In consumer damnation 71, we talked about governments and how government customers can not only be very demanding, but how they can be quick to pass on the blame to your company when something goes wrong even if it’s not your company’s fault. In addition, they generally mandate that you provide bill of material data, shipping manifests, country of origin determinations, quality inspections, and other information with every product that you provide the government so they can meet their accountability mandates — a paperwork nightmare, especially if all you are selling is office supplies. And if that’s not enough, if the government runs out of budget and can’t get agreement to run a deficit, there can be an indefinite spending freeze while the situation is resolved — and if you are waiting on a few million dollars for products and/or services delivered, you could be waiting quite a long time. They can be your organization’s best and worst customer.
That is, until your corporate customers are taken into account. Government customers will always give you headaches, but corporate clients will often give you nightmares. But that’s partially a story for different post. In this post, we are going to talk about specifically how they can be a nightmare for your Procurement organizations.
They can demand the SLAs be met — or penalties be applied.
If a big corporation knows that a good chunk of your organization’s revenue needs are dependent upon getting their contract, they will be very demanding in their negotiations and your sales team might end up agreeing to rather unfair SLAs that Procurement will be expected to deliver on. For example, there might be a penalty for every day a shipment is late, which could be something out of your control if a port closes, a primary transportation company’s drivers go on strike, or the supplier’s source of raw material dries up due to a mine collapse and there is no way to get a new shipment of the product produced on time to transport from the new supplier’s factory in Shanghai to the distribution facility in San Francisco, but yet Procurement will be held accountable when the shipment is late and penalties are applied to the invoice.
They can not only insist on extreme corporate responsibility requirements and demand not only end-to-end supply chain transparency, but that every supply chain participant be one that has been vetted by an accepted third party audit in the past two years.
This can make complying with the documentary requirements that the local government will insist on a walk in the park. As a good corporate citizen, you would have mapped your supply chain and vetted all of your tier 1 and critical tier 2 and tier 3 suppliers, but considering there could be over ten thousand suppliers in your corporate supply chains when you consider every purchase from the 50M you spend on your primary electronics retail products to the 50K you spend on miscellaneous office suppliers, its an almost insurmountable task to identify every organization in the chain and map them against a list of audited suppliers. If your choices are do your best to comply or lose a third of your revenue (because you are CPG and they are the biggest of your big box retailer clients), it might be the case that you really don’t have a choice.
They can be a real pain in the backside.
If they are a big customer, in addition to the huge discounts they negotiated during the sales process, they might expect free service, warranty support beyond the warranty period, and the ability to make additional purchases at a moment’s notice. And who has to arrange that free service, deal with the manufacturer to try and negotiate additional warranty support, convince the supplier to add a second shift, or find an additional source of supply at 7 pm on a Friday night? That’s right, Procurement.
Corporate customers don’t just make hell for Sales, they often make hell for Procurement too. And when they decide to spread the damnation, Procurement is the organization that really feels the burn.