Global Leaders in Procurement & Negotiations (PSCMInstitute.com)

Category: Supply Chain Management Training

  • Negotiating with Suppliers that have ALL the Bargaining Power

    I have more and more clients that are struggling with pandemic negotiations with suppliers who hold all the bargaining power.  There’s really only 2 things that can be done to address this:

    1. Change the bargaining power dynamic
    2. Drive Investigative Negotiations and Value Creation

    Or you can keep hammering the supplier on price, but you are already doing that, and you were doing it before the pandemic too.   And right now it’s not working, or you wouldn’t be reading this I suppose. 

    Changing the bargaining power dynamic comes down to identifying the source of the supplier’s bargaining power, and then taking steps to reduce the value of that source and/or increase your bargaining power in turn. 

    The end goal of changing the bargaining power dynamics is to create a circumstance where your offer is perceived as being more desirable than it was previously. 

    I remember something Carlsberg Beer did with their soda ash suppliers (glass bottles are made of 70% sand and 30% soda ash).  The sand was plentiful, the soda ash was not.  They were dealing with a powerful oligopoly – almost a cartel of sorts.

    The soda ash suppliers were dictating the terms and getting them, because there were few alternatives.  Carlsberg didn’t know what to do.  The source of the supplier’s bargaining power was the oligopoly and Carlsberg’s lower volume. 

    Carlsberg couldn’t change the oligopoly, they couldn’t use something other than soda ash, and they couldn’t wave a wand and suddenly increase their volume requirements.  

    Or could they…..

    Carlsberg decided to take a disruptive sourcing move and talk with supply chain partners buying soda ash as well.  They put their requirements together and went to the oligopoly with a massive volume that was irresistible.  All in one take it or leave it contract offer.

    Now the oligopoly companies were going head to head for the business and a sweet deal was landed.  The bargaining power dynamics, once hard as steel, were melted away and the tables were turned.  

    This is just one example of how to change bargaining power dynamics.  You have to dissect the source of the bargaining power and take moves to undo it.  

    The other thing you can do is to drive Investigative Negotiations and Value Creation.   I have endless client examples of this.

    One example is with Tata Steel.   Tata is probably the biggest company in India – a massive conglomerate that has no equal elsewhere in the world that I’ve seen.  You can’t breathe air or drink a cup of coffee in India without Tata being involved.      

    They were negotiating with a German mining equipment supplier, the best in the business.   The Germans tend to do business cut and dry.  They had a hard as steel fixed pricing schedule.  Tata wasn’t going to get a single penny deviation from that schedule. 

    Tata thought about this problem, did some research – Investigative Negotiations – and realized that the mining equipment supplier had zero foothold in India.  How could this be?  But it was true. 

    That meant that they didn’t understand how commercia precedents worked in India.  They explained to the supplier that the volume at stake was not just that of Tata’s. 

    They explained that when Tata buys from a given supplier, this is an implicit seal of approval that the entire country of India uses to start buying from that supplier.  They then went through a myriad of examples. 

    They explained to the supplier that whichever company wins this business also wins the whole of India’s mining business.   This suddenly made the pie much bigger – Value Creation. 

    The rigid German supplier came back on their hands and knees with an incredible proposal to win the Indian marketplace.  Their first deviation ever from their hard pricing schedule.  

    Tata signed the deal, whereby the German party made far less money at the transaction level, but stood to gain FAR more in the aggregate from this new marketplace.   Both parties were thrilled with the outcome. 

    That’s exactly  how you do Investigative Negotiations and Value Creation. 

    If you are trying to solve your supplier bargaining power problems with management escalations and hammering the supplier, you’ll lose a lot of hair, but you won’t accomplish much else.     

    Read this Twice:  Doing what you’ve always been doing in negotiations will only deliver you the same results that you’ve always been getting.  And that’s not good enough.

    Now go off and do something wonderful.  Be your best!

    Omid G.

    “THE Godfather of Negotiation Planning” ~ Intel Corp

    www.PSCMInstitute.com 

    P.S. If you want to be a ROCK STAR at driving strategies like the above, check out the 100% online CPSCM™ Certification Program at https://pscminstitute.com/certification/.  You will see the materials and hear my voice throughout, as your own private instructor.  With almost 50% of the Fortune 100 having invested in CPSCM™, there is no equal in the marketplace.  Invest in your career and results today.  

