"I'LL GET A BETTER DEAL" AND OTHER MISCONCEPTIONS

If you are in Procurement, you will have heard, more than once, an internal client say that they can get a better deal than procurement. They believe they negotiate better, and they know better than procurement what their needs are. And to boot, they will often then add "and I can get it done faster!"

Let me tackle these comments one by one with a real life example that happened years ago, in a corporate environment where I was in the procurement team. 

We discovered that one of our internal clients had chosen to buy two servers on his AMEX expense card. The supplier was a firm that we did purchase servers from, on a regular basis for the company as a whole. This individual though felt that they had gotten the best server, at a cheaper price and it was processed much faster than having had to go through procurement and our "tedious" process.

 Pricing

• Was the price quoted to this individual cheaper than the one that we would have had on the purchase order issued by procurement? Yes, absolutely it was! But there were a number of issues with this price:
• The price quoted was in US dollars, not Canadian. At that time the Canadian dollar was trading about 10 cents below the US dollar. So the "real" price would have to be converted to Canadian dollars for comparative. When this was done the price was equivalent to that in our database
• The price didn't include freight. The way it was ordered, this was being shipped from the US to Canada and you can imagine for this type of product, shipping is not chump change
• Because of the way it was ordered, on a credit card, and outside our company's contract, once it crossed the border, there would be no warranty. The person ordering said he thought that because it was on an AMEX card, that there would be a provision of warranty. Actually, I don't think he ever even thought of warranty and this comment was a Hail-Mary pass to justify his questionable behaviour.

So when taking all of these items into account the "price" became significantly higher than the one we had negotiated.

I know what I need

Actually, I accept the fact that the business unit will be able to articulate and even identify what they need, perhaps in the server case even down to the vendor and model number. So as a procurement organization it is not our role to say "no you should buy this, not that." However, if  procurement is doing their job, they will be up-to-date on what is happening in the market, across a realm of various suppliers and be able to advise on other alternatives than the one presented. 

Procurement personnel have taken a vaccine against sales pitches and are pretty immune to the "this is the best for you pitch." A lot of others are not and they may be mesmerized by the shiny new toy, and want to buy the space shuttle, when a VW bug would do. They may have developed a more fluid relationship with a salesperson from one organization vs. another, so this company has a clearer understanding than another. So inevitably procurement will get the comment "the other supplier doesn't understand out business needs." 

And you know what? All of these things might actually be true, but I have found multiple times that when providing other options/alternatives that the original "must-have" isn't. 

Procurement is never there to dictate to an internal client what they should or shouldn't do. The role of procurement is as an advisor to the business. An influencer if you will, and never the final decision maker. Working hand-in-glove with the business to proactively define their needs ensures that the company as a whole benefits.

Faster

I think by now you probably realize that faster in the front end, is highly problematic and becomes a lengthy "fix it" situation on the back end. In the case above, we could have probably actioned the server buy in about 24 hours -- of course that would have been dependent on the approval hierarchy that would be required (note, this person did not get any approvals -- was just going to expense the servers). I have yet to be in a Procurement organization, where if something is identified as urgent, that it won't be actioned extremely quickly, and often faster than if the individual does it themselves, because, procurement has the relationships within the vendor's business to make things happen -- because procurement represents the entire spend, not just a one-off buy. 

The problem is though, is that when a group always advises Procurement of the urgency of their situation, it becomes like the Boy Who Cried Wolf. We don't believe it anymore and then action it in a regular manner. And if everyone says everything is urgent? Well, then urgent becomes routine and again, not necessarily the outcome that is desired by the end client.

Granted, if urgency reigns supreme, then it is up to Procurement to engage with the internal client and discuss their needs and put together a plan to ensure that they are getting what they need when they need it. 

By being proactive and when Procurement is involved at the beginning, in the planning stages, at budget time etc., then again the entire process becomes mutually beneficial.

