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In the end, the PIM model is just all about working smarter, Collins says. What Do You Say? Click Here to Send Us Your Comments Click Here to See Reader Feedback

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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He adds that the “Savings opportunity” criteria is often the most difficult to score because it is usually the most subjective, and that often – but not always – the biggest savings opportunities and largest spend areas overlap.

Step 3 — Assign scores to each activity based on scoring tiers:  After inputting the list of activities in the initiatives and the scores in the three measurement categories, the three category scores in the "total" column are totaled (see graphic below).

The highest score attainable is 30 (if category scores were 10 each), and would therefore be assigned to the A, or most important, effort-level category. The A, B, C rankings then tie back to the purchasing task table to define what level of effort the procurement organization will apply to each initiative.

Source: Inside Supply Management/Steve Collins

An important point is that in a period of low staff, using the PIM almost by definition requires others outside the purchasing organization to perform some purchasing-related tasks. While procurement would continue to handle core tasks such as contract reviews, non-core tasks, such as the creation of RFQs for low-impact, low-value initiatives, might be delegated to internal customers.

“Because internal customers are asked to perform tasks traditionally performed by purchasing, it is important they are equipped with the tools and knowledge necessary to perform these tasks,” Collins writes. “One approach to fulfill this need is to provide them with a purchasing toolkit with instructions, templates and examples for them to leverage.”

In the end, the PIM model is just all about working smarter, Collins says.

Of course, we’ll add, other departments may be similarly strained, so whether they have the bandwidth to add new tasks that were being handled by procurement also must be evaluated.

What is your reaction to the PIM approach? Do you use something similar? Do internal customers have enough bandwidth to take on the procurement work for low value activities? Let us know your thoughts at the Feedback button below.