I interviewed Tony Noe who discussed Product Versus Process Knowledge: How to Decide Who to Hire?
Can you first provide a brief background of yourself?
I’ve been in the procurement profession for just over 40 years. I started in Mill Supply, industrial supply company and have been in several Fortune 500 companies—Siemens, Emerson, Holley, Johnson Control’s automotive group—a number of companies that are very large operations. I’ve served as category manager, as director of procurement, manager of purchasing, a number of different titles, which are typically found within different companies, called the same exact position, different names. I’ve been the boss and I’ve been the follower.
Thanks. My first question is regarding finding sourcing professionals. What are the stumbling blocks that a hiring manager may face when looking for talent in sourcing?
One of the things that’s not unusual is to find people who are actually salespeople who want to switch the side of their desk and become a purchasing agent. Their knowledge is based on their knowledge from across the table of what it takes to do the purchasing job. They know they get a purchasing order; they know that the purchasing agent looks for the best price, but that’s about the extent of it. A lot of times they’re not acquainted with the process of developing specifications, developing the RFP, RFQ, whatever you use in particular, and the fact that your customer, if you will, if it’s a manufacturing firm, is that guy on the assembly line. It’s not the customer who will eventually get the assembly; it’s the person to whom you’re supplying goods to keep him working. A lot of times, that’s a critical factor to make sure that they’re aware of.
Making sure what the background is, also making sure, in the course of the conversation, what you’re looking for is a person who adapts well to change, because there are different requirements depending on what kind of buying you’re doing, or is this a person who really needs some focus time to be able to do a good job. In other words, they really can’t be interrupted constantly and do a really good job.
The first type, the guy who really adapts and takes change, just rolls off his back, doesn’t bother him at all, they make excellent MRO buyers—material, repair, and operations buyers—because in that environment, your requirement changes constantly, and people from the plants and maintenance department of the plant, sales expediters are constantly bombarding you, wanting their number one priority to become your number one priority.
On the other side of the coin, you have the raw material and manufacturing buyer who is looking at—typically in a larger company—he’s looking at some kind of ERP that’s telling him some period out on a forecast, what he needs to buy so he can work out the best deal for whatever it is he’s buying. He knows a quantity, he’s got a history, he knows, he can look at history and see he’s been buying this about every two months, this size quantity, so he has a pretty good feel for what the overall annual volume is. He can take all of that knowledge and put it together in a reasonable RFP or RFQ so that the supplier has an idea, a very good idea, not only of today’s requirements, but tomorrow and the next day and the next day after that.
It’s a different type of buying. Typically, an MRO buyer will be interrupted every 15 minutes, sometimes more frequently, sometimes out to a half hour between interruptions. A raw materials supplier frequently—if he’s doing his job right—they can go for two or three hours before somebody wants to interrupt them or there’s a salesman calling or something like that.
Plus, in raw-material buying, you have an opportunity to schedule sales calls, whereas an MRO, there’s always another salesman wanting to sell you drilling tools, cutting tools, grinding tools, janitorial supplies, paper for the copier; there’s always somebody selling something. They’re much narrower in their area of representation because there are more of them, whereas if you’re buying production material, there just aren’t that many people selling steel, there aren’t that many people selling copper, and until they know your volume, they may not want to call on you in the first place, so you have to go out and look. It’s very different. You have to identify personality type, and that’s part of the process too.
Would you say that process or product knowledge is more important when hiring sourcing professionals?
I think in the majority of cases, the process knowledge, the knowledge of how to do a reasonable buy; do a very logically developed RFQ and then an evaluation of that quotation, proposal; developing the specifications so that they’re clear but not restrictive.
Early in my career I had an opportunity. I was buying things for the state of Oklahoma and the IT department wanted some new mainframe computers because they were maxed out on what they had. In their specifications, they had in there that the panels on the outside of the computer needed to be blue. Well, I wasn’t a big IT person, but I knew enough to know there’s a reason IBM’s called Big Blue, and other mainframe manufacturers use other colors on their mainframe panels, the outside, dressy panels.
