The Procurement Chronicles is on hiatus

We plan to return with regularly scheduled snarky Procurement goodness soon!

Thanks for your patience!

Getting a (deserved?) bad rap

Recently, I had occasion to have a really great conversation with a contracts guy. His team comes in after the sales people have done their work, along with the pricing team, and they put a contract in place.

It’s heavy negotiation work, have to be on your toes, and every day, he sits across the table from…well…from people like me. Procurement reps.

This very successful and hardworking gentleman said, “now, let’s see…Procurement. So you are the people who just say no all the time, right?”

I explained that I understood why he had that observation. That many of my peers had certainly earned that reputation, and it was deserved. But it was not the hallmark of all Procurement professionals.

He replied, “well…we’re trying to make a sale, we can’t just go find another vendor.”

I nodded, and said, “well, I’ve worked deals on behalf of the CIO of our company. You don’t really tell him no.”

The Contracts Man nodded. But he was still skeptical.

I could speak to him, at length, about how I’m not that sort of Procurement person. That yes, I’ve said my share of “no” to suppliers around the globe, but that my main goal, day in and day out, is to get the deal DONE.

But each day at work, he has to deal with government contracts, mostly. Government procurement really are the kings and queens of “no”.

So, sadly, because he’s been there, seen that, got many tshirts, I’ll never be able to convince this incredible negotiator that I actually understand his plight. That I get it. That I might even be on his side.

Ah well, we were able to bond over limitation of liabilities, so we’ll always have that…..

That Buffett kid could have a future in Procurement

From an article titled “How Warren Buffett Got Rich” in the Pittsburgh Post-Gazette.

(Link discovered via Supply Chain Management Review)

Based on a review of Buffett’s book, the author discusses some of the top traits that Buffett embodies and are, according to the author, attributable to his success.

Stay with me Procurement Heroes…and you might see something familiar.

First: Intuition. Or what the author calls “informed intuition”. The ability to sniff out if a deal is viable. Go with your gut, is the old saying. You *know* because you’ve been doing this for a while, whether something smells right or not. I’ve only rarely had to go to my clients and advise them not to do a deal. But in every case, I was right. I knew it. In my gut. Based on some intangible factors…but then…

Next: Intuition MUST be backed by careful research and analysis. You can feel it in your gut but you aren’t going to convince anyone without something tangible to back your play. From the article: “That’s work, even drudgery; it requires plowing through irrelevancies to get to what is relevant.” Essential.

And finally: You used that gut for instinct, now use that gut again to step up and get the deal done. At some point, you gotta screw up your courage and deliver. Even when the going gets rough. Seas stormy. And other metaphors for difficult times. Getting a deal completed requires a certain amount of courage and tenacity. The measure of each depends on a lot of variable.

Hey, this is not to say that all of us in the Procurment profession have the business acumen of Warren Buffett, but we can either learn from this, or take comfort in knowing we employ many of the same business techniques.

In the end, it’s all about getting the deal done…and done right.

Ruh Rho!

Injunction Blocks Microsoft From Selling Word

Hmm. I’m sure it will get settled out of court soon…but in the meantime…DOH!

You know…(ponder, ponder)

“Fasthosts Internet Ltd, a leading web hosting provider (in the UK), has released a study showing that 53 per cent of US business owners seek more involvement in the purchasing of their IT services, such as hosting, than ever before.”

You know who could help with that?

An experienced IT Procurement Professional.

It’s ok to let someone who has done this before step in and help you out.

Winning over executive management, one person at a time.

Source

Mssrs. Sarbanes and Oxley would be *so* disappointed!

“A former Kraft Foods purchasing manager was sentenced to two years and three months in prison today for taking $158,000 in bribes from a broker for a Central California tomato processor…”

This is always disappointing to me when I read of a purchasing person going to the dark side.

It’s never okay to take kickbacks. Especially the kind that come in cash. Ever!

It seems like the guy offering the bribes has been busy. He’s awaiting sentencing also with a procurement person from Frito Lay (and others!).

You know, when they force you to take all that SOX training, and they tell you “you could go to jail!!” and you roll your eyes…well, remember this story, eh?

You’d think Kraft and Frito Lay would be above such stuff, but it goes to show that every manager in a procurement department must stay diligent. Always.

Source

Making the Best of Bad News

Did you know that it is possible to put a bright smile on a $4 billion (with a capital B) loss?

