Stars are raring to go

PROCUREMENT UNIVERSITIES - Coming out of the far corners of the organization and getting up onto the big stage of strategic management – that's the development purchasing departments currently go through in many locations. To prepare procurement specialists for their new role, companies spend up to seven figures. Those training providers stand good chances to be awarded orders who not only know what buyers have to learn but also how they want to learn.

By Axel Gloger

The corporate university now has a little sister – the procurement university. What's special about this institution: Only industrial buyers go to school there, those managers who select and control their company's suppliers. The curriculum includes subjects such as negotiations, value chain management and process optimization. Such educational institutions specializing in procurement subjects are already being operated by some globally active corporate groups – for instance the multinational food group Nestle, the aircraft construction company Airbus, and the electronics group Siemens.

Since the turn of the millennium, this new field in continuing education has been growing, but had remained hidden for years from the public eye. Only insiders knew about the new trend. Procurement universities – or purchasing academies as the continuing education projects are also called – formed a small, fine market.
That only changed at the end of last year: The European Business School (EBS) pushed the new type of corporate educational institution into the limelight. Its Supply Chain Management Institute (SMI) specializing in purchasing invited to a worldwide contest entitled "Talents in Supply Chain Management". The objective: Finding, awarding and presenting the best continuing education institutions for buyers. On September 30, 2009, the spotlights were turned onto the educational institution by Siemens which was awarded the gold medal; a silver medal went to Nestle, and the bronze medal to Swisscom and the U.S. Postal Service.

This little world championship symbolizes a trend reversal: The purchasing department is leaving the rear corner of the organization. The department's staff members are no longer nonentities nobody is really interested in; now they are supposed to play along on center stage: "They arrange strategies, increase the corporate value, realize profit contributions", this is how Sven Marlinghaus, partner at the procurement optimizer BrainNet, describes the new role of industrial buyers. So the procurement people take off their sleeve protectors and leave behind the role of odd jobber and price cutter in purchasing.

Crisis as a chance to pass the test
During the crisis in 2008/2009, companies really became aware of their buyers' value when penny-pinching was the standard just about everywhere. "Reducing short-term purchasing cost, unblocking liquidity," that's how Gerd Kerkhoff, founder and general manager of the Düsseldorf-based procurement optimizer Kerkhoff Consulting, describes the agenda which buyers and consultants had frantically worked on at that time. They were hunting for the so-called "quick wins" – fast advantages which, in the form of expenses saved, were to provide companies with additional financial maneuvering room. Many contracts with suppliers were renegotiated within a few weeks; moreover, supply chains were stabilized – vitally important in times of stockless production.

Having passed the test in the crisis, many companies had an increasingly greater desire to further 'upgrade' their purchasing departments which are called procurement departments in the international management language. The objective: "In the future, procurement people in the companies are to optimize the entire value chain", explains Kerkhoff. Thus, they are to decide on their own, for instance, whether they want to buy the individual components for the dashboard and have them assembled at the plant or whether they rather want to obtain from the supplier the complete dashboard ready for use. Concerning durable capital goods, the so-called "total cost of ownership" also needs to be considered in the future, i.e. what maintenance will cost, or service, possible downtimes, as well as spare parts of the machine. "The successful procurement manager also keeps the risks in sight at all times which may result at the individual steps of the procurement chain", that's how Nicole Gaiziunas supplements the task list. She is General Manager of the Supply Chain Management Institute (SMI) and responsible for Executive Education.

Smallest budgets for continuing education in purchasing
That's a big task and cannot be mastered without intellectual upgrading. "To get the super buyer, one must invest in heads", that was the credo at the award ceremony of the SMI competition.

But it also calls for a rethinking process. Because when a company's specialized areas used to receive warm showers of courses and trainings in the past, the company's purchasing department was often left dry. According to a study with the short title "Quest" conducted in 2007 by the consultancy BrainNet, companies merely spend € 876 per year and person for continuing education programs of their procurement staff; no other department is so sparsely equipped. For comparison: Sales/Distribution ranks first and gets € 7,200 per year and employee; the Marketing department gets € 5,300Euro, and the Logistics department € 4,600.