  • Purchasing Negotiation Training – Get Out of Dark Ages

    Get Your Negotiations Out of the Dark Ages

    No matter what industry or geography I get contacted by, the request is always the same: “come talk to us about negotiations”. Purchasing Negotiation Training

    It’s a hot topic, that’s for sure.  I’m just not happy with the state of the union though.

    There’s so much bad information out there on negotiations.

    There was a time when purchasing was very transactional, by design.  We’re talking pre-1980’s.

    Customers opportunistically decided who they would do business with and the goal was to get what you wanted, as fast as possible, from whom you wanted, at the price you wanted – it was all about the win, for the person with the money that is.

    High stakes negotiations were viewed as warfare, and like any war, the goal was to make out on top in the conquest.  If the supplier didn’t like it, they could go pound sand, because you were the one with the money, and you could call the shots.

    The goal was to get an unfair advantage, to get the upper hand, to use deceit and aggression, to use psychological warfare to to paint the supplier in a corner.

    We are now entering the era of supply chain management.  It won’t just be companies competing;  supply chains will be competing too.  Without an effective supply chain, companies are rendered ineffective as well.

    Supply chain councils will be governing the effectiveness of the supply chain.  The council’s scorecard success metrics that are measured and monitored will be for the good of the chain, not for the good of the individual links. Costs will be taken OUT of the supply chain instead of forcing suppliers to make less profit – so purchasing can report more savings.

    If an individual company in the supply chain is faltering, they don’t get dumped like yesterday’s newspaper and unceremoniously have their business put out to bid.

    Instead, the supply chain council will try their best to support the companies in the chain in good times and bad, investing time and resources in them to help them be successful – for the good of the chain.

    Only the worst of conditions will result in a supply chain link being replaced, because – just like divorce – the total cost of doing so is very high.

    Back to negotiations training.  Given this supply chain model above, if the goal is to make the supply chain effective, it makes absolutely no sense to employ 1950’s tactics to get the upper hand or get an unfair advantage in negotiations.  How does that benefit the supply chain?

    This sort of antiquated negotiation training, which is out there everywhere in our profession being taught, needs a one-way ticket to the nearest landfill.

    You know the type of boss who you would take a bullet for?  It’s probably been a while, but you know exactly what I’m talking about.   You really cared about them, because they cared about you.

    Negotiations are no different.

    What you want is a set of powerful negotiation strategies that invoke INTRINSIC MOTIVATION and make the other party WANT to help make you successful, and leaves them feeling great about the deal.

    You cannot negotiate effectively with anyone unless they know, like, and trust you.  Period.  And you’re not going to achieve that with 1950’s tactics and counter-tactics that involve psychological leverage.

    If you’re doing these things, it’s not your fault, it’s probably what you’ve been taught.  But it’s time to stop.

    Do you know how you’ll know that “you’ve arrived” as a purchasing and supply chain management professional?

    You’ll know you have arrived when you can exceed your TCO objectives in a negotiation and the supplier feels great about the deal.  There’s a lot of strategy that goes into making this happen, and it doesn’t happen accidentally.  But that’s the outcome you want.  I can put you on that track.

    Procurement pros, we are in the BEST profession in the world.

    My challenge to you, as always:  Be your best!  Don’t ever settle for anything less.

    See you next week!

    Omid G

    P.S. We’re putting the finishing touches on my new negotiations course, “Negotiation Strategies for Breakthrough TCO”, that will get you out of the old and into the Now.

    There is nothing like to this new training that will put you into a league of your own, and I can’t wait to get it into your hands. Stay tuned!

  • Purchasing Training ~ Validation of Demand

    Are You Performing “Validation of Demand” With Your End Users?

    Ok, you’ve heard me say before that I prefer we not call anyone inside of our companies the “customer”.  The only customer we have is the Board of Directors, Taxpayers (for public entities), Shareholders (for private companies), and Internal Audit (for all companies!).

    So the right term is ‘end user’, because that’s what they are.  And our job is not to delight them, but rather to meet their business needs and requirements in a way that Demand Valuation Purchasing Trainingdelights the REAL customer – the groups noted above.

    Now there is a function in the overall procurement process called “validation of demand” that every end user is supposed to go through when they generate any kind of demand – usually through a purchase requisition.

