I hate to break this to you, but there is no “instruction manual” that can tell you exactly what to do in every specific purchasing situation that you will ever face in your career. Sorry.
However, there is enough good education and information out there that can empower you to make the right decisions in most purchasing situations you face. But there is a caveat.
The education and information that you receive must be interpreted, adapted and applied to your situation. Unfortunately, not enough people demonstrate the ability to learn about how one similar, but not identical, problem was solved and then implement a similar solution to their own problem.
Too many people will say “But that situation was different, that solution doesn’t apply to me” and not take anything away from the education or information they received. I’m here to tell you that you can learn something applicable from almost every bit of purchasing education or information you receive.
It may just require a little brain work. You’re not scared of a little thinking, are you?
Consider these situations…
1. A school district buyer reads an article in a supply chain trade publication describing how a prepared food manufacturer’s purchasing department was given credit for helping their company survive because it contracted with its corn supplier such that the food manufacturer sustained only a 9% increase in the cost of corn from January 2010 to January 2011 while the market price for corn increased by 63% during that same period. The school district buyer may say “This doesn’t apply to me. I don’t work in the food industry.” I would argue that the school district buyer could learn something. If the school district buyer applied the same contracting techniques – understanding cost drivers, using market intelligence to predict future price changes, entering into a long-term contract, and accepting a fixed price that was slightly higher than current price because of expected inflation – the school district could have better contained its costs for diesel fuel used in its buses, which increased by 18% in that same period. Different industry, different commodity, similar solution!
2. A purchasing manager for a bank reads a blog post about how to build a should cost model. The example used is one that involves the manufacture of a part that will be used in the production of automobiles. The purchasing manager scoffs, “Ah, should cost models are for manufacturers. I’d never need to use one.” Yet, that very day the bank purchasing manager is reviewing three bids from providers who will produce and install decals with the bank’s business hours to be used on the front windows of each of the bank’s 100 branches. One bid is $2,000, the second bid is $5,000, and the other bid is $20,000. Wow! What a range of prices! Should the bank accept the lowest bid? It is pretty cheap. But is it too cheap? Might the supplier not know what they are bidding on? And is the supplier who bid $20,000 trying to rip off the bank or might they know something that the other bidders don’t? A should cost model would help the bank purchasing manager figure out the materials, labor, and the cost for each of those to determine what a range of legitimate bids is. Of course, a service industry would never use a should cost model…right? Uh, wrong.
I could sit here for days typing examples of how some people in purchasing roles refuse to think outside the proverbial box and end up limiting their potential and their success.
So, instead of wishing you had the purchasing instruction manual that gives guidance on every specific problem imaginable down to the exact industry, commodity, and smell of the saleswoman’s perfume, my advice to you is to have the willingness to say “Hmmm, how can I apply this to my situation?” and spend a little time thinking creatively instead of saying “This doesn’t apply to my situation.” You may come up with more effective solutions to your purchasing problems that you ever imagined.
To Your Career,
Charles Dominick, SPSM, SPSM2
President & Chief Procurement Officer
Next Level Purchasing, Inc.
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