Welcome back! After a thrilling round of March Madness: 64 Slam Dunk Procurement Tips, we are down to our Sweet 16 procurement tips from our global purchasing experts. The competition is getting tougher (especially #6), so let’s get started!
1. The ideal sourcing situation for an organization happens when a cross-functional team collaborates on all aspects of a sourcing project. This includes the procurement department being involved in early stages of a project, such as specification writing or product design. And it also includes internal departments being given a voice in supplier selection decisions. Benefit: Cost, delivery, quality, service, and source flexibility objectives are balanced rather than one being sacrificed for another.
2. Most procurement departments have a mission like “acquire the best quality goods and services at the lowest cost.” But more advanced procurement departments make collaborating with suppliers on process improvements and innovative business ideas an equally high priority. Benefit: A competitive advantage in the market.
3. Though usually orchestrated by senior management, procurement departments can often find opportunities to collaborate on socially responsible initiatives with mission-driven organizations, such as those who seek to reduce animal cruelty or increase the use of locally sourced products. Benefit: more recognition for the organization as a “good citizen.”
Next Level Purchasing Association
4. The best advice I’ve heard is to listen. Listen to your team, your suppliers, your managers. They all have good, valuable ideas and they will keep the function moving forward.
Tim Burt | Deputy Editor | Procurement Leaders Magazine | @tburt85
5. During the sourcing process, don’t be hasty to award an order or a purchase contract until you have conducted a thorough, apples-to-apples review of the total landed cost for components or total cost of ownership for equipment. An offer that looks too good to be true usually is. Take the time to analyze payment terms, freight terms, warranty period, scheduled and unscheduled maintenance costs, training, scrap value, disposal costs, and implementation costs, in addition to price. It’s best to compare all the components of cost side-by-side in a detailed matrix.
Jason Holliman, SPSM | Nordex USA, Inc.
6. For me, my discussions and corresponding interviews with Karen Evans, the former CIO for the U.S. Federal Government was powerful, in that it confirmed a position I have held since the late 90s . . . that technology in and of itself is largely irrelevant and ineffectual – at least in the traditional sense.
In fact in a July 13th, 2010 post titled “Calculating Digital Capital and what it Means to Traditional ERP Vendors”, I wrote the following:
In the just released white paper titled “Transparency in Government Procurement” Karen Evans the former CIO for the U.S. Federal Government under the Bush Administration hit the proverbial nail on the head when she made the statement that “products” (re technology), does “not replace skill sets,” and that “vendors have to change their business models” focusing on the critical areas of “quality of service and reliability of data.”
Evans went on to suggest that this “change” is “different from selling an Oracle data base,” even if it is within the realms of a virtualized or “cloud computing” architecture, and that computing in the clouds is really just “optimizing the use of infrastructure” and is therefore a commodity versus being an actual service.
This entire post is quite revealing and worth reading today, especially given that it was at a very interesting point in time when the wave of change we are now experiencing was just beginning to create notable ripples.
It was a time when the industry first started to acknowledge that the 2000 SIIA white paper “Strategic Backgrounder: Software As A Service” actually existed, let alone that “packaged desktop and enterprise applications will soon be swept away by the tide of Web-based, outsourced products and services.”
Think of it in this context . . . the changes we are seeing today were identified in the late 90s, acknowledged in 2010, and acted upon in 2014.
In the end, what Evans did in the 2010 interview, was confirm that my advice prior to that time was on the mark, while creating a contextual tipping point for industry acceptance of what the handful of one time industry rebels had been advocating all along . . . that technology while important, is not by itself or mere implementation, the sole determining factor in enabling an organization to build a successful procurement practice.
Jon Hansen | Host | Procurement Insights | @piblogger1
7. Use outcome based requirements. Often buyers generate requirements based upon how something should be done rather than what the desired outcomes are. The classic example is software in which the buyer creates lists of hundreds of features for the vendors to respond to. This is difficult for the vendor and even more difficult to evaluate and compare. The better approach is to outline the goals for the project and then challenge suppliers to come up with creative and unique solutions.
Tim Schmidt | eBid Systems
8. Ronald Reagan said it best, “trust but verify”. You should trust your key suppliers but you need to ensure that processes and mechanisms are in place to verify the outcome. It strengthens the supplier relationship, increases compliance and enhances internal customer satisfaction.
Bruce Marshall | Vice President of Consulting | GEP
9. Go back to the basics. Use proven p2p tools that facilitate spend management, control and visibility while enforcing best practice policies.
Puridiom | @PuridiomPros
10. If you don’t ask for a discount, you won’t get one.
Dan Ross | VP of Sales and Marketing | Bellwether Software
11. Do your homework when it comes to choosing a procurement system. I believe companies that choose a system which is adaptable and the least disruptive to their current processes will be the most successful. Remember, if it’s too good to believe, then it probably is. It’s also important not to force fit a solution so don’t over complicate things – it’s ok to keep things simple and take a pragmatic approach to solving a problem. By doing this, you will achieve success in increments versus having one big failure on your hands. Finally, your team, both internal members as well as your solution provider, should be onboard with this approach.
Anthony Kylitis | VP Marketing, Co-Founder | ReactorNet | @
Leveraging Sales Tactics
12. As a purchasing professional, you must convince your management that your work has more value than the money the organization pays for the purchasing department (compensation, office space, resources, etc.). You do this by showing how purchasing activities contribute to the financial health of the organization.
13. The #1 thing that buyers want to negotiate is price. So, salespeople find themselves defending their prices often. Their goal is to convince their prospective customers that their “numbers” are fair, using pure logic. In purchasing, you likely find yourself trying to justify to the finance department that your cost savings “numbers” are valid. Use the same type of logic that salespeople use to illustrate why your numbers should be accepted.
14. Salespeople aim to convince buyers to stop negotiating, agree to the terms currently “on the table,” and place orders in the shortest amount of time. You also want your suppliers’ salespeople to agree to the terms you’ve proposed in the shortest amount of time. Therefore, you need to learn how to negotiate in a way that convinces salespeople to let go of their ideas that they could get better terms for themselves, stop negotiating, and accept your order.
Next Level Purchasing Association – Powerful Negotiation for Successful Buying
15. “Procurement is no different than sales, we are both working to deliver growth for the company” This advice came to me from an ex mentor, who is now Head of Procurement for Australia’s largest airline. Procurement is not just about cost savings, supply & risk management; we can be innovative too and impact the overall growth of the company.
Vincent Nguyen | Global Category Manager |International Flavors & Fragrances Inc.
16. Especially in the wake of the near shutdown of the West Coast ports, the best advice I’ve heard is that risk planning matters across the supply chain. Analyze the breadth of the supply chain early and often.
Hailey McKeefry | @HaileyMcK