    Validation of demand entails answering the following questions:

    1. Why is it you want to buy this?
    2. Why is it you need this many?
    3. Why is it you need these items now – as opposed to two quarters from now?
    4. What will happen if you don’t purchase this item at all?
    5. How will this purchase make your department better, and how will it enable your organization’s business objectives?

    Now the question I want to ask you is, is ANYONE asking these questions?  Do you even know?

    Traditionally, three groups own driving validation of demand.

    Before the PO is Approved: This should be the end user’s manager and someone in finance (two people total, at a minimum) that are approving the requisition.   This is a preventative control.  Meaning, the goal is to prevent a problem from occurring.

    After the PO is Approved:  That is the job of internal audit.   This is a detective control.  Meaning, the damage is already done, and everyone at this point is hoping internal audit is not smart enough to figure it out.

    Obviously the focus is on ‘before the PO is approved’.  So my question to you is, why can’t purchasing play a role in this space?

    In fact, let me word that differently.  I’m advocating, and have been advocating for a long time, that purchasing DOES play a role in this space.

    Why? Because I’m betting that the end user’s manager and finance rep are both focusing on whether or not there’s budget for these items and that’s about the end of the discussion.

    That’s not nearly enough.  I have always said that the majority of TCO opportunities are found before you go to bid, and simply assessing budgetary availability won’t get you there.

    Once you know the answer to #5 above – and you REALLY need to understand how the purchase enables your end user’s business, otherwise you can’t challenge them on anything – then you can ask a few key questions (these are just starters, for the purpose of a blog post):

    1. How did you come up with this SOW or Spec?
    2. Why do you need these particular bells and whistles?
    3. Did you use standard components and offerings instead of custom? If not, why?

    You need to integrate yourself into the validation of demand function.  If you simply jump to who supplies these items exactly as requested and try to create competition, then you are presupposing that your end user created the SOW and Spec and everything else in a way that is TCO efficient…….

    ……….Which is a totally false presumption.

    So step out of your comfort zone, step out of what you think is your role, and add value even earlier in the end user engagement process.  Challenge your end users.

    Don’t just get the lowest TCO on what the end user says they want, challenge the end user on what they think they want and make changes that utilize more standards and less customer parts and services, only as many bells and whistles as necessary, and the right quantity to enable the business and not a single unit more.

    You might not thrill the end user, but you’ll definitely thrill the Board of Directors, the Shareholders, the Tax Payers, or whomever else your allegiance SHOULD be aligned with.  Make the right people delighted, and watch your career prosper.

    ***********************************************************

    HUGE Summer Surprise! Only 25 available.

    It may not be summer in your part of the world, but we’re in full swing here.

    To celebrate, we’re offering huge discounts on our purchasing training memberships that will catapult your career in big ways: 

    Power Purchasing Pro Membership – “Discover The 7 Paradigm Shifts That 99.9% Of Purchasing Pros Don’t Know About That’ll Allow You to Catapult Your Purchasing Results, Career And Income Potential,… Even If You’re New Or A Seasoned Veteran!”

    If you don’t have our flagship Membership, you need to get it now.

    Click Here to learn all about what you’re going to get. When you order, use coupon code: surprise and save $200 instantly!

    Power Secrets of Purchasing Contract Law – “Discover How You Can Virtually Eliminate Redlining and Slash Your Overall Time Spent On Contracts and Excursions While Getting Far Better Results With My Purchasing Contract Power Secrets – Guaranteed!” 

    Don’t think for a minute that this breakthrough training series won’t apply to you. 

    Click Here to discover what you’re going to learn. Save $200 instantly when you check out by using coupon code: surprise.

    21st Century Buying for Public Purchasing Officers – A four part Advanced Purchasing Excellence video training series exclusively developed for Government & Public Sector Purchasing and Procurement Professionals.  

    This training series will uncover the four dramatic shifts you need to be taking *now* to boost your skills to the next level.

    Click Here to see what you’re going to get with this training and use coupon code: surprise to get over half off now.

    Quite frankly, these training memberships are worth far more than their regular price for those who implement what’s taught. If you’re an implementer, I encourage you to join us NOW. Not later today. Not tomorrow. NOW.

    It’s THAT important and THAT significant. Heck, join all three Membership training’s for less than the price of one!

    All of my products come with a no questions asked, 30 day money back guarantee.

