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• W230091479 abstract "Lt. Col. Michael E. Heberling is department head of the Department of Systems Acquisition Management at the Air Force Institute of Technology located in Wright-Patterson AFB, Ohio. Dr. Heberling received his doctoral degree in purchasing management from Michigan State University. Joseph R. Carter is Associate Professor of Purchasing and Logistics Management at Arizona State University. Dr. Carter holds a D.B.A. degree in operations management from Boston University and is recognized as a Certified Purchasing Manager. John H. Hoagland is Professor of Purchasing Management and N.A.P.M. Professor at Michigan State University, Emeritus. He received his Ph.D. degree from The Ohio State University. Dr. Hoagland is recognized as a Certified Purchasing Manager and is a recipient of N.A.P.M.'s J. Shipman Gold Medal award. Management has focused a great deal of attention and resources on improving the efficiency of direct labor employees. It has tried to increase the productivity of these workers by improving attitudes, tightening discipline, providing training, or when all this fails, eliminating workers. Unfortunately, direct labor costs exceed 10 percent of sales in only a few industries. In contrast, purchases exceed 60 percent of sales in many industries. Hence, it appears that management should accord materials expenditures an even greater level of attention than that which is currently reserved for labor expenditures. This article provides an empirical justification for that restructuring. The authors present research concerning the proportion of costs attributable to major types of purchases and to labor by all major industry categories. INTRODUCTION|1~ It is widely acknowledged by industry leaders that becoming globally competitive requires effective management of the productive and material resources of any organization. Cost, quality, delivery, and flexibility have become the watchwords in manufacturing operations. In their relentless pursuit to match and exceed foreign competition, U.S. industries increasingly are viewing purchasing not just as a necessary function but as a weapon in their strategic arsenal. Purchases are known to represent a major commitment of resources for many individual companies and for some types of industries. To date, however, limited information has been published on the total magnitude of dollars spent for purchases by American businesses and governments. Furthermore, there has been little definitive information available that allows inter-industry comparisons of purchases (materials and supplies, energy, resales, capital equipment, and other items) or comparisons of the relationship of purchases to revenues and other cost elements, such as wages and salaries. And when purchase figures have been published, often they significantly understate total purchases either by addressing only the manufacturing industry or by providing figures for only one company, and not for a total industry. In reality, America's management has largely failed to recognize the importance of purchases as a major investment element in business operations. Knowledge of cost proportions should direct control efforts. In many companies, although direct labor represents less than 10 percent of the product cost, labor receives a great deal of attention by industrial engineers, factory supervisors, and labor negotiators. Purchased materials may represent 50 percent or more of product costs, but many companies consider purchasing activity routine...a shift of attention will benefit the company.|2~ The proportion each cost element contributes to total production cost is an important factor in deciding which costs to control. For example, for a product whose labor cost is 5 percent of production cost and material cost is 80 percent, control of material costs obviously is important. Yet many companies have elaborate systems to control minor elements of total cost, but ignore more important cost elements. …" @default.
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• W230091479 date "1992-09-01" @default.
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• W230091479 title "An Investigation of Purchases by American Businesses and Governments" @default.
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• W230091479 doi "https://doi.org/10.1111/j.1745-493x.1992.tb00580.x" @default.
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