Sensing a theme here?

From The Financial Times, a UK newspaper:

[Members of Parliament] lambast defence procurement ‘fiasco’

Fiasco? Pretty tough words for yet another government procurement team.

Ugh.

As the financial market continues to look bleak, not only can procurement be the first to help, to rework deals to get costs down, to help be more efficient, they can also be the dumping ground for blame when bad processes are uncovered and discovered to have gone awry.

Don’t think government is the only place this is happening. It just doesn’t get space in the media when an intrepid procurement hero gets the legs cut out from under them in boardrooms around the world.

Take good notes, people, that’s all I can say.

Words you don’t want to hear from your boss

In relation to your project: “an example of the procurement process gone amok.”

Ouch. That’s a pretty damning thing to say to a procurement professional.

That says the training wheels were off and people were spending money like drunk sailors on leave.

Keep in mind that the speaker of that quote is the President.

Yup, President Obama has roundly chastised the contracts let out to Lockheed Martin for the replacement of Marine One, the President’s helicopter, a fleet of some 28 different birds.

The program is under Pentagon review because “overall costs have risen at least 65 percent to $11.2 billion from $6.8 billion.”

I don’t care what the commodity, office supplies or capital equipment, a rise of 65% in pricing is inexcusable.

Somebody ought to get fired. But this is the government. That won’t happen.

I’m sure glad I don’t have to explain this one. I did, once, have to stand up in front of a Navy Admiral and explain why the source of raw stock metal used to make rockets for his nuclear subs was constrained.

That’s an event I’d not like to live again. I left that conference room that day in a massive sweat.

I can only imagine the Federal procurement guy answering to the Pentagon.

Source.

(Yes, I know that photo is of former President Bush Sr, but the image was just too perfect to pass up……..)

There’s always someone out for a buck

I was appalled today to read a brief article in Federal Computer Week regarding the use of protests in the award of government contracts.

Used wisely in a clearly unfair situation, it can bring light to inequities and straighten out an unfair award.

But that’s not what the article’s author, Robert J. Guerra, is talking about.

Per the article:

“Some company is actually conducting a seminar titled “A Successful Bid Protest Can Produce a Contract Win.”

Yes, for a mere $350, the e-mail states, ‘This seminar will give federal salesmen and sales managers the information that they need to use the bid protest process as part of a successful sales strategy.’”

Sales strategy?!?!? What!?!?

In my tenure working for a government agency, I made an award of a highly prized contract that was almost immediately protested by the not all together sane owner of the displaced incumbent.

The protest was absolutely without basis and my scrupulous notes showed that to be true. I was never so glad for my anal record keeping ways.

That didn’t matter, however, because my employer spent an awful lot of time, energy and money to defend the case. It dragged on for years. I was three years gone from that job and still got deposed.

The case ended up settling for a small amount to finally make the agony end.

I’m not personally amused at the idea of launching a protest just for sport.

Besides, why would anyone want to do business with the kind of company that will launch a protest at the drop of a hat? That says to me they don’t know how to win in their space and rather than learn and grow, they’ll whine about it until a judge gives them something they didn’t deserve in the first place.

This is not a good trend. In an era where we are all trying to save money, this is an egregious waste.

I protest all this protesting!

Combining purchases to get lower prices

Such a simple time tested concept. So rarely used.

In my own company, everybody has their “no, I want my own supplier!” : stamp foot : mentality. That means we buy a little from a lot of suppliers.

Widely known as an inefficient way to purchase.

So I was a bit surprised to see two auto makers, two competing automakers no less, though known for partnering in the past, employ this concept.

BMW, Daimler bundle forces in electronics procurement

Seems American automakers might take notes.

Around the Globe

The world’s economy is ever more global as each year goes by. I’m seeing this in both my former employer and my current employer. We’re growing, in spite of the dim view on the economy, and the majority if our growth is not in the US.

This is on my mind, because a couple of my counterparts from our AsiaPac office are headed this way. I’m excited to host them, too, because we have much to discuss.

Global focus provides some fun opportunities to set up global deals. A wily procurement professional can take advantage of cost savings by lumping together buys from all over the world and working with genuinely global suppliers.

It often benefits the smaller locations, too. You put all US spend in with small UK spend and whoa nellie! We’re all saving some money!

It also presents problems. Shipping and customs is just the start.

VAT taxes are a headache. Who owns what and how we account for it. Ay yi yi.

An article on purchasing.com points out another issue: Non-compliance with using established global deals. Every time one of those remote sites goes off on their own, it whittles away at the potential big savings you can get by doing a truly global deal.

From the article:

“For example, non-participation by internal organizations to a global sourcing contract (defined as an internal business unit opting out of a given contract or supplier before it is in place) reduces savings potential on average by 8%…”

8% of a multi-million dollar deal is a lot! Could be the difference in a go-no go decision and it’s something to consider.

To me, non-participation means that your procurement teams across the globe aren’t playing together. That’s bad.

You can’t just plop a “global deal” out there and expect everyone will use it. There has to be buy in from the star, and even then you can’t predict how the remote sites will behave.

Some CPO’s are unwilling to put their foot down on this issue. The CPO of my former employer certainly was.

I know it’s difficult to coordinate across time zones and cultures. But business isn’t going to stop being global. It’s up to the procurement heroes to do something wise about that.