    If you don’t agree that this training is all I say it is and more…. If you don’t agree that it’s the best training you’ve ever received… 

    I want you to ask for and get a full, no questions asked refund. You take no risk, it’s all on us.

    Join us today and take your zero-risk test-drive because this offer is available for only the next 25 to join. You’ve got nothing to lose and so much to gain.

    *******************************************

    We’ll see you next week.  Be your best!!

    –          Omid G

  • Purchasing Negotiations Training

    Purchasing Negotiations – Is Your Style Adaptive?

     

    You’ve been doing a lot of things the same for a long time.  Life would be too complex otherwise. Purchasing Negotiation Training

    Imagine if every time you wanted to brush your teeth, you had to sit and think about which teeth to start with, what type of strokes to use, how much pressure to exert, etc.

    The mundane would suddenly become a huge time sink, and there’d be no guarantees that you’d end up with better results.  It would be a nightmare.

    Luckily, your brain has accounted for the mundane.  It’s a part of your brain called the “Paleo-Cortex”.  No higher order thinking happens here.  Just the mundane, your regular rituals.

    Even making coffee or breakfast is governed by this part of your brain.  Unless you are using higher order thought when you scramble your eggs – and if you are, you have more problems than I can help you with!

    In any event, why would I even bring this up in a negotiations blog?

    Well, my concern is this: I’m worried that your negotiation strategies are stuck in your paleo-cortex, where they shouldn’t be.

    Why do I care?  Because all the training in the world does you no good if, in the heat of the moment, you revert to learned behaviors that are very possibly part of the problem.    Just because they are learned behaviors doesn’t mean they are productive ones.

    Worse yet, there will be no flashing neon sign telling you that your paleo-cortex has taken over.  In fact, you will be more at ease than ever.

    Why? Because the mundane is, well, mundane.  It requires little energy and little thought.  It just happens. And in our industry, that is not a good thing.

    Many bad things happen when let your paleo-cortex take over in negotiations.  Probably the worst is that you will employ a “one size fits all” approach in negotiations.

    Why is this a bad thing?  Why can’t you use a consistent strategy in negotiations?  Because a consistent strategy in negotiations will get you consistently bad results.

    Why? *Hear me clearly*:  Because your ability to be successful in negotiations hinges on you reading the situation and customizing a negotiation strategy for that situation.  Negotiations involve people and personalities, all with different motivators.

    Heck, even my 3 kids, all of whom are close in age, have completely different motivators. Each of them gets motivated by and responds to something different than the others.  I have to change my approach depending on which one I’m trying to influence.

    Why would adults, with all their idiosyncrasies, be any different?

    Negotiations is the art of achieving your high value TCO objectives while ensuring the other party feels good about the deal.  Even a cave man can sacrifice on price to make the supplier happy.  That doesn’t take any skills.

    Therefore, if your job is to find out non-price related motivators, you have to put your paleo-cortex to sleep and start really focusing on why the other person is in this negotiation with you, and what they need out of it to be successful.

    You also need to figure out what personality type they are.

    Some personalities are impatient and want short and succinct communications that get to the point – they thrive on time to results.  Others thrive on rich face to face communication and interactions with no rush.  Still others thrive on process flow documentation to ensure no excursions. Finally, some thrive on the status quo – they are willing to change, but they want to know why before they do.

    These are in fact the 4 high level personality types that you will find when working with people.  There’s much more to this, but for the purpose of a blog, this is what you will find in a nutshell.

    By understanding the personalities of everyone around you with whom you negotiate (and believe me, that’s everyone), you can do something incredible:

    Instead of negotiating using principles that are comfortable for you, you instead negotiate using principles that are comfortable for the other party, because you understand how they tick and what motivates them.  This gets you breakthrough results, with suppliers feeling good about the deal.

    The paleo-cortex couldn’t do this to save its life.  So keep that part of your brain focused on the things you truly don’t care about – like your methodology for washing your hands.  Once you check into work, put the rest of your gray matter to work and nail those TCO results.

    We’ll talk with you next week.  Be your best!

    Omid G

    P.S. Become Elite in our profession. Get my Elite Purchasing Training Here. 

  • Purchasing Training ~ Breakthrough Negotiation

    Getting Breakthrough Negotiation Results

    Suppliers are pretty smart.  They are smarter than you think actually.  Did you know sales people spend up to 40% of their time in training, while purchasing on average spends less than 2% of their time in training?