You are probably wondering what happened with the server scenario. We didn't find out about it until the hardware was delivered and the expense report was filed. It was Procurement that fixed this mess, and it wasn't easy. We went to our supplier reps in Canada, and indicated that the US never should have excepted an order from a company that they knew to be a client, on an expense card (without a PO). We also stated that we were sure that considering the millions of dollars of business we do with the supplier it would be worth their while to find a solution to this issue. We accepted that our company didn't follow proper protocol either, and we would put checks in place that this would not happen again.

The outcome was our vendor, on paper, took the servers into their inventory in Canada, reversed the charges on the AMEX, we issued a PO, which was based on our contract and pricing terms, and the issue was resolved. It took about a month to unravel this, but we did it.

And the rogue individual who did this? Well, he just got a slap on the wrist and was told never to do it again. Why were there not more consequences? Because at the end, we fixed it, so it was considered "no harm, no foul," because no one knew the number of hours and negotiation it took in the back room to make the fix.

Most of the internal clients in this corporation came to rely on procurement and our expertise. We listened, we understood their needs and we became part of their teams. Hand-in-Glove. We respected each others' knowledge and experience. The individual who had ordered the servers was new and who knows what kind of procurement group he had been exposed to in his former company. Probably not one like we had.

The next blog entry will be about what Procurement teams need to do to make themselves valued partners in the business and how to market their value proposition.

PROCUREMENT AVOIDANCE BEHAVIOUR -- PROCEED AT YOUR OWN RISK!

After many years of ensuring that business stakeholders, both internal and external, find that engaging with the procurement team is of immense value, I am still astounded at the number of people who still espouse the "avoid procurement at all costs" philosophy. 

There are several elements to this Procurement Avoidance Behaviour which will be discussed over the next few blog entries

1. Suppliers thinking working around procurement is a good idea
2. Internal departments seeing procurement as non-value add and they are better dealing with the "buy" directly
3. Procurement organizations that are not working hand-in-hand with their clients and suppliers to enhance the overall business.
4. Procurement organizations that are not marketing their value proposition effectively

Suppliers 

Recently I was told by a salesperson that he is working directly with the end client in an organization and that this end client does not want to have procurement involved because they aren't working on his behalf and a deal struck with another firm a couple of years ago by procurement is affecting his bottom-line.

This salesperson had developed a whole approach, protocol and had buy-in from this end client and the next move was for the end client to "spring" this on the head office (this was a company that had a US parent from where the procurement decisions had been made) and for the end client to insist that this is what is best for his part of the business.

The salesperson was excited about undoing the loss of the business that had occurred a couple of years before. In other words, he had drunk the end client's Kool-aid.

I suggested to him that he had made himself the meat in the sandwich of a family feud and that this was not going to end well. Did he know what the contracts were with the other supplier? Could the Canadian market be split-off from the rest of the deal? Did his end-client know how the rest of the organization had benefitted by Canada being as part of the mix -- that is, even if it is costing him slightly more, how is the rest of the business benefitting? Did he realize that by working behind the

scenes and not having established any relationship with the US Procurement team, or having made any effort to find out  what their current business drivers were  -- he couldn't effectively position his firm for future business? (note he had lost the business three years prior, but hadn't made any effort to maintain a relationship -- read a previous blog of mine on this Where Have You Been). Did he realize that procurement members could help him, but if you cross them, by bypassing them, sending a message that you don't respect their input,  that a) they have long memories and b) they can make you look foolish by pointing out all the things that you don't know.

If you are a salesperson reading this, you might be thinking, "of course she's saying that, she's one of them!" But the reality is distinctly different.

I won't dispute that there are some procurement teams that don't get it, that are so rule driven and so enamoured with meeting their savings metrics that they forget that they are an enabler to the business, they should provide insight, innovation in deals and negotiation expertise. They should ensure that the company maximizes and leverages their buy. They should introduce new suppliers to their end clients who may provide a different approach which may be beneficial and help on the revenue side. They should work hand-in-glove with the business to ensure the best outcome overall.

But you know what? More and more procurement teams do get it! It is often the suppliers who are still behind the times and buy-in to the "end-client" who may have an agenda which is counter to the overall business.

