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Article # 0027

UNCONVENTIONAL OCCUPATIONS

FOR ENGINEERS 

R.L. Langley, P.E.

 

Introduction

Many folks have a paradigm that engineers are “techno-geeks” that can do little outside a narrow, specific area of learned college degree expertise. Fortunately, this is a misconception recognized by many companies in that they have human resources departments that provide designed advancement progression choices between the “technical ladder”, or the “supervisory/management” avenue. The purpose of this paper is to provide practical, experience based insight into certain rewarding  areas of employment for engineers  that are normally thought of as  the exclusive purview of financial types (CPA’s, MBA’s,etc.), specify the applicable skill sets that allow the engineer to make value added contributions, and finally denote any pitfalls.

 

Director Supply Chain Management/Strategic Sourcing; Category Manager Strategic Sourcing

          For this article, strategic sourcing is defined as a function of supply chain management. It involves a defined process that includes the following steps:

·        Identifying what significant  goods and services are required to support the company’s business

·        Identifying the cost of the similar goods and services used across the organization.

·        Analyzing the cost and geographic factors, as well as location needs to determine what of the total spend across the organization is indeed “sourcable”.

·        Developing a Request for Quotation (RFQ) or Request for Proposal (RFP) for suppliers that provided identified sourcable goods or services.

·        Selecting which suppliers should receive the RFP or RFQ.

·        Receiving and analyzing the proposals or quotes to get all vendors “apples to apples” (this is one of the most difficult steps).

·        Selecting the supplier(s).

·        Writing the contract

·        Sealing the deal

·        Monitoring and measuring the supplier’s performance (communicate savings to users); lessons learned

 

All                    This work isn’t done in an engineering vacuum. Usually, companies perform the aforementioned steps with cross functional, user staffed teams. Successful strategic sourcing efforts require buy-in from user groups from the gitgo, and sometimes that’s a big challenge for a variety of reasons. For example, if it’s a decentralized company with opex accountability at a field office level, sometimes users have established, local suppliers and the prospect of changing isn’t too attractive. However, if the top management support is there and the spend is sufficient, successful sourcing can cut service and/or goods annual costs 10-15% average.  I’ve seen some costs cut as much as 40% in certain spend categories.

Engineers have much to offer in executing the sourcing process, particularly if s/he has (technical) experience in the company’s business and basic interpersonal skills. The steps that require numerical, specification and analytical skills—i.e. identifying what’s really “sourcable” out of the total category spend, developing the RFP/RFQ, analyzing  RFP/RFQ responses and getting to  “apples to apples” comparisons, developing evaluation parameters and scoring methodology for supplier selection, working with legal departments in developing the contracts, and developing measurable performance models.

 

Sr. Auditor-Accounts Payable

          This is a fascinating, but very competitive business. It’s sort of like metal detecting on a playground.  It involves securing a company’s accounts payables transactions over a defined period (usually 3-4 years) and identifying payment discrepancies (duplicate payments, payments in error, sales taxes paid in error, contract compliance, uncashed checks, etc.) leading to recovery for the client.   Usually this work is done on a straight commission basis, or very low base salary plus commission. The advantage to the client is that they only pay for recoveries, so for them it’s a no lose deal.

            This business is usually staffed with auditors that are CPA’s or have considerable financial or accounting background. The successful ones have a great deal of insight into interpreting financial/accounting data (data handling is usually contracted out) and how to manipulate data to get good results. However, just as non CPA or MBA engineers may lack detailed accounting insight, these type folks sometimes lack a technical insight into the physical processes that support the business. As an example, I worked with a CPA on a project where he was trying to recover sales taxes he thought were improperly paid on rental gas compressors scattered throughout Texas.  I have considerable background in midstream operations (gas processing) and I could tell from reading the statutes along with the angle he was pursuing, the State would probably never buy his argument. However, in Texas if one can prove that the process is “Manufacturing” and what one is trying to claim as exempt within that realm is “necessary and essential” to changing the physical product so it can be sold, there’s a reasonable chance sales tax exemptions can be realized.  In this case, through simple block diagrams and explaining process flows, we were able to convince the Comptroller that compressors were “necessary and essential” to change the product (remove water and contaminants from natural gas) for sales.  We were able to recover for the client about $1,000,000 in sales taxes improperly paid over a 4 year period by using this argument. This is a case where teamwork worked great—the CPA auditor felt strongly there might be an exemption here (and should be credited for the initial discovery), and the engineer helped explain it in a way that produced the desired result.

            Engineers can contribute in this business because they have an innate curiosity about what makes just about any manufacturing or service business operate, they can assimilate and analyze data (with proper PC skills), they can spot patterns in payment records (root cause analysis) and extrapolate to other potential, they have skills in converting contract verbiage to quantifiable terms, and are detail oriented.  As a related matter, a good measure of perseverance is sometimes required to affect a successful collection, so that’s a helpful attribute that’s usually learned by engineers through structured academic programs.

