Seriously, you can’t make this up.

Motivational (?) poster that was hung up about a month ago (right after our company was acquired) in the largest conference room in the building. This is an actual photo of an actual poster actually hanging at my job.

(image removed as upon closer inspection, I realized it had identifying information on it. Suffice to say, it was a big swirling ocean with a bunch of boats headed for a narrow passage and the title Sea of Change on it. It’s very…weird.)

What the sam hell am I supposed to deduce from this poster? That things are changing fast? That I should be sick to my stomach? Build an Ark? Take sailing lessons? Tsunami? The new company is full of hot air?

Seriously, what?

As a procurement person, I have to wonder how much we paid to procure this bit of four-color printed confusion.

Truth continues to be stranger than fiction.

How to boost an economy

Smoke more. Make it mandatory.

The Obama administration can thank me later.

Can the old dogs really learn new tricks?

It’s a good question. In fact, a question so well posed on the Procurement Leaders Blog that I did a gulp and a step back when I read the post.

Here’s the question: “…is the average procurement team happier when simply negotiating price?”

This question is asked under the auspices of the hypothesis: “… most middle-manager level procurement people are, at heart, negotiators, and lack the strategic ability to take their function to the next level.”

David Rae, author of the post, claims that due to the economy, there is a drive to focus once again on cost cutting. This has made most old school Procurement managers happy, because negotiating cost is what they know best. It’s easy. The path most traveled.

However, driving for costs at the exclusion of everything else is ultimately short sighted.

I would argue one cannot lose the focus on cost, but Mr. Rae is right, in this new world with a shaky economy, beating down suppliers for every penny just isn’t going to work. We’re all struggling. There needs to be a more holistic view of the supplier base and how we can continue to work to achieve both of our goals.

In the end, The Company and our suppliers, we need each other.

At my own company, we’re focusing on reduction in the supply base along with deeply researching the solvency factors of the suppliers we do use. This is especially so for the top tier suppliers who are mission critical to what we do.

But saying that procurement managers tend to fall back on what they know best, “the good old days of hitting suppliers over the head with a big stick” touched a nerve within me. Yes, I might be guilty of that too. I have an organization I need to help navigate these stormy seas. What is my focus?

Excuse me while I go take a look in the mirror.

Never the twain shall meet

Until the economy forces everyone’s hand, that is.

Ask any CEO of any company what is the largest line item on their budget. Go on, ask ‘em.

I can guarantee the answer.

People.

So you would think that the largest spend item on any company’s budget would be covered top to bottom, stem to stern by the good people in the procurement organization, right?

Sadly, no.

There has long been an uneasy relationship between the fine people of HR and the folks over in Procurement.

As the Procurement Blog over at ProcurementLeaders.com says, “…it’s perhaps not particularly ground breaking to suggest that procurement must work more closely with HR to reduce costs.”

Ah, but can this be done? HR, the touchy-feely, squishy “people” people and Procurement, the pain in the ass negotiators and “bottom line at any cost” people, can they really work together?

As the Procurement Leaders blog suggests, yes, these two groups can work together, but both need to give a little.

Procurement may need to back off a little bit, let HR lead the negotiations, or at least guide the conversation.

HR may need to step back a little, too, and let Procurement “be the bad guy,” and have that be ok.

Procurement needs to remember that we’re buying human capital and that comes with more complexities than buying a carton of capacitors for a half a penny a’piece.

HR might come to understand that some of what they do actually *can* be commoditized and that just because you *like* a supplier, that doesn’t mean they are giving you the best value for your dollar.

Rifts like this are a good place for a savvy sales person to drive a deep wedge, much to their advantage. In the end, both groups want to avoid this. They also both want to do the right thing for the company.

I’ve seen it work, but it takes a little give and take internally among the organizations. Stuff to be worked out well before sitting in front of a supplier.

I think the key to success is best summed up by point #2 in the article:

“Trust and value each other’s expertise.”

That goes a long way.

Just shut your eyes and place the PO

Working in a procurement organization gives one a *fabulous* glimpse into the inner workings of The Company.

We often know what’s going on well before the general population.

But this can bring up problems, as well. Like when your buyer brings you a several million dollar purchase order that is the backbone for an upcoming employee giveaway.

