As the recession unfolded, supply chain staff levels in many companies were hit hard, in the procurement organization as much as anywhere.
Often, the level of work did not decline anywhere near as much as the reduction in headcount – and that meant longer, more intense work hours for those that survived the cutbacks.
That not only takes a personal toll, but can lead to poorer performance as well, as staff is not sure how to best prioritize the work that is more than they can collectively manage.
That’s the challenge Steve Collins and his colleagues had recently at a multi-billion services firm headquarted in Troy, MI (easy enough to deduce who the company is).
Writing in the most recent edition of The Institute for Supply Management’s Inside Supply Management magazine, Collins says purchasing staff was downsized some 30% during the recession, “but the expectations for the remaining employees remained unchanged…The additional workload placed on the remaining employees following the downsizing created a much more challenging environment.”
To cope, the company developed what is calls a Purchasing Impact Matrix (PIM). The PIM approach is similar to the familiar ABC analysis, with a few differences, and allows individuals and departments to tailor the level of effort based on the rank of the activity.
How the PIM Works
According to Collins, there are three steps involved in creating the PIM.
Step 1 — Create a list of all of the known activities for the year (for example, contract expirations, new sourcing opportunities, supplier management and the like): Most tasks should be known at the beginning of the PIM process, but others may come up later that need to be added.
Step 2 — Define categories and scoring tiers: Collins says that there are three categories of measurement that should be considered:
(1) Annual contract value: total amount of projected spend with a vendor.
(2) Business impact: How core is the vendor to the operation of the business?
(3) Savings opportunities: Where is the most opportunity?
Collins’ company used a 1-10 scale (10 being the highest) for each of these categories.
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