To the salesperson with the scenario above, I strongly suggested that he convince his end-client to engage with procurement and that jointly, they present the planned approach. Not as a fait-accomplis, but as wanting procurement's input. 

Even if the proposal doesn't fly, he will find out things he didn't know (e.g "our current contract goes for another two years") and  the salesperson will have established himself as procurement friendly and family feud "agnostic." 

And this sets the foundation for a better relationship, one with procurement, as well as the end client and possibly business in the future.

The other way? Well, let's just say proceed at your own risk -- because it is truly a mine-field.

WHERE HAVE YOU BEEN?

I am constantly amazed at sales people who, when they lose business, either through an RFP or some other means, won't re-engage with the client, until the next RFP or the like.

During the debrief of why they lost the business, they inevitably ask "How long is the contract for?" When told 1, 3 or 5 years, they check out and no one sees or hears from the company until near to the time that they may have an opportunity to re-engage.

So, as Dr. Phil would say "How's that working for you?"

I've seen too many sales people go off, licking their wounds and figure next time. But if the next time I see you is only when the business is up for tender, then you'll probably lose.

If you were the incumbent and lost or even if it was a potential new client and you lost, don't wait to re-engage, because quite honestly at that point it is too late. And by the way, if you were the incumbent and you lost, well, your competition was certainly cultivating the relationships over the years that you had the business. They understood the client, the client's direction and knew what was needed to win.

I know, you are probably saying, "well, you know those ______ (fill in the blank) procurement people won't make time for me." How often have you tried? And at what level? Yeh, maybe the VP or Director won't have time but others in the chain will, and you can glean valuable insights from them.

And yes, right after losing is probably not a great time to begin the next sales cycle, but even during the debrief, you can say "Well, we thank you for the opportunity. Obviously we are disappointed that we lost. We look forward to keeping connected, so who would it be best to reach out to in 8 months or so?"

And even if they say, "we'll call you," just reach out in 8 months anyway. And see how things are going with the chosen supplier. Have a coffee chat or something like that. Nothing formal, informal is best. Keep your potential client up on whatever new things your business is doing. Say "we've had real success in approaching issues with another company by doing this...."; "We've really moved forward on our sustainability platform...."; "We won an award for......" Plant the seeds. The old adage, you reap as you have sown is a truism.

Start doing your homework and keep up the contact. You don't want to show up in three years and all the players have changed, the strategy has changed and you don't have a clue what's going on.

I mentioned incumbents earlier, but let me tell you that keeping abreast of what's going on goes double for you. If you lose the business on price, then you didn't effectively put forward your value proposition when you had the chance. Furthermore, you missed the business drivers that were pushing in this direction. You missed the opportunity to develop some innovative approach to the business, which could have had the organization meet their metrics, while you maintain the business.

Don't walk away at anytime from a client or potential client. Keep up the relationship. Keep them close.

Because "Call Me Maybe" is not a strategy.

ARE YOU TRYING TO ELICIT BLOOD FROM A STONE?

Do you remember one of the final scenes in the Raiders of the Lost Ark, when the "bad guys" open up the Ark of the Covenant and well, they meet a very gruesome end? Well, I believe that with the metrics for procurement often being purely about just driving down costs, will inevitably cause procurement and/or the business to meet the same fate.

Prior to procurement becoming an integral part of an organization, there was limited consistency and the opportunity for cost reduction abounded. It was like a kid in a candy store! A lot of the categories were tackled and professionally negotiated and the metrics of cost savings were not only met, they were consistently exceeded. Procurement folk, got bonuses and accolades and the future seemed bright!

Unfortunately, the powers that be thought "Wow, this is great! We can get these type of bottom-line savings every year, and well, because these procurement people are constantly exceeding expectations, let's up the ante and give them even a higher goal!" 

After a few years of this, the adage "blood from a stone" becomes appropriate. Assuming you have been diligent, you should be pretty much at the bottom of the price structure. 

The metric of cost savings can result in behaviour that doesn't help the business and in the long run can cost more! 