The picture changed, even drastically, for the pioneering users of the new continuing education concepts in the procurement department. Here, companies take six figures or even seven figures and let buyers line up in contingents of several hundreds to make them mentally fit for the new requirements: Procurement universities are generously endowed projects. At Deutsche Post DHL as well. Since 2005, they have a specialized continuing education program for its Purchasing. A total of 600 employees are involved, among them the heads of purchasing in 46 countries. "Filling the entrepreneur role, acting like an entrepreneur, fully utilizing the chances of the supply market for the benefit of the company", this is how Dr. Hugo Eckseler, Chief Procurement Officer (CPO) of Post AG, describes the guiding principle of the project "Fit4Procurement". It's set up according to the textbook:

  • Stocktaking: A job profile is prepared for all participants according to worldwide uniform standards.
  • Target definition: Actual and nominal profiles are prepared for every employee. Qualification measures will begin where both profiles deviate from each other. From the aggregation of profile deviations, Post AG derives a portfolio of standard seminars which are conducted worldwide. Subjects are for example: "Purchasing of production machines", "Purchasing of packing means".
  • Diversity of formats: In the starting phase, classroom training is primarily used which is later supplemented by e-learning formats ensuring greater flexibility of time for the participants and faster handling of the content logistics.
  • Self-management: In the advanced phase of the project, everyone manages his/her own competence structure. E-learning will support it. "Participants are to continue their training pro-actively and thus give up their consumer attitude", says CPO Eckseler.
  • Wikinomics: P2P learning will become an important component part of the progress made in knowledge and skills: "We want to hear about the good idea in Tokyo not just in three years, but immediately when it has been successfully implemented", says Eckseler. To achieve that, Post AG uses a method of share-of-best-practice which quickly propagates useful new knowledge.

Conclusion of the program: "The performance increase significantly exceeded the measure expected at the beginning of the project", sums up CPO Eckseler. Purchasing were now set up and ready for the future, he said. Instead of individual products or services, optimized packages are now routinely procured. Example: Instead of a batch of laptops, Post AG with its upgraded know-how will now buy complete PC networks which the supplier will install, service, update and provide with software.

Procurement universities usually pay off already in their second year
The fast return of invested funds is typical for procurement universities. Optimization profits usually cover the cost of further education already in the second year of operation. The payoff was even faster for the project "Competence management in purchasing" which Siemens AG had set up in 2007 for the Transformers business division. "Already in its first year, the program's benefit exceeded its cost", reported Thomas Holzner, Vice President Strategic Procurement at Siemens Transformers. Although the investment was by no means small: Of the 120 employees working worldwide in the department Strategic Procurement, 100 were included in the qualification program. Over a period of 15 months, they received training in three modules which comprised a total of about twelve days of further education.

"Thanks to the program, Purchasing is one of the important drivers of innovations", Holzner concludes. Moreover, he said, procurers were working with a better focus, and processes had gained in transparency and efficiency. Even personnel development which used to be rather a step child in this area had emerged from the program with a double plus: It had only been the specific further training of ten top talents that caught the attention of the responsible people. In the future, those ten will be able to take over executive positions in purchasing and thus defuse the expected shortage of talents.

Universities do not provide enough junior staff
Extreme shortages are now already the standard in purchasing; qualified procurement managers are as rare as water sources in the Sahara. "Universities do not supply adequate numbers of graduates as junior staff", notes Kerkhoff, "it is true that all the better colleges and universities already have a chair for marketing and sales; but the special field of purchasing is still uncharted area in practice-oriented research." If any university or college picks up procurement at all, it is usually tagged onto another field. Only few universities and business schools lend more weight to this subject, such as e.g. the University of St. Gallen or the EBS with specialized chairs.

Accordingly, companies will have to do their own training for years to come. As a consequence, even small and medium-sized companies whose purchasing department typically has a staff of five to 20 persons meanwhile have to afford themselves a mini-format purchasing academy. Consulting and further education providers already reacted to the new demand and include corresponding offers in their portfolios. For example, the Düsseldorf-based personnel consultancy Penning Consulting conducts special qualification measures for procurers which take three to twelve months, beginning with a strategy workshop and subsequently including interval training periods in blocks of two days each. As a rule, training is provided in four special fields: Data analysis, supplier management, procurement controlling and handling negotiations.