    It’s no wonder they are able to be so capable in selling solutions.  And as the old purchasing saying goes, “a solution looks suspiciously like a good or service, except it costs a lot more.” Purchasing Negotiation Training

    Here’s the deal.  Suppliers are well trained in negotiations.  More than most purchasing professionals.

    What does this mean to you?  It means when you aren’t prepared, or aren’t prepared enough, they will know it.  They WILL know it.

    But the issue continues.   They are not going to tell you that they don’t feel you are prepared.  They are actually trained on how to respond.  They are sure as heck not going to let the cat out of the bag and send you back to the drawing board for further planning.

    What kind of responses do suppliers come up with?  Their goal is to show you that the knife is cutting deep, and that you are the one wielding it.

    In fact, they will also make you feel like a superhero in the process.  Be prepared to hear things like this:

    “Nobody has ever been able to drive this kind of negotiation outcome like this before with us.  I had to break every rule in the book to make this happen, and getting this deal done required approvals all the way up to the head cheese.  You should really feel good about what you’ve negotiated with us.  This is not the norm. ”

    Pretty compelling, huh?  The problem is almost none of it is ever true.

    You see, there is only one thing that defines a good deal, and that is DATA.  Benchmarking, competitive bidding, favorably written Most Favored Customer contract clauses, cost models, value analysis – these are what define a good deal.

    But the supplier’s goal is to keep the focus away from those things, because then suddenly things become difficult.  Data is difficult to refute.

    It’s not their fault for doing all of this by the way.  Think about it, are any of your suppliers non-profit organizations?  Probably not.  They are in the business of making money.  That’s their job.

    So you need to do your job.  Don’t judge your negotiation skills and capabilities be judged based on  a supplier’s response, words, or actions.

    Judge your negotiation skills and capabilities by your preparation, and look at what the data tells you.  Let the data paint the picture.

    Not only that, let the data guide your strategy.  Negotiations are won and lost before they ever start – it’s all down to how you prepare, and what sort of analysis you do, and how you use it.

    On top of that, you need to get your behavioral strategies down pat.  We’re not trying to “get the upper hand” – that’s a 1950’s strategy.

    We’re trying to identify what unique motivators your supplier has and determining how to leverage those to create intrinsic motivation models for them to give you an even better TCO value proposition while still feeling good about the deal.

    There is an art and science to achieving breakthrough negotiation results, and I want to key you into these strategies.  I want to give you a chance to learn the powerful and game changing insider secrets I’ve developed to give you the tools to generate these kind of breakthrough negotiation results.

    To that end, I invite you to join us on my upcoming Advanced Purchasing Excellence Training Series Webinar, “Negotiation Strategies for Breakthrough TCO”.

    To learn all about it and join us, Click Here Now.

    Talk with you next week!

    Omid G

  • Purchasing Training ~ Managing Currency Risk

    Are You Managing Your Currency Risk?

    I’m vacationing in Italy and France right now with my wife, but being the dedicated guy that I am, I’m sneaking in a blog – being typed as I fly from Venice to Paris.

    After feeling the personal sting of currency exchange using the once mighty dollar (and it’s interesting to note that the root cause of the collapse of the dollar is all purchasing Purchasing Training - Managing Currency Riskrelated – by consumers, businesses, and government – but let’s not go there in this blog) here in Venice, I’m more sensitive to this topic.

    I had my US Dollars converted to Euros at pretty bad rates for the first few days.  It wasn’t until I took the time to do a quick internet search and found out that the market rate is .74 that I started to negotiate and convert in larger quantities – getting the best rates in the process.

    But what I realized was I made a rookie mistake.  My wife and I spent so much time researching and planning tickets, hotels, tours, etc that had good early rates with high reviews, that we totally overlooked currency exchange as a huge cost sucker.

    (Note: Keep reading and you’ll understand the connection to your job in a few paragraphs – there is a purchasing parable here)

    Until we figured out the system here, we were first getting .52 Euros for every dollar.  By the third day, I was getting .7 Euros to the dollar.  For you math geeks, the exchange companies were making 35% extra currency exchange profit off of me early on.

    So while my focus was on not getting ripped off on everything from a PRICE perspective, unbeknownst to me, I was getting ripped off not on price (well, I was, but not more than anyone else), but rather on exchange ratios.