What's the point is saving ten cents on a bolt, when the result becomes a quality issue and there is greater amount of discarded product (and damaged reputation)? And if the ingredient in a food product is cheaper, but the taste isn't quite the same and customers move to another product? You might be able to get cheaper contract labour, but the cheaper person, might take 6 months vs. the three months the slightly more expensive/better person would have taken. And by the way, if you continually to squeeze the margin of the provider of the contract labour firm...well, the "good" people will be placed where there are higher margins, because that's the client that they want to keep happy.

But because of the metrics, which are focused on procurement cost savings and not on what's best for the business, this type of behaviour is encourage and is repeated over and over again.

On Monday, I wrote a blog suggesting that it is time for greater decentralization (Deconstructing a Sacred Cow) and today I'm probably going to be seen as an outlier on this topic (but given my blog entry from yesterday that shouldn't surprise anyone) but I believe that too many procurement folk have begun to bully their suppliers so that they can meet their metrics and get their accolades. And they always go to price, because, hey that's the easiest and fastest route, but it is also potentially the most damaging one. The other one I've seen continually as well, is significantly extending the payment terms to suppliers, more or less making your supplier, your bank. And when your sales force gets the same request from their clients, well they can't say, this is not how we do business. So cash flow ends up being neutral...so who wins this game of dominoes? 

Why not focus on demand management? Work with the business unit to determine if they need as many bolts, do they discard many, or can they be ordered in different volumes to potentially affect a discount? And how about compliance? I have gone into many firms where they thought there was an over 90% compliance rate, to only show that it was less that 50%. Why? Because when you are not representing the true needs of the business, people can be very creative in getting around you. And process streamlining -- there can be significant savings in that as well!  Renegotiate the contract -- there might be an opportunity to have longer warranties, have tiered levels of buy etc., etc.

Oh...and by the way, has your finance department actually removed budgetary dollars from the departments that use the products/services? I have found that most don't, so you truly haven't saved anything. What you have done is given those areas of the business a slush fund. So procurement might feel better, but nothing has been truly accomplished and that may be one reason the corporate gods keep coming back to you

I could go on, because there are lots of levers of opportunity for reducing costs -- both tangible and intangible -- that are beyond price.

So it's time to reset the expectations of the corporation and work with both vendors and the business units. You can't get blood from a stone, so stop bullying the suppliers to giving you more. It is time for Procurement to advise the senior leadership that given the successes to date, that the trough of cost savings is pretty barren, but you have other ideas on how to support the business, perhaps streamline processes, introduce technological advancements, become a revenue source (or at least a revenue catalyst) and that you are working, in partnership with your suppliers, to become creative in how services are delivered and perhaps even entertain a shared-risk, shared reward model.

Just as your business costs are increasing, so are those of your vendors. Yet we expect them to go to prices that are based on yesteryear benchmarks. Does that make sense to anyone? Certainly not to me.

As procurement professionals, we shouldn't be dealing with the supplier as the enemy. They are as important to your success, as you are to theirs -- ergo the need for openness, honesty and partnership. And don't give me "ah, there are twenty other suppliers who could provide this product/service." I don't know about you, but I've found when you find a vendor, who understands your business, who works hand-in-hand with you, that is responsive when there is an issue or problem and they are cost competitive-- well they are worth their weight in gold. Ok, maybe not gold, but they are worth paying a little bit of a premium, because they ensure that your business and its reputation (and the reputation of procurement) remain stellar.

I hope you are not thinking that she's crossed to the other side and become a supplier lover. Not at all. And I'm sure that any supplier that I've negotiated with would tell you that I'm not that easy. But what they would say, that I was tough, but fair, and I worked with them in partnership. With that attitude together we came up with some pretty creative ways to do business, that benefited all!

Change the metrics to incent the behaviours you want. Tell the powers that be, you have a better approach. And open up the kimono, and ask your supplier to do the same. And work together with them. Challenge them to be creative, not to sharpen their pencil. They will help you get to where you need to go.

Your success, is their success. Remember that!