Especially broadly set up providers like Penning Consulting frequently collaborate with external trainers in the implementation of procurement universities. According to the Quest study by BrainNet, a total of 36 percent of continuing education programs for buyers is carried out with external trainers. "Wanted are trainers who have a basic understanding of the mode of operation and the most important circuit systems in purchasing", says SMI General Manager Gaiziunas who is also active in training executive personnel.

Background as head of purchasing or distribution
Job experience in this application area is accordingly very welcome – many a successful trainer in the purchasing academies formerly used to be either a purchasing manager or, as a distribution manager, faced the purchasing side at the negotiation table. This ensures that he will share the mindset of his course participants: "Most procurement specialists are absolute pragmatics. They don't want any academic models but convertible knowledge", explains Stephan Penning, General Manager of Penning Consulting.

In addition to the generalists who are in on the market of procurement universities, quite a number of specialists have established themselves. These service providers not only provide trainer days but frequently also supply complete PE concepts. They will thus meet the need of those companies which want to bring up their purchasing staff from zero to one hundred which before had been undersupplied in terms of new knowledge. That means, these companies want to prepare their staff for the requirements of tomorrow, but they also want to eliminate the failures of the past.

One of these specialists is Positive Purchasing. The training company was founded only in 2003, but with a staff of 14 people today, it's already among the big ones in the fragmented training sector controlled by very small firms. Positive Purchasing is headquartered in Plymouth, GB, and offers all relevant topics in purchasing, starting with purchasing strategy via supplier management all the way to corporate social responsibility. The Danish Purchasing and Logistics Forum (Dilf) is on the market with similar offers and serves primarily clients in Scandinavia. In contrast, the British management consultancy Future Purchasing with headquarters in Guildford also conducts Europe-wide purchasing academies.

SMI: German battleship among suppliers
SMI supplies companies according to the same pattern – but of course three sizes bigger. The Executive Education branch of the institute can employ 19 EBS professors as lecturers specializing in the study subject procurement. In addition, SMI has 40 salaried trainers and a large number of free-lance trainers who are used by SMI in its programs.

That makes the university institute one of the battleships on the continuing education market for buyers. From one source, SMI can also do projects by globally active groups. "Our presence in China, India and Russia provides us with local know-how from three of the most important procurement markets worldwide", says General Manager Gaiziunas. Per year, the EBS offshoot gets 2,500 participants in their training. Moreover, with a mix of consulting and training, it provides ready-to-use concepts for procurement universities and supports them with their implementation.
So there is a lot going on and a lot of movement on the continuing education market for the purchasing people. It looks like companies finally begin to accept and recognize the age-old saying "profit is in buying". It will certainly take some time yet for regular training in purchasing to become everywhere just as perfectly natural as in distribution or sales. But a new leaf has been turned at least.

Continuing education in the purchasing department:

Study about the status quo
In September 2010, the publisher Wiley VCH-Verlag, Weinheim, will publish the book "Der strategische Faktor Personal im Einkauf. Warum manche Einkaufsorganisationen erfolgreich sind - andere aber nicht' ['The strategic factor of personnel in purchasing. Why some purchasing organizations are successful – but not others']. The authors are Stephan Penning and Gerd Kerkhoff. Within the scope of preliminary work for this book, personnel consultant Penning recorded the "personnel barometer for purchasing", a survey of 500 general managers and heads of purchasing regarding their educational activities for procurement managers. Below, the most important results in excerpts.

Purchasing used to be the step child in continuing education.
Currently, purchasing is still undersupplied with regard to continuing education. A typical procurement department has 2.7 continuing education days per employee and year. The average of all departments is significantly higher; depending on the calendar year, between 5 and 7 days per employee and year.

High demand of continuing education in three specialized fields.
In mediocre or not very successful companies, buyers are often not fit in procurement topics of the future. Specially targeted continuing education programs should make employees mentally fit especially in the fields of procurement controlling, risk management and global sourcing.

Successful companies rely on interdisciplinary soft skills in purchasing as well.
Highly competitive companies also invest in their buyers' soft skills. They make sure that procurement managers hold their ground in competition with other departments and that they have high staying power vis-à-vis the other side of the market (distribution by the supplier). Investments are made especially in the areas of conflict handling skills, conducting negotiations, entrepreneurial way of thinking, and general willingness to learn.