He was trying to restrict it to just IBM mainframes, so I challenged it to find out if there was a good reason. The only reason he had was that they matched what they already had. Not a question of maintenance, it would be cheaper if they had all the same manufacturer or something like that; it was strictly that they looked good sitting side by side.
That skill, that knowledge of the process, the knowledge to know what you can share with a salesman versus what you absolutely should never share with a salesman. The personality that you’re not going to be influenced by a salesman taking you to lunch or dinner. That your ethics are well-developed and understood. That whole realm of the process of being a professional purchasing agent, senior buyer, whatever title your company happens to have. That process, to me, has always been far more important because I find the learning curve of a product, be it corrugated boxes, plastic molding, raw materials in the steel and red metals range, ferrous and non-ferrous.
All of those you can learn. There are always, in a true manufacturing company, there are always experts in your engineering department who know the details and specifics of the raw materials, and they can advise you and guide you, whereas they can’t help you with the process; in fact, they may lead you down the wrong path. More valuable to me is knowledge of process than knowledge of product, with a few exceptions.
And how would a hiring professional evaluate whether someone has the process knowledge?
Generally, in a one-on-one interview either one the phone or face-to-face, asking some key questions such as situational type questions, where you would say, “Okay, you’ve got three current suppliers of left-handed widgets, and you’re trying to determine the best strategic sourcing plan for your company. How would you go about that?”
The answer they give you is going to tell you a great deal about their understanding of the process, if you will, of strategic sourcing. If their answer is, “Well, I’d ask them all the quote and see who had the best price,” they’re probably not ready for a really heavy workload in strategic sourcing because they’ve missed a lot of different factors, such as: Are these the best three suppliers of that type product? Are there other people out there who are better? What’s your history with the three that you’re dealing with today? Are they delivering on time? Have you had pricing problems? Do their prices go up constantly, and, really, all they give you is, “Well, that’s the way it is”?
If the rest of the story isn’t part of the answer, they’re probably not as process-savvy as what you may be looking for. If you’re looking for an entry-level, yeah, they certainly could help you out. But if you’re looking for somebody to take charge of a commodity category and handle it, you’re probably going to be looking to have to help them a lot, whereas if—and I’ve had this happen—you’re looking for somebody in a category, a commodity manager, and you ask them how to deal with it, and they start asking the specifics about what gauge metal, what the finish is like, etc.
If they start asking very specific questions about the commodity itself, then you know they've got the product knowledge, but you’re still trying to get them back to do the newer process too. I’ve known a few engineers who’ve gone to the purchasing area and done very well; not as many as I wish, because they would get hung up sometimes on the product specifics and sacrifice price, delivery, requirements, things like that to get exactly the right, perfect material. We frequently say in purchasing, “It’s getting the right material at the right price at the right time.”
One of the things we need to always keep in mind, the right material that is just right for the application, it’s not better material and it’s not worse material. It’s just right. You can get out there in the sourcing world and frequently find somebody who can make it to a tighter tolerance, to a higher finish, but do you need that? You’re paying for that; you’re paying for that extra expertise, that extra skill.
Some years ago, buying castings, just gray iron castings, there was a company out of Germany that I was dealing with that was capable of making gray iron castings with such a fine finish that they didn’t even need to be sand blasted to look like they’d been polished. In their casting operation, they could cast threads that you could actually screw onto. That was great but that was not what I needed; I just needed casting. It was casting nobody would ever see; the finish wasn’t critical. I didn’t have threaded requirements. Their pricing was typically quite a bit higher, so for the application I needed at that point in time, it just didn’t make sense. Some castings I didn’t buy from because they had that lower requirement. You have to understand the specifics of your requirement and meet that, not what you think is better. Sometimes an engineer can get hung up in that area, and that produces a higher cost for goods sold.
Thanks, Tony, for sharing today.
I appreciate your time too.
About Tony Noe
Strategic Sourcing/Procurement Professional and Leader