IT'S ABOUT MORE THAN SALES

Organizations are always quick to put sales on a pedestal. Sales is the lifeblood of the organization they will shout from the rooftops. Much effort and money is put towards annual sales conference, sales training, "President's Club" trips, etc. etc. etc.

A stellar sales force is extremely important to a company, because obviously without revenue generation there would be no business. But focusing most efforts on sales is like saying you only need a frontal lobe in the brain, there is no need for the rest of the organ to think and make the body function.

So what about Supply Chain, Procurement, Finance, HR, Marketing, IT. Research etc.? Could sales actually put together proposals, sell to the client and deliver excellent service to that same client without these so-called support organizations? Of course not. Yet because these are what are typically referred to as "back-room" functions (or even worse - cost centers) they are taken for granted.

Some organizations get it and celebrate the contributions of stellar individuals or teams outside of sales. But most do not. They will slash other budgets while putting more into sales, not recognizing that the other aspects of the organization are in fact the "client retention" part of the business.

I will address Supply Chain and Procurement specifically here because that is what I have the most experience with, but that is not to diminish the rest of the "support" functions...they are equally important.

When dealing with  product distribution, Supply Chain defines the client experience. From having the inventory available, to delivering the right product, to the right place, at the promised time, in one piece. If you think about whether you would want continue to deal with an organization that never had the product you wanted available, and never delivered to promise, well, you would take your business elsewhere, pretty quickly. 

Supply Chain and Procurement often work hand-in-hand with the sales force in structuring deals, whether in services or product sales. They may even be asked to go on client visits to give some credibility to the "team" approach of their company. I have also seen deals sold, where it was almost impossible to deliver to the promises made within the profitability matrix provided. That's when all the non-sales functions role up their sleeves and become creative on how to make this work. But at the end of the day it will be the sales rep who will get the shiny statue and maybe a trip to boot.

I could give more examples, but I think you have the basic idea. I am not dissing sales, far from it. I actually like sales people. They have a tough job, I mean they have to truly go through a labyrinth, with unknown obstacles hiding away, before they make a sale. So I think it is appropriate to recognize them and train them to do better.

Yet don't forget the rest of the folk back at the shop. They don't expect much, they are used to being overlooked. But if you really want a high-functioning organization, make a point of recognizing all the contributors to the achievements of the organization, and promoting that success is the net result of everyone in the team -- not just sales.

Good Consultants Vs. Bad

Ok, it might seem a little odd for me, a consultant, to be writing a blog on how to procure consultants, but let's not forget that my specialty is in procurement and consultant and contract labor spend is often a major category for most public and private sector companies, except most often, there are no controls, consistent processes, or benchmarks surrounding pricing/disbursements. Furthermore, everyone knows someone who is in the "body shop" or consulting business.

So it is very difficult for organizations to actually know the value of the spend, because there is so much leakage surrounding it. And furthermore, often, during the contracting phase, the issue of disbursements is often overlooked. If you read the headlines in the newspapers, this is often what gets press.

I am getting a little tired of consultants taking the bashing for poor procurement practices...such as the media reports at eHealth and now Cancer Care. Interestingly at no time has anyone said that the consultants haven't done their work. The issue mostly is how the contracts were awarded, the pay rates and the disbursements (or in other words expenses).

Now personally, when I do a contract for a client, unless I have to travel outside of a 60 KM radius, I don't charge mileage; I certainly don't charge for meals (I have to eat anyway); and lord knows, I'd never even think of billing the client for coffee. The only extraneous expense that I charge is parking -- because that is directly related to the client and in a major metropolis it can get quite expensive. And as an independent (highly skilled I might add), I don't charge what other independents do nor big firms...because I recognize I don't have overhead like the latter do. Why the former charge $3K plus rates, who knows.

So how do you procure consultants...Firstly, you don't need to tender everything, particularly if it is a smaller project and you need specific expertise. But what you do need to do is ask for a proposal that outlines approach and expected deliverables. You should know what the market pricing is, and you need to have a clear understanding of the costs of disbursements...don't pay for meals, mileage and the like...because this is a boondoggle. Make sure as well that any travel outside a specified area follows your corporate guidelines....not theirs.