It is!

“The forced merger of Lloyds Banking Group and HBOS has been making headlines this week for the spectacular £4bn loss that was announced earlier this week. But, if it wasn’t for procurement, those losses would have been even worse.”

(emphasis mine)

Music to my weary Procurement Hero ears. If it wasn’t for the hard work of their procurement team, that four billion (with a capital B!) would have been much, much worse.

Nice!

And the procurement folks got credit too:

“‘Procurement is playing a key role in assisting the Group to achieve its integration synergy targets,’ the banking group’s interim results statement said.”

Congratulations to the good folks working hard to find synergies in a tough economic time!

Source

Two Can Play at That Game

Oh Oracle, how you keep procurement professionals on their toes!

“Ray Wang, an analyst with Forrester Research, found that Oracle had bumped up prices for three products…”

“Oracle’s targeted price increases may have everything to do with the needs of procurement managers…”

“‘Oracle is responding to what procurement managers are saying about how their bonuses are based on how much of a discount they receive,’ Wang said.”

Ah yes, this the same company that changed their licensing model from seats to some wonky calculated backend user model that said, basically, if you have a database as the backend of your online store, then EVERY potential user that might hit the store had to be licensed.

In essence, you had to license the entire user base of the internet.

Uh. No. I believe they were taken to task on that one.

This is a little more insidious. I mean…it smacks of collusion, doesn’t it?

I’ll help you make your goals if you help me make mine?

Gack. And yet, Oracle is the 800-pound gorilla in the living room. There’s not a thing you can do. They keep gobbling up more companies that you *do* like (Agile, PeopleSoft) and making them into their model. *sigh*

Stay on your toes, Procurement folks. Don’t take a discount at face value! If Oracle says they can break the bank and give you fifteen percent, ask for fifty! Push back! They will jump up and down and threaten to walk away. Let them jump, but hang strong.

I say this from experience. After years of tumult and torture, I was part of making an really excellent deal with that big mean company in Redwood City.

It *is* possible to do a good deal with Oracle. They are used to making procurement people break, so we all just have to be a little bit stronger. Just remember to do your homework and steady the course!

Source

Easily the best title EVER for a whitepaper

Oh sure, in my profession, I see a lot of whitepapers cross my desk.

The titles are usually yawn inspiring, not to mention the content.

But not this one…no. This one made me sit up and take notice.

“E-ZPass: The Making of a Procurement Disaster“

Wow. I’m only a third of the way in, but it reads like a really great procurement novel.

Good stuff.

Source.

Striking the right balance

Today, perhaps my most talented procurement employee came to my office.

“Can we talk?” he asked? I could tell something was weighing on his mind, so I invited him to take a seat.

He spread in front of me a thick stack of papers and talked through a long and tangled story of our accounts payable department.

It’s and old song about an invoice that should be paid in full but was instead short paid, a $300 credit due was applied to more than one invoice, seemingly willy nilly fashion, and no one will take accountability for fixing it.

My employee, and MBA procurement person, said, “I’m not a finance person, but I’ve now spent several hours investigating this issue. Who do I have to speak to now?”

And it was then that I had that managerial pang that lets me know I’m about to fail my valued and trusted employee.

See, in the evolution of this corporation, there was no procurement department for a long, long time. When it was actually discovered that there needed to be a formalized procurement department, it was bolted on as part of the Finance organization, utilizing accounting and finance people in their spare time.

The department has since evolved quite a bit from there, but those roots as a part of finance still run deep.

My buyers are only part-time buyers. They are also part time finance personnel, trouble-shooters and occasionally check runner downers.

This makes me nuts. I’m a procurement guy. I’m old school, negotiate the contract, get the art of the deal right, cut the PO and be done! Someone else pays the bills!

But, as they say, you can’t fight city hall…and you can’t fight the ingrained culture of an organization.

We ultimately talked through the issue, I provided some suggestions, and sent him back out into the cold, callous world of both sides of the purchase to pay equation.

Purchase to Pay means both purchase and pay. And our senior leadership has made it clear that both procurement and finance own making sure both sides of that happen fast, efficient and correct on behalf of our end users.

Having a procurement department overrun by finance is tough to manage. Having an organization too overpowered by the needs of procurement without thought about how suppliers get paid is also not so good.

Striking that right balance is key. I can say, right now, we don’t have it. But we keep trying.