    I also figured out that Europeans practice the “nibbling” strategy when selling things (e.g. try booking an inter-Europe flight and see how much the total cost comes out, as compared to the ticket price you were quoted up front), but we’ll save that for another blog.

    The bottom line is this:  virtually all supply chains are global now.  It’s an inescapable fact.  And with that, one of the costs we rarely spend time looking at are currency fluctuations, yet it’s one of the most impactful.

    I challenge you to find one person who knows that China’s exchange rate has increased from ~ 8:1 to around ~6:1 over the last decade.  And they are gradually making their currency stronger and stronger, through a pegging process – which means your country currency will buy less and less Chinese goods, Ceterus Paribus (“all things being equal” – an economics flashback for some of you I bet).

    That also means massive inflationary pressures for supply chains that run through China.  How many of those do you think you have?  TONS.   And the Chinese government plans to keep on bringing the exchange rate closer and closer to natural equilibrium – which means again more inflation for those buyers in other countries.

    Same thing with Brazil – their currency strength relative to the USD has doubled in the last 8 years.  DOUBLED.  That means the price to you doubled if you are paying in USD.  Not to mention world cup related inflation that’s happening now.

    Even if you aren’t sourcing internationally, your suppliers probably are.  And guess who that currency risk gets passed onto?  You guessed it!

    Well for starters, if their exchange rate becomes more favorable, your suppliers are going to quickly enjoy a fatter profit margin.  They’re certainly not going to contact you and let you know that you are due a currency driven discount.

    However, if currency rates change to a supplier’s detriment, you are the *first* person your supplier is going to call.  So if you aren’t paying attention, what will happen is you will bear the brunt of currency risk, but will never reap any benefits when it changes in your favor.

    You should also be looking at taxes and tariffs.  I know of one Fortune 50 company that legally has as many of their purchases go through their Oregon based purchasing department as possible, because Oregon doesn’t have sales tax.   Hey, if there’s a legal loophole that your company approves, why not take it?

    So don’t just look at your own currency risk management strategy, look at your supplier’s as well.  If your company is of reasonable size (say, Fortune 1000), then you should have a treasury department of sorts with at least one person who has professional training, experience, and current job scope related to management of currency risk.

    Talk to this person!  Make them earn their money!  Find out who is paying attention to currency risk for your materials and services purchases.  Is anyone?  It’s not enough for your price in USD not to change, you total cost has to not change.  And for that matter, if exchange rates change to your benefit, then your costs should improve.

    So now here I sit with Euros in hand, purchased at a favorable rate for current economic conditions.  It doesn’t mean I’m going to get a good deal though.

    Chances are, Parisian vendors of food, local transportation, and various trinkets all have ensured that my work is cut out for me.  While I’d like to tell you that I’m going to issue an RFQ for lattes, croissants, museums, and taxis…..it’s just not so.

    I’m afraid this is one market for which multiple sources are available for everything, but due to unique market conditions, all suppliers act like sole source vendors – they have you over a barrel and they know it.

    It’s all good.  My only objectives are to have a good time and not gain weight.  I already know a blanket PO is the only thing that works on these kind of trips.  For once, I’m not going to negotiate.  Not too hard, anyways.

    I’ll be back with you again next week, from someplace in Italy. Until then, be your best!  Ciao!!

    Omid G

    Special Offer! This month’s Special Offer is for readers of this purchasing training blog. If you don’t have Omid’s flagship training product membership, then here’s your chance to join us and save $100 now. To see what you’re going to get, Click Here but DO NOT buy from that page! Use This Link instead and save $100 instantly!

    We’ve reserved only 25 of these special membership discounts and once they’re gone, they’re gone. So hurry and grab your Power Purchasing Pro Membership and Join Us Now! 

  • Purchasing Training ~ Issue #57

    Who’s Managing Who With Your Suppliers?

    What would you think if you entered a cruise ship and found out that the captain was not only steering the ship, but also cooking the food and cleaning the restrooms?  The thought is ludicrous, right?

    Purchasing Training - Leadership
    Lead!

    It’s ludicrous on a lot of levels.  One is that there just isn’t time for all of those activities.  Another is that if you try to do all of them well, you won’t be able to do any of them well.