 

Purchasing Agent; Contracts Administrator

 

            Akin to strategic sourcing, this involves getting with a user to define needs, develop specifications, solicit bids, evaluate same, and recommend a vendor selection. Engineers, particularly those experienced in the company’s core business, are well suited to these tasks. Also, on construction projects, mechanical integrity engineering types are usually consulted on any proposed specification variances or alternatives.  This area can include writing Master Services Agreements with service providers that serve the company’s business. An engineer new in this area may need assistance in developing industry contacts that service different phases of the company’s business.

 

Financial Advisor

 

            The author has no personal experience here, but has an acquaintance who by initial degree is a civil engineer that is a successful independent financial advisor. He cultivated his interest over a considerable period time with much self learning and formal training.  He started out with a very simple premise…he thought he could do better than those who were managing his company’s 401K plans. He decided to try it while still employed as a civil engineer, and found out he could be successful.  He notes his penchant for numbers, research, unbiased analysis, and fact based interpretation as success factors.  All of these he attributes to his engineering training and experience. I should note that he also holds an MBA and is a Certified Financial Professional (CFP), as this is a highly regulated industry.

 

Director/Manager-Accounts Payable

 

          I had a co-worker that was a BS ChemE by degree, but later in her work life was placed over the Accounts Payables group of a Fortune 500 energy company.  The group went through several changes-personnel, organization, reporting structure and accounting systems—but she pointed to the same things mentioned before that positioned her well for the work—i.e. work process orientation, logical approach to problems/issues, understanding the technology of the systems, change management, orientation to detail (an absolute necessity), developing performance measurement metrics, and analysis. A word of caution: she did mention that when one gets into regulatory accounting areas (Sarbanes-Oxley) an engineering degree isn’t enough--having CPA training is a necessity.

 

 Conclusion

 

            There are many positions available that are traditionally staffed with “financial types” that an engineer, with proper background and skills, can do well. However, when one gets into the regulated areas of accounting or financial practice, additional directly related formal training and certifications are usually necessary.

  

Biography

                                                                                                                

            Robert (Bob) Langley, P.E. holds a B.S. Degree in Chemical Engineering from the University of Oklahoma.  For over 30 years he worked for a Fortune 500 midstream (natural gas processing) company as Process Engineer, Plant Engineer, Plant Supervisor, Plant Manager, Supply and Distribution Manager, Manager of Environmental, Health and Safety, and Director of Supply Chain/Services Strategic Sourcing. He served on the industry (Gas Processor’s Association-GPA) Legislative and Regulatory Advisory Committee for 7 years.  Lately he has worked as an independent contractor/consultant in the positions of Sr. Accounts Payables Auditor, Sr. Contracts Compliance Auditor, Buyer, and Assistant Procurement Director.

 

  RLL-9/4/06

Article # 0027         TEST QUESTIONS:

1.   For this article, strategic sourcing is defined as ...? 

  1. the exclusive purview of  CPA’s, MBA’s, etc.

  2. finding the least expensive supplier for each item to be purchased.

  3. a function of supply chain management.

  4. All of the above

2.   Strategic sourcing includes which of the following steps?

  1. Selecting which suppliers should receive the RFP or RFQ.

  2.  Identifying what goods and services are required.

  3. Writing the contract

  4. All of the above

3.   What is one of the challenges to successful strategic sourcing mentioned in this paper?

  1. When the users already have established local suppliers

  2. When large volumes of a particular supply is needed.

  3. When the service or supply is only available from a limited number of sources.

  4. All of the above

4.   Successful sourcing can cut service and/or goods annual costs ____ average.

  1. 5-10%

  2. 10-15%

  3. 15-20%

  4. 20-30%

5.   The review of a company's accounts payables transactions over a defined period to identify and recover payment discrepancies is the job of a ___.

  1. Manager - Strategic Sourcing

  2. Director/Manager-Accounts Payable

  3. Sr. Auditor-Accounts Payable

  4. None of the above

6.   Which of the following is NOT generally considered a part of the job of a Purchasing Agent/Contracts Administrator?

  1. Developing specifications.

  2. Defining needs.

  3. Solicit bids.

  4. Incoming inspections.

7.   According to the Author, what is one of the most difficult steps for a Manager of Strategic Sourcing?

  1. The daily drive through downtown.

  2. analyzing the quotes/proposals to ensure all vendors are "apples to apples".

  3. Writing the contracts.

  4. Monitoring the supplier's performance

8.   When one gets into the regulated areas of accounting or financial practice, _______  are usually necessary.

  1. related formal training

  2. certifications

  3. RFQ's

  4. a and b

9.   Successful Sr. Auditors have a great deal of insight into ____.

  1. what significant  goods and services are required to support the company’s business

  2. interpreting financial/accounting data

  3. 401K plans

  4. All of the above

10.    For this article, strategic sourcing does NOT include ...? 

  1. Identifying the cost of the goods and services used by the organization.

  2. Developing a Request for Quotation (RFQ) or Request for Proposal (RFP).

  3. Developing evaluation parameters.

  4. Identifying payment discrepancies.

 

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