I'll spec out full disclosure below, but this needs to be identified for any sole source arrangement. Also there should be some documentation that supports why this individual/company has the skill set required and why a tender was not required.

Make sure that there is a hold-back of 15 to 20% which will only be paid at finalization of contract. Oh and this brings me to another point. If you actually have a pretty clear project scope, have the consultant bill you on a fixed price vs. per diem base. Most consultants can pretty much figure out what a project will cost, and it will save you from having to pay for non-productive time.

If it is a larger project, of course you need to tender, but make sure there is no pre-conceived thought as to who to award it to...as my previous blog said, don't tender for the sake of tendering. Make sure that all conflicts of interest are clearly stated up front...that is has this person/company worked for you before, do you have a personal relationship with this person/company or anyone else (such as a wife/husband etc); have you ever accepted any service/good from this person/company greater than $100...well you get the idea.

I could rant on about this for a long time, but the reality is don't blame the consultants...there are always people who will try to take advantage of a situation -- but don't paint everyone with the same brush. If the appropriate procurement was done on this category...many issues could be avoided even more than those stated...because there is also risk, intellectual property, liability, not to mention what I have seen several times is that two different groups hire consultants for the same work, or a year later a consultant is brought in to do the same work someone had done before.

I'll stop now. But as you can see I could go on for a long time.

Is it time for more entrepreneurial thinking in Procurement?

When most think about procurement (of course that assumes that some do think about it), they often perceive a group that is so focused on the savings line and therefore misses the bigger picture. Of course, for procurement, one of the key measures of success often lies in the "savings metric", but as always, be careful about what you measure because it won't necessarily drive the correct behavior.

So why not focus on more of an entrepreneurial procurement organization -- focused on top-line and the bottom-line,with more of an emphasis of providing frameworks and act as a consultant for corporations in all matters relating to procurement, and at the same time ensuring that effective partnerships are pursued with vendors (note I mean real partnerships --walking the talk, not just talking and tripping when push comes to shove), and that the innovation within that community is utilized for enhancing the overall business model for the corporation.

Depending on where you are at in procurement's evolution within your organization this may need to be done incrementally vs. in one fell swoop. The stepping stones which I see to get to entrepreneurial procurement are:

• If mostly tactical and administrative and decentralized -- focus first on centralizing and moving the team up the ladder by developing effective processes/procedures in concert with your constituency...internal and external
• Focus on understanding the business as a whole...not from your little world. Although you cannot cut lose the savings umbilical cord quite yet (as this is what binds you to the organization)...start working with your internal business partners...try to understand the business from their perspective....then develop your strategies to align with those of the business.
  
• Reach out to your suppliers...go visit them...meet with their key people, including their procurement and supply chain folk....you might find that there are some common issues/challenges which you can work on commonly. Utilize your suppliers knowledge of the marketplace as a whole...find out what innovations they see coming up in the future...how can that potentially advance your corporations competitiveness?
• When you have gained traction within the organization and a centralized model is working effectively, it is now time to decentralize (OK stop the screaming)....There is an old adage that before you can let go, you need to take control...so the first steps here are taking control...and now...when it is in the corporation's DNA to understand the procurement protocol...it is time for procurement to become more of a high level consultant to the organization...working with the internal teams to ensure that they have effective go-to-market strategies for procuring goods and services and that all options have been considered; maintaining the relationships and tapping the innovative supplier corridor; providing high level negotiation and dispute resolution skills; acting as an ombudsman(woman) for issues/challenges;....there is more but you get the idea. The senior leader of this group would be part of the executive leadership team and actively participates in corporate strategy development and discussions.

Being the police and the savings entity is not helping move procurement to the boardroom table...

In Business, as in American Idol -- too often we make the safe vs. innovative choices

I love innovation and creativity. That's why I was hoping that Adam Lambert would win American Idol last night. But, as my son calls them, the "sheeple" won the day.
I'm not taking away from the fact that Kris Allen has talent. He has loads of talent. Unfortunately, he is like a lot of other performers out there and inherently a safe harbour -- people felt comfortable with Kris, whereas Adam, with his looks and his innovative approach to every performance made many a little uncomfortable.

