Anna is that you? Image via Wikipedia
The title, for those who may not have guessed, is tongue in cheek. However, in some circles, that is the general line of thought even if some are too passive aggressive polite to say it openly.
One criticism that we often hear is that procurement savings are not actually savings at all, but rather more like an intra-group hug. This feedback is sometimes well-deserved, and even if not, at least provides insight into what the rest of the business is thinking about us. Better to bring this stuff to the surface than complain to your neighbor/boss/dog, right? Agreed.
That is why, I’d like to thank T. Cummins (don’t call me ‘Mister’) for his latest blog post on this very subject. Check it out here. Go and read it if you like, but hurry back. It’s lonely here inside a WordPress server. Plus, the web config file is digging into my ankle.
I think the discussion has some good points about the need for improving the way in which we measure savings and the need for improved focus on contract management and performance management, as often the ‘finishing’ and follow-through parts are the most problematic.
Having said that, I think it also reflects the established mental framework that non-procurement people have that reduces procurement to the role of the cheap uncle who unplugs his television every time he leaves the house. Picturing procurement in this way provides Alexey Alexandrovitch-style mental relief. (Here’s a hint: Google “Alexey A., Anna Karenina, Tolstoy and Read a book that does not include a bunch of business truisms”).
However, where crunching the savings numbers falls short is the scenario in which a supplier relationship delivers a huge increase in sales because of having a joint approach to marketing. Or where the relationship translates into a focused investment that delivers a service that customers can’t wait to open their wallets for. Or…well, you get the picture.
Contract management is certainly one strong way to get value, especially when coupled with relationship management efforts. However, there are plenty of others, and which one delivers the most depends on the specific opportunity.
He also mentions the aggressive approach we sometimes mistakenly take with suppliers, which again is valid in some circumstances. Having said that, a semi-organized approach and united stakeholder front – all easier written than done – can alleviate that particular issue. It’s basic, but applying the basics well is significant.
Now, everybody back to work.
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Tags: Anna Karenina, Category Management, Contract management, Leo Tolstoy, Procurement, Purchasing, Strategic Sourcing, supplier relationships, Tolstoy
