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Barking up the wrong tree

I’ve been in purchasing, procurement, sourcing, supply chain or whatever you like to call it, for over twenty years now. And in hindsight, as long as I can remember, purchasing has been barking up the wrong tree.

Oh, I’ve been up there barking with my fellow procurement professionals about how important professional procurement is to the corporate bottom line; a dollar saved is a dollar profit.

 

Barking about all the savings we could have achieved, if only they had involved us in the early stages of the procurement process. All the costs that could have been avoided, if only we had reduced our supplier base and cut down the number of transactions. All the price reductions we could have negotiated if only we would have standardized our requirements and leveraged our volume to maximize market potential.

If only……

 

So why are, generally speaking, our non-procurement colleagues so stubborn, shortsighted and un-cooperative? Shouldn’t they all have the company’s best interests in mind? Some time ago, it dawned on me; we, as purchasing professionals, have been trying to sell what we want to sell, not what the others want to buy.

 

Now take into account the following:

Of an average company, only 5% of the employees have financial responsibility; call them the ‘budget owners’. This means 95% of the employees have no official financial responsibility. So why should they truly care about cost? I would even dare to state that in a budget driven organization, of this 5% with financial responsibility, again 95% don't really care about cost, just as long as it stays within budget.

Preferably even close to budget, or they may be accused of poor budgeting for this year, and lose out on next years budget.

 

Well, mind you, it is not politically correct to publicly state that you don’t care about cost. I’ve never heard a budget owner say: ”I’m going to waste a lot of my company’s money, simply because I can and I don’t care”.

However, when push comes to shove, and one has to choose between a potential cost reduction and hurting one’s self interest, the self interest is going to win over the saving time after time. It’s just human nature.

 

So there we are, trying to sell them the financial benefit of our early involvement. Fat chance.

If it is not money they care about, what benefits can we bring them in order to spark their interest?

 

Now each procurement process has 4 main performance areas: First of all we have availability; getting stuff and services delivered. Second we have risk; be it financial risk, legal risk, operational risk, social risk or personal risk; you name it. And they like as little of it as possible. Third is value; what does it do for our customers? What does it do for the position of our company in the eyes of our stakeholders? Think of brand perception and public opinion. And because obtaining availability, reducing risk and adding value are not for free, cost is the fourth element.

 

It’s those other three area’s that your colleagues are interested in. And you have a lot to offer in those areas. Reducing lead times, reducing inventory risk, obtaining exclusivity from a sought after supplier so your competitors can’t use them; and the list goes on. And while you are at it, you may even influence your colleague to choose the less costly option which delivers the same or even better results in the availability, risk and value area. But remember: it’s not your saving. It’s theirs.

 

Because it’s their choice, their money and basically it's their responsibility.