Well, we often make this type of decision in business as well. Go with the "tried and true", vs. the innovative and creative. Yes, the choosing of the latter is riskier...you might be pushed to have to think in a whole new way, but the payoffs for reinventing your business could be amazing.

Just think if GM had chosen to follow the Lambert Way, instead of the Allen comfort zone? We might actually had seen some innovation and perhaps the firm would not be teetering on the edge of bankruptcy today. Same goes for Chrysler...and let's not forget Microsoft, which to a certain extent has rested on its laurels...as opposed to Apple, which has continuously pushed the envelope. The mantra of "it worked before, so let's not change it", is inevitably the death knell for many companies...who once were leading the pack, but now find themselves at the back of the pack...seeing the competition ahead by many lengths in the business Kentucky Derby!

So good luck to Adam Lambert. This young man is going to be a superstar, regardless of mainstream America's rejection of him. In a few years, Kris Allen will be all but forgotten, and Lambert will be playing to packed stadiums around the world.

Best-In-Class versus Best-for-You

Everyone is constantly talking about best-in-class, and very often, for the wrong reasons, labelling themselves as such or indicating that that is what they strive for. According to the business dictionary, best-in-class is defined as:

"Highest current performance level in an industry, used as a standard or benchmark to be equaled or exceeded. Also called best of breed."

So what is this thing that many companies strive for, and is it truly what they should be doing. Sometimes by focusing on best-in-class, are we missing what is best-for-you?

No two businesses are exactly the same -- that is a truism. Comparatives are always interesting and knowing what others are doing is of value -- what is working, what is not. But there is a danger when looking at best-in-class -- who decides what it is, and furthermore, when looking at instituting what someone had deemed as best-in-class -- are you perhaps trying to put a square peg in a round hole.

Often times, corporations are disappointed with the results from some of the mega consulting firms coming in and leveraging on what they have done before -- cookie cutter their solution to a client. Too often, what I have experienced is that when I get to the client, they have spent a couple of years trying to implement something, which truly didn't make sense for them, but because this "respected" consulting firm told them this is what the "best-in-classers" do, they felt obligated to try.

Don't get me wrong. I am a big fan of seeing what has worked (or hasn't) for other firms. Yet once you've done that -- then look at the business your running, and see if it makes sense for you. Having been as an executive in many different industries, and consulting in many more, I can comfortably say that the Pareto rule is alive and well. That is to say that 80% of the aspects of the business are similar -- processes, business drivers, etc., however 20% are unique. What I have also learned it that if you ignore that 20%, anything you try to institute is doomed to failure -- the square peg, round hole scenario.

So let's give "best-for-you" more credence. Create your own horizon -- take heed of the lessons learned from others, but don't follow blindly -- just because some amorphous mass tells you this is what should be done. Create your own footprint...and who knows -- tomorrow someone might be calling you best-in-class!

The Same Issues -- No Matter where!

Recently I had the privilege of meeting with some top procurement/supply chain leaders in Austria. I wanted to hear from them what the challenges and opportunities were in the European market vs. that which I am more familiar with, which is North America.

Obviously there are some differences, particularly regarding the vast number of countries, in a relatively small geographical space, with different languages, different laws, and inherently different cultures. There are also the issues of emerging economies and in some cases the not quite ethical accepted way of doing business in these types of marketplaces.

But what struck me more were the similarities -- the business attitude towards the procurement organizations. The individuals with whom I met faced the same barriers that procurement groups do in North America. That is gaining the requisite respect from the rest of the business for how procurement can impact and advance the enterprise.

Procurement in Austria also carries with it the "cost savings" hair shirt and the teams struggle to position themselves more effectively. The individuals with whom I met with have made significant strides in their being accepted by the business, but just when they potentially are on the tipping point of greater acceptance, the other leaders in the organization seem to lose their appetite for pushing further to achieve beneficial inroads.

