Vendor Management

The prolific Doctor has started another cross-blog series titled the Seven Grand Challenges for Supply and Spend Management. I’ve enjoyed the posts so far – in particular Justin Fogarty’s piece on Spend Management 3.0 (despite my misgivings that we have started a spend management version-war where everyone with a new idea can up-the-version at their whim – how long before we hit Spend Management 35.0? What about Spend Management 34,986,586.0? – I recently saw a reference to Web 4.0 which means I’ve missed Web 3.0 entirely. Was I on holidays or was I just looking the other way when Web 3.0 came and went?).

Whilst many of the contributions have focussed on challenges that arise from new forces at play in the business world (such as the proliferation of information), I have chosen to focus on traditional challenges – challenges that will be impacted by the availability of technology but will always exist in one form or another for purchasing professionals.

In-keeping with the traditional focus, I have elected to theme my contribution using a tried and true formula. My challenges are themed around the 7 deadly sins.

1. Lust: Demand management must be at the top of every buyer’s list of key success factors. No matter how good you are at negotiating, you’ll still never beat the buyer who figures out how to achieve their business ends without buying the product at all. The challenge for procurement professionals is to get close enough to the point of design that they can influence the need for products in the first place; rather than merely responding to an already fully defined need and asked to “just get that cheaper”. The current market conditions (which I believe can rationally be described as “crazy”) can be a great enabler for procurement professionals looking to influence demand.
2. Gluttony: This is closely related to the first challenge. The first challenge asks the question “Do you need it or do you just want it?” whilst the second asks “How much do you need?” The challenge for procurement professionals is to master existing methodologies such as lean to influence demand for products and services.
3. Greed: This is a complicated challenge. Greed can manifest itself in a supplier taking advantage of a buyer (such as the Bernie Gunther’s example of the Office Supplies vendor – As an aside, I do feel sorry for the poor office supplies vendors who seem always to be the first cab off the rank with any spend visibility initiative) or it can manifest itself in a buyer with significant market value tearing the throat out of their supplier’s margins (If a buyer has sufficient purchasing power, it is difficult to resist this temptation – of course, as I write this I’m drinking wine purchased from a national retailer rather than my local bottle shop). The challenge for the procurement professional is distinguishing one situation from the other and managing the stakeholders on both sides.
4. Sloth: The most valuable skill that a supplier can cultivate in its relationship managers is the skill of getting a customer to roll a contract over. When I say this, I’m not suggesting that you swap out your good, long-term suppliers for new and untested suppliers every contract term but that you ensure that your stakeholders see value in getting a procurement professional to review and renegotiate the contracts prior to re-execution. This is one of the true competitive advantages of the procurement team over teams located within the business. If a relationship between the vendor and the buyer is strong then having a more independent group such as the procurement team involved can create an environment where commercial concerns can rise to the fore.
5. Wrath: When a relationship has soured to the point where either the buyer or the supplier is willing to risk supply disruption to extract their pound of flesh, a procurement professional can play a role in keeping the relationship on life support long enough to either revive the corpse or replace the supplier.
6. Envy: There is a lot of me-too-ism in the business world generally. Good salespeople excel at inspiring fear in their prospects that, by failing to use their services or use their software, that they will miss an opportunity that their competition is already pursuing. Procurement professionals, as expert purchasers, can assist the business in differentiating true opportunity from fear-driven me-too opportunities. The challenge lies in getting recognised in that role.
7. Pride: The core challenge that must be met to meet the previous 6 challenges is attracting and keeping people who are capable enough to meet these challenges. To do this, procurement teams need to foster pride in their work and the role within the business. Once this is accomplished, procurement teams can meet any challenge that presents itself.