Now look, we’ve placed a million tee shirt orders. Embroidered vests. Engraved plaques. Metal reusable water bottles. We batted nary an eyelash, except to say, “damn” over the total value of the line item. And then we placed the order.

Fine, it’s all about employee morale and so we buy the schwag in a timely manner and gladly expedite the shipments and make sure all is handled with kid gloves.

That’s our job.

But every once in a while, you get a PR that you *know* is a bad idea. You see your company hurtling toward ridiculous but you just can’t do anything about it.

Well, that’s not quite true. As a procurement rep, you *could* do something about it. Sit on the PO. Demand backup. Go out for competitive quotes. Get it hung up in Legal.

If you are able to get in there on the front end, as the client just has the glimmer of a purchase in their eye, you can ask the right questions. You can guide The Client in the right direction or at least get the full story. You can get your vote in there.

But when the decision has been made, the PR is sitting on your desk and the CEO has already announced, well, at that point you have to remind yourself that it’s not your job to judge what is being bought. You just have to buy it.

Just close your eyes and place the PO. And hope for the best.

Being a support organization means sometimes you have to support buffoonery.

Metrics

Stumbled across an article at Purchasing.com entitled, “AT&T provides nine metrics no procurement group can live without.”

Oh really? AT&T? If I could possibly adequately convey an arched eyebrow with words, I would.

Having worked with AT&T as a supplier for the better part of a decade I am, to say the least, skeptical.

A company that cannot figure out how to provide consistent service, correct billings, or how to combine services in a timely manner with the company that acquired them is going to give me hot tips on managing a procurement organization?

Ohhhhkaaaaay.

“… the procurement organization at AT&T has realized that big wins are predicated on small gains and has metrics so seemingly small and exact that they measure the time it takes for contracts to get from procurement to a centralized quality auditor for review.”

Hmm. That contract cycle metric… As a customer, would be great if they measured it for me. Internal efficiency is fine, but it’s the end user that pays the bills.

But I digress. Let me divest myself of my customer hat and put on my procurement professional hat. What metrics is AT&T measuring that are good enough to crow about in a procurement magazine?

1. Business Partner Satisfaction (measured by a post-deal survey)
2. Contract Savings
3. Budget Attainment
4. Contract Document Quality (graded on a point scale by an internal auditor)
5. Manage Contract Expiration
6. Contract Under Negotiation (manage anything past 90 days)
7. Contract to Auditor (to insure contracts get reviewed in a timely manner and that none are lost)
8. Supplier Quality (ah, the ubiquitous QBR)
9. Supplier Diversity

Well, ok. I can’t actually argue with any of these metrics. Like a good old fashioned telecom, some of the metrics are pretty hardcore, in your backyard, controlling.

But I don’t actually see anything new here. This is not groundbreaking stuff. Any procurement organization SHOULD be managing cost savings (#2), contract expirations (#5), contracts under negotiation (#6), negotiations vs budget (#3), supplier performance (#8) and if you do work with any government agency, you HAVE to measure supplier diversity (#9).

The document quality metric (#4) is interesting, but is really just a SOX control. Contract to auditor (#7) is an internal issue to how AT&T works.

And then there is business partner satisfaction (#1), the one that the VP of Strategic Sourcing says is most important…

I am a big advocate of surveying our end users to be sure we’re hitting the mark, but after *every* deal (or actually, per the article, after every deal milestone is reached)?

People get tired of being surveyed. It’s been my experience that a procurement organization tends to work with the same people over and over. Your key end users will weary of your survey monkey. Trust me.

In all, it’s not a bad list. As said, not groundbreaking, but a solid foundation for any procurement group. I’m a bit surprised a company the size of AT&T is just now getting the backbone in place.

Good to know that the foundation, what we all know to be important, still works in this ever-changing economy.

Global Sourcing

In my internet wanderings today, I came across this blog post from Smartblogs.com.

The focus of the post is on global sourcing, an inevitable step in the expansion of just about any sized business. We’ve truly become a global economy, and it’s vital for the procurement department to figure out how they can get the most out of their global sourcing arrangements.

The authors, both esteemed employees at the University of Michigan, put forward five distinct skill sets that are necessary (and should be nurtured) in order to thrive in a global sourcing economy.