The same question is asked by these procurement leaders -- which is why? Why can't the organization see that not everyone is a negotiator, not everyone knows the dynamics of the marketplace, not everyone has the unique insight that procurement professionals have of the activities of the entire organization and the marketplace and that this group can provide leading edge advice which can not only save "costs" but deliver excellence, as well as enhance revenues significantly. Similar as to here in North America, there is the proverbial banging of the head against the wall.

In the June/July issue of Supply and Demand Chain Executive Magazine, which should be available any day now, I write an article called "Is Procurement a Brand or is it Branded".
In this article I provide some insights, which I now believe have global relevance, based on my recent meetings.

Why can't corporations have an Auditor General?

Recently Sheila Fraser came out with another one of her "take no prisoners" Auditor General Report. It is always amazing the shenanigans that go on that makes you wonder "Who is actually watching the hen house?"

I know corporations have annual reports that are fully audited, and there are requirements from a SOX perspective to keep things on the up and up. But anyone who has worked in a corporation has seen many different rules for many different people. And when you sit in the Procurement chair and observe some of the ridiculous and unnecessary wastage -- well let's just say that it's a good thing that blood pressure medication exists.

We all know that there could be a multitude of things that could occur that could enhance processes, create efficiencies and of course provide significant savings. Yet what happens is the extreme bad or just dumb practices are allowed to go on and on -- because sometimes organizations consider "those folk in Procurement" to be akin to Chicken Little. The reality is that we all have flat foreheads from banging our head against the wall so often with limited success.

Imagine if corporations would have someone in place like a Sheila Fraser or Andre Marin, who answered to the shareholders and did not have to massage or downplay the message. What effect do you think this would have on corporations.

I believe that you have one of these "What were you thinking or were you?"
reports and then the roaches would go scurrying for cover saying "not me; not me" and perhaps think twice about acting in an inappropriate way....well at least temporarily -- because as we know, Sheila Fraser will always have a job, because just when the light is shone on one travesty, some "untouchable" (or so he/she thinks) does something again that makes you wonder if they were truly seeking their 15 minutes of infamy.

It's Not Easy Being Green

Many years ago Kermit the Frog of Muppet fame, came out with his hit single (okay, maybe not quite a hit) "It's not Easy Being Green", and for many in the procurement profession the words ring true .

Today, being "Green" or environmentally friendly is in vogue. Let's face it -- Al Gore -- has reinvented himself into the Oracle of Delphi for the Green movement. And to say anything contrary to this movement could result in being shunned.

But how "Green" are corporations in general. Oh yes, everybody talks the good talk, but is there actually true effort beyond lip service being given in many organizations. Everybody has their blue boxes in their offices and there is double-sided printing -- but is this really making a difference.

If an organization truly wanted to be heralded as environmentally friendly it would need to truly set its current practices on its head.

For the procurement profession, it would mean firstly stopping the process of having paper RFP's sent out and allowing suppliers to provide reams of binders and glossies as part of a response -- the electronic tools are here, why aren't we using them. Of course even with the electronic tools, the option to PRINT still remains -- and I will accept that I am guilty of that as well -- but if when we went out to tender for computer screens we thought of making them more "eye" friendly perhaps we would not need so much paper.

A "green" commissioner should be appointed in organizations, much like integrity commissioners seem to be the flavour de jour. These green advocates, would report directly to the CEO and be responsible for creating strategy and policy around the greening of the corporation -- from lights being on, products being bought and suppliers being used.

The latter is of extreme importance and it talks to a corporation's social responsibility. In the rush for cheaper goods, a lot of offshoring is used and a blind eye is being turned to the lesser environmental requirements in some locales like China, India and Mexico. This is by no means an exclusive list, but it highlights some of the major sectors for offshore manufacturing -- where pollutants are being spewed into the atmosphere, but, so what? -- the products are cheaper!

Corporate responsibility would say that we ensure that no one, anywhere now or in the future will be harmed by our decisions today.

We need a corporate titan to stand up and be counted and say "hey, we may be a little more expensive, but we are ensuring that we are not killing you and your descendants tomorrow, for a little more profit today!"

I'd buy that!