Daily Archives: June 21, 2016

The Direct Procurement Challenge Webinar is One Week From Today!

That’s right, only one week until the upcoming ISM webinar, sponsored by Pool4Tool, where both the doctor and the prophet will discuss:

  • the direct procurement lifecycle
  • how it is different from the classic indirect procurement lifecycle
    (which was cost-centric perfect for indirect)
  • key requirements to support direct procurement that indirect procurement platforms lack
  • key technological capabilities to truly manage the direct procurement lifecycle
  • 15 ways your platform likely isn’t up to snuff
    (especially if it’s a platform built for indirect)
  • the consequences of using the wrong platform for Procurement platform
    (which can leave a lot of blood on your hands)

The fact of the matter is that you wouldn’t use a Chihuahua to herd sheep, so why are you trying to use a mouse to herd cats (which is mission improbable anyway)? (This is exactly what you are doing if you try to use an indirect sourcing platform for direct sourcing.)

Join our webinar next Tuesday on June 28, 2016 @ 11:30 AM PT, 14:30 PM ET, and 19:30 PM BST (UK Time) and find out why your procurement platform may not be doing your Procurement organization justice!

All attendees receive 1 CEH certificate. This is an ISM webinar after all.

Register today. Don’t delay!

Why Good Procurement Goes Bad. Part II.

Most poor-performing Procurement departments don’t start out bad. They start out with the intentions of doing a good job, at least as good as any other department in the organization (although not necessarily a better one), but somewhere along the way, they stumble, and sometimes fall. And since there are not enough best-in-class Procurement organizations, (8% is a small number), and since there are theoretically more good people out there, we have to ask: why does good Procurement go bad?

Yesterday we covered two major reasons good Procurement departments go bad: strategic blinders (like Excel, where nothing good happens) and efficiency over effectiveness (where process is adopted for process sake and no other reason). Today we’re going to cover two additional reasons.

Relationship Blinders

Sometimes a good Procurement department will start by segmenting spend into strategic and non-strategic, do the right thing and start negotiating the strategic, and then treat those suppliers as strategic suppliers. When the suppliers deliver a more consistent, somewhat higher quality product, at a lower price than was delivered before, those suppliers will be looked upon as partners and, as the relationship cements, the relationship will not be questioned over time. Contracts will auto-renew at annual increases to cover “inflation”, but sometimes the “inflation” will also cover “margin inflation” and the quality of the product will not increase.

Even strategic relationships need to be reviewed and the suppliers subjected to a (360-degree) scorecard. The supplier might still be the best choice, but needs to know that the relationship is being monitored and the goal is that both parties continue to benefit, not just the supplier.

Plus, if a customer never goes back to market, it will never know if new suppliers with production capabilities and innovation capacity hit the market and if some of the award should be shifted to a new supplier to help them become a strategic supplier for the organization’s next generation of products down the road.

Values become Dogma

Values are good things. They should be respected, adopted, and implemented. But they should never become dogma. For example:

Relationships first
is a great idea, especially with strategic suppliers. But, as per above

Relationships above all else.
can blind an organization to faltering performance or better alternatives. Similarly:

Value-add
is great to get in every negotiation and can be a differentiator but

Value-over-customer-desire
can simply increase cost. If the customer is buying a “disposable” product that they plan to replace in a year, they may not want a two-year warranty, and focussing on “value” that the customer doesn’t want just increases cost.

There are other examples, but you get the point. Just like an organization can go process-crazy, they can also go dogma-crazy. Too much becomes as ineffective as too little.

For a Procurement organization to get good, and stay good, it has to reevaluate its processes on a regular basis and not get blinded by its own good intentions.