Daily Archives: May 21, 2009

Purchasing’s Best Practice Tips for Buying in a Recession

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Purchasing recently ran an article on “best practices for buying in a recession” that contained five tips for buying in these troubled times. While most of the tips were pretty basic, sometimes the basics are best, and they are worth repeating.

The tips were:

  • Put the pressure on business stakeholders
    Put the onus for achieving defined savings goals on the business unit executives (with backing from senior management).
  • Give your suppliers a check-up
    Make sure your suppliers are healthy and not on the verge of bankruptcy. Do this by insuring your suppliers are paying their suppliers on time, aren’t burning through too much cash too fast, and have the resources to weather the storm.
  • Help key suppliers
    Start by paying promptly. Delaying payments for ridiculously long timeframes will just cost you more in the long run (since suppliers will likely not be able to get financing as cheaply as you and, at contract renewal time, will have to up their prices to cover the loss).
  • Don’t forget the fundamentals
    Consolidate buying, extend contracts with preferred suppliers, and continually monitor your suppliers’ health.
  • Get Lean
    Control inventory, control commodity costs, and minimize waste.

Retailers Have a Thing or Two to Teach Wall Street

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A recent articles in Stores on “six lessons Wall Street could learn from retailers” caught my eye because I just couldn’t fathom how, out of all the lessons Wall Street needs to learn (again and again) you could limit the number of lessons to just six, but since I’m a big believer in lean, and fundamentals, I decided I’d give the article a shot. After all, a blogger can never have too much material to write about. It was, at least, an interesting article and I would recommend you read it all the way through if you have the time.

So what were the lessons?

  • Times have changed since 1984.
    If bankers and financiers had been applying some of the basic business practices used by the retail industry, they might be doing the hula today instead of trying to undo countless missteps. After all, companies like Best Buy and Wal-mart are doing fine. (Most likely because good retailers don’t sell items [like complex derivatives] they don’t understand or don’t believe consumers will see a need for.)
  • If somebody calls himself a liar, maybe you should believe him.
    The principle of trust, but verify is etched into the way a good retailer does business. Trust without verification is a recipe for disaster. (Just like handing out loans to borrowers without credit checks.)
  • Hold the spaghetti sauce.
    Retailers know that focusing on what you do best yields the greatest returns. (Financial leverage spawns financial ruin.)
  • Don’t take the t-shirt.
    Retailers, like Wal-mart, have gifts and entertainment policies to prevent conflicts of interest. (Wall Street, in comparison, threw lavish multi-million dollar extravaganzas for its clients while Rome was burning. )
  • Give the lady what she wants.
    In retail, serving the customer is a long term strategy. The best retailers refuse to compromise customer service by adopting short term measures. (In comparison, the Wall Street crisis is intrinsically linked to a financial system obsessed with short-term gains.)
  • Keeping a dog around doesn’t change it into a cat.
    Retailers know that if a product isn’t selling after a short period of time, it’s not going to get better with age. (And throwing more money at it isn’t going to help.)