chassis suppliers, Mr. Ward listened as they aired their respective frustrations.

Andrzej Lewandowski, president of the Polish company, Gliwice-based Zaklady Mechaniczne Bumar Labedy SA, complained that the Manitowoc people weren’t telling him far enough in advance which parts Manitowoc’s German plant needed on a weekly basis. As a result, he sent other parts that weren’t the ones expected on the production line.

Mr. Ward turned to his buying colleagues and forged a plan. One of Manitowoc’s top European managers was going to Germany the next day and agreed to buttonhole the manager at the German plant who was responsible for visiting Polish suppliers every week. He would instruct the manager to communicate better with his Polish suppliers, or someone else would get the task.

But even if the communication problem is fixed, Mr. Ward knows it’s not going to solve a more fundamental problem: The Polish supplier can’t get enough steel to make the chassis.

Mr. Lewandowski told the group that a steel mill in Scandinavia that supplies much of the metal is behind on shipments. And the mill is actually planning substantial, temporary cutbacks in what they’ll be shipping in the fourth quarter.

Moreover, his own Polish plant, a former tank factory, is struggling with a growing labor shortage. Since the start of the year, when Western European countries made it easier for Polish workers to migrate in for jobs, there’s been an exodus of skilled workers from factories in Poland. Mr. Ward listened politely, but could do little about the country’s labor problems and sensed it is a pretext for trying to get more money from Manitowoc.

Mr. Ward’s meeting with the other Polish supplier didn’t go much better. Piotr Majcherczyk, president of the other supplier, also said he isn’t getting enough steel. In addition, he demanded a 9% price increase to keep his workers from migrating West. Mr. Ward said he would entertain a price increase if the supplier not only guaranteed shipments but could also expand capacity.

Mr. Ward also promised his suppliers he would help with their steel shortage, but said it would take time. He has already visited with one big European steel mill, aiming to use the huge steel purchases Manitowoc makes across all its divisions as leverage.

Mr. Ward has been through this situation before and finds that power is constantly shifting from buyers to sellers and back again. Last year it was tires. Manitowoc’s factories kept running short of the large sizes of tires used on mobile cranes.

But no matter how many times Mr. Ward pressed his longtime suppliers, they refused to produce more for him. So he called an outside consulting firm, which sent him a list of 97 tire factories from Brazil to Bulgaria that could potentially make the tires. He eventually found one in China.

“And now, wouldn’t you know it, my old tire suppliers are saying they can make more for me after all,” says Mr. Ward. “It’s amazing what a little competition can do.”

As for Poland, Manitowoc has hired a consultant to go into one of the Polish factories to help them streamline their systems, hopefully allowing them to increase output without adding more workers or machines. In the meantime, Mr. Ward is looking around the world for stocks of steel plate held by distributors that might be snapped up and diverted to Eastern Europe for use in those Polish plants.

“We’re out scavenging to make up for some of what we need,” he says. It’s more expensive than buying the steel directly from the mills, he says. But in his business, the gauge of success is keeping supplies flowing.

Write to Timothy Aeppel at timothy.aeppel@wsj.com

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