I may not hold a degree from a venerated University with a profoundly successful procurement education program, I’ve only been doing the actual job of global sourcing for a few (*cough*fifteen*cough*) years, and I have to say, while I think their list of five skills is pretty good, they widely missed the boat in a couple cases.

From the article:

1. “Analytics competency. The old model was based on deep domain knowledge and management by walking around. The new model relies on daily reports, statistical analysis, and adherence to performance levels specified in service level agreements.”

Ok. Sure. I’m onboard with this one. My only problem is that an over reliance on numbers, statistics and service level agreements shows a HUGE weakness on the part of the sourcing manager. If you look at numbers and fail to use your procurement intuition, you are doomed to fail. Always.

In fact, I believe that an OVER reliance on data is driving my profession into the ground. Sure, numbers and charts looks good when projected on the wall, but if you can’t explain WHERE you got the numbers and you can’t define WHY they numbers trend as they do, you just look buffoonish.

If you can tell a good story, numbers or no, and draw your suppliers, managers, key stakeholders, etc into your same line of thought, you’ll win hearts and minds every. single. time.

2. “Systems thinking. The old model emphasizes fixing errors and moving on. Global sourcing managers must work with vendors to identify the root cause of errors, jointly redesign workflows and controls, and negotiate how to share the costs and benefits of such continuous improvements.”

I am totally on board with this one. But this isn’t new thinking. This is what sourcing managers should have been doing all along. This isn’t impacted by global sourcing, this is just good business.

3. “Negotiation and soft skills. Global sourcing managers do not directly control workers, so they must influence them via incentives, well-designed contracts, and other soft influence methods.”

Yes, yes, yes. The lack of ability to negotiate, influence and be willing to stand up for what you know is right/wrong is an epidemic in the sourcing world. For some reason, the concept of “negotiation” has taken on a distasteful connotation. Like it’s a curse word.

It’s not.

Negotiating like a used car salesman with only an eye on the bottom line *is* passé. Negotiating for the greater good of both organizations (a “good deal” is one where both sides are mildly unhappy…a paraphrase from a from a really, really good lawyer) is how you continue to advance your business and meet your corporate goals.

4. “Cross cultural comfort. Front-line workers now reside in far away places, with very different work styles and cultural backgrounds. Global sourcing managers must thrive in this environment, but many can not make the transition. My research shows that 50-70% of middle managers cannot make this transition – primarily for cultural reasons.”

50% to 70%? Really? That’s a mind-boggling number to me. I may be fortunate in that I live in a highly diversified geographic area, because I don’t see numbers anywhere near this. If this is true, then I suggest some Chief Procurement Officers take a good hard look at themselves, because they set the pace for this sort of thing.

There are no lack of services and products out there to help workers over the hump. There is no excuse for this, honestly.

5. “24/7 work cycles with constant travel. Global sourcing managers are constantly on call, and many are abroad at least one week a month. Again, some managers thrive on such challenges. Others wilt.”

This is one where I have to disagree. Because given current economic conditions, this point is out of date. Yes, there is still a lot of global travel, but any company worth anything these days have SERIOUSLY curtailed international travel. The travel costs kill us. The exchange rates kill us. So what does that mean?

Global sourcing managers need to figure out how to be savvy about communicating with their international counterparts. Ask me the time difference to London. Mumbai. Singapore. I can answer immediately. I know when are the best times to call, email, text, video conference, iChat conference, etc, etc, etc.

I agree with the line, “…some managers thrive on such challenges. Others wilt.”

It’s not easy working in an international stage. Especially if you are a direct side sourcing manager and you’re getting parts for overseas manufacturing. Those 2:00am conference calls are deadly. It’s all part of the game.

So fair enough…this has given me much to think about and even some ideas I need to bring forward to my own organization.

I wonder how all of this might change as the cost and tax advantages for doing business overseas start to dwindle. The current Presidential Administration has been vocal about “buy American” and cutting some advantageous reasons to do business outside of our borders.

I don’t know what that means, yet. I don’t think the focus on international business changes, but it will change how each Procurement professional approaches their deals.

Thoughts? I’d love to hear them.

Sage Advice

“The bottom line: if a sales rep can’t tie his own shoe laces, don’t buy from him.”

Procurement people, if you aren’t reading “I Love Closing,” you should be.