With Purchasing being viewed as more and more valuable, we are seeing Purchasing taking responsibility for more and more categories of goods and services that have not historically been part of Purchasing’s portfolio: travel, fleet management, HR benefits, advertising, etc.
But, in many companies, getting the opportunity to be responsible for every dollar spent on goods and services is still challenging. Especially when there are internal politics involved.
Sometimes, senior management needs that little extra push to feel comfortable in reigning in spend. I found an interesting push.
I was listening to a recent Business Week podcast called “Selling To Giants,” which discusses how small companies can sell to big companies and the advantages of doing so. There were a couple of quotes from host Michelle Nichols and guest Jill Konrath that I think could help convince senior management to ensure Purchasing’s involvement in more services purchases. Check these out:
Konrath says: “Bigger companies pay better than smaller companies and they’re willing to pay higher prices for products and services,” but then sheepishly adds “Maybe not always – if they’re in supply chain.”
Nichols asks: “So you mean we can actually sell that same hour of that same service for more per hour to a big company than a small company?” Konrath replies affirmatively and explains how small companies’ purchasing decisions have the built-in control of the fact that purchases take money away from the owners for the owners’ personal financial needs such as funding their children’s college education or even their kids’ school shoes. No such control exists in large corporations where budget holders have total responsibility for their purchasing decisions.
Nichols then replies: “So what you’re saying is (that) small businesses – their purchasing is personal because they had to decide between (doing business with) Jill or (buying) shoes for the baby. But (for) big companies it’s impersonal – it’s just a bucket of money called ‘my budget.’”
To me, these quotes reinforce the truism that budget holders are not all that fiscally responsible when Purchasing is not involved. Obviously, I’ve seen this behavior first-hand in companies and, as a purchasing guy, was able to introduce more fiscal responsibility into those areas.
Does your senior management need that extra piece of ammunition to understand how the company’s money is being spent?