Every 8% adds up.

The Bark and The Bite

Seems there is a common theme for procurement professionals around the world: Getting people to actually follow the rules.

We don’t make these things up for our health, you know. The focus of your procurement organization is to protect the company both in terms of preserving precious budgets, and to keep from getting ourselves into legal hot water.

And yet, so many executive teams of so many different companies are *unwilling* to enforce procurement policy. Even though these processes are proven to save money, time and hassle.

I was told once by a high dollar engineer, “I can do your job. You can’t do mine.”

Yes, that’s true. But your hourly rate is double mine. You CAN do my job, but you shouldn’t. It’s wasteful.

I had this is mind when I read an article today.

Kind of an odd source, I grant you, but the story comes from Awoko Newspaper out of Sierra Leone. Seems they are having a conference to discuss the functions of something called the Independent Procurement Review Panel.

Here’s a quote (emphasis mine):

“Delivering the key note address Dr. Kandeh said Procurement needs powers to bark and bite defaulters of procurement procedures, so as to minimize corrupt practices and wastages in both public and private sectors involved in procurement activities.

Yes! I might borrow this phrase. We need to authority to both bark and then bite people who don’t follow the procedures. Because following the processes reduces both corruption and waste.

My own top management can’t even work up a good whimper in the face of our research staff.

Meanwhile, procurement continues to work like a dog to keep us on the up and up.

woof

This is what I’m sayin’…

I may not be the “expert”, but I know my profession.

From printweek.com:

Procurement professionals are ideally placed to weather the economic downturn…

Yes, I’ve been saying this here on this very blog. With the weird turn of the economy, companies falling by the wayside left and right, the talents of Procurement professionals are necessary. Finally, what we’ve been preaching all along, cut costs, do effective deals, negotiate, don’t roll over. Finally these values are important to all the right people. We’re starting to see client groups who refused to let us in the door now coming, hat in hand, to ask for help. Which we’ll gladly give.

From the article: (emphasis is mine)

Mike Coveney, operations director at print management firm AccessPlus, agreed the sector remained strong: “Clearly all skills give a degree of resilience but the reason procurement is more resilient than others is that for business leaders, the easy solution is to cut costs.”

Right!

Excuse me while I go do the “I knew it all along” dance.

What’s in a name?

You might recall, back in September, I spent some time pondering the difference between the terms “sourcing” and “procurement” as they relate to my chosen profession.

Today, I came across a blog from the UK pondering the same sort of conversation about the differences between the words “purchasing” and “procurement.”

To me, they all describe the same thing, but I’m seeing in procurement circles that we’re narrowing down meanings and ascribing certain specifics to each word.

And don’t even get me started on the argument between “vendor” and “supplier.”

Ah, the mighty power of words.

Paradox

“A paradox is a statement or group of statements that leads to a contradiction or a situation which defies intuition; or, it can be an apparent contradiction…” Source.

Yesterday, I spoke about many companies with an eye to outsourcing to help cut costs in tough economic times.

Outsourcing often means overseas where labor is well trained and considerably less expensive than American labor.

Yes, it seems like a very good idea.

But then, how does that balance with the “Buy America” provisions of the proposed stimulus package in front of Senate?

Sure, buying American first, keeping our dollars in our borders, looks good in order to stimulate our economy. But will that also lead to many companies unable to cut costs sufficiently to stay afloat, thus collapsing and putting more Americans out of jobs? Which is the opposite of stimulating the economy.

Are we chasing our tails here?

The White House is currently trying to water down the provisions, per this article, but who knows how this will all come out when the package is complete?

Tough times for the Procurement folks in any organization. Save money. Cut cost. Reduce overhead. But do on while strapped firmly down by federal rules.

I have no answers, only much scratching my head, reading the news and spending each day trying to figure out how to do the right thing to do for my employer.

Image source.

Pendulum Swings

It’s doing it again. The pendulum. It’s swinging.

Which one? You might ask. There are so many of them swinging every which way.

Mind your noggin, please.

The one that’s rearing its ugly little head is the pendulum of outsourcing.

Given this economic crisis of epic proportions, there is much talk of outsourcing once again as a way to cut costs and salvage margins.

The concept of outsourcing seems to hit the IT group the most. There are plenty of cheap offshore suppliers with great qualifications just raring to do business.

At my last employer, just as I joined in 1999, they were finishing insourcing their outsourced data center. Oh for years we talked about what a debacle that was. When I left in 2008, they were seriously in talks to outsource it again.

Just a decade. That’s a pretty quick cycle.

Purchasing.com has an interesting article this week with q&a from Robert E. Kennedy, executive director of the William Davidson Institute at the University of Michigan, and author of a new book on outsourcing entitled “The Services Shift.”

Mr. Kennedy talks about how Procurement is being invited to sit at the table more and more as outsourcing decisions are being made. This is good. He also discusses how the focus of outsourced activities is growing broader to include marketing and engineering activities.

All of this talk brings up the specter of outsourcing the Procurement function. A lot of companies are doing this. Big companies. There are plenty of players in this space, ready to sit at the table and do your negotiating for you.

Plenty of talented procurement and sourcing folks are being laid off in the rush to this new way to buy.

Give it a decade. Wonder where we’ll be then? Because what was a good decision today may look different to you tomorrow.

As the pendulum swings.