    Yet another is that it detracts from the most strategic goal – safely and efficiently guiding the ship.  Finally, engaging in cooking and cleaning activities represents an opportunity cost for someone who is skilled enough to be a captain of a cruise ship.

    Why are we talking about captains, cruise ships, cooks, and restrooms?  I’d like to tell you it’s because I’m getting ready to go on a cruise, but that’s not the reason unfortunately.

    The reason is that supplier managers in our profession are trying to be the captain and the cook of a ship, and it’s not a sustainable or an effective model.  What do I mean by this?

    Well, grab a mirror, look in it deeply, and tell me who is really accountable for your supplier’s success.  Are your rolling up your sleeve and tackling supplier performance problems?

    Is your supplier taking complete control of their performance, using metrics, and updating you regularly? Who discovers the problems, the supplier or you?  Who makes all the phone calls?  Who is driving the action plans for resolution?

    Keep holding onto that mirror.  Now tell me, is it you doing any of these things?  If the answer is yes, then there is a high probability that you are trying to be the captain and the cook of your very own cruise ship.  Want a different analogy?  You are trying to be the maestro and the orchestra of your own symphony.  It’s not going to work.

    Besides, who gets to do all the bowing at the end of a symphony anyways?  That’s right, the maestro gets all the credit.  That’s the way it works.  It really doesn’t matter that the orchestra was the one doing 99% of the work.  Heck, that’s the way it’s supposed to be, and the Maestro still is the one doing the endless bowing.

    One step further, who is responsible for supplier continuous improvement? Is anyone?  Or is the focus just on meeting the bare deliverables of the contract?

    How about when something goes wrong with supplier performance.  Is the focus on the symptom or the root cause? Who is doing the analysis?  Who reports it out?  Who ensure non-recurrence?  I could go on and on here.

    Have you seen those characters that have a banjo in their hands, a harmonica situated in front of their mouth, and a drum set someplace on their body or back, as they somehow become a one person band?  How many of those folks have landed in the Rock ‘n Roll hall of fame or won Grammy awards for best album of the year?

    It’s funny looking for sure to see those people, but funny doesn’t shoot you up the  procurement career ladder and catapult your income.  And it’s definitely not funny when it’s happening to procurement professionals….. and my guess is it might just be happening to you when it comes to supplier performance management.

    You see, not a single one of you is an individual contributor.  ALL OF YOU are people managers.  The people you are managing, and who work for you, and who should be at your beck and call TO ENSURE YOU ARE SUCCESSFUL are your high expenditure suppliers.  Reread this short section here (the preceding 3 sentences) a few times before moving on.  Throw away every notion to the contrary you’ve ever held to date.

    Don’t be afraid to make suppliers earn their money.  Set expectations for performance results, report cards, root cause analysis on excursions, and continuous quality and TCO improvement.

    And if you haven’t done it yet, it’s not too late to start.  Don’t ask your suppliers, you have the right to tell them.  YOU are the one with the money, and it is a privilege for them to be on the receiving end of your money.  It’s so easy to forget this, especially with all the misperceptions around the concept of win/win out there.

    Now I’m not at all asking you to become a dictator.  What I’m saying is really only common sense.   After all, if your kid does bad in a subject in school, do you dive and start doing their homework and taking their exams for them?  Absolutely not.  And this is no different.

    So exhibit some leadership.  As long as you use influence and not authority, your suppliers will respect you for it, I promise you.

    Now go off and do something wonderful with this purchasing training.  Then come back and tell me about it.  It’s the highlight of my job.

    We’ll talk with you next week.

    Be your best!

     

    Omid G

     

  • Purchasing Training – Specifications and Scope of Work Analyst

    Watch this purchasing training that picks up where last weeks left off about why you need to STOP buying goods and services and instead, start buying PERFORMANCE RESULTS.

    Eliminate almost all of your procurement problems becoming a Specifications and Scope of Work Analyst.

    Email readers, click the video image below or Click Here to watch now.

    blogstill

  • Purchasing Training ~ HUGE Secret

    This week Omid delivers his purchasing training blog on YouTube from his man cave. This one purchasing tip alone will cause a massive paradigm shift in your purchasing career.

    If you enjoyed this video, please share with your colleagues. Thank You!
    Purchasing Training

  • Purchasing Training

    Let’s Agree to Kill the Word “Customer” From Purchasing Lingo

     

    I did a seminar just recently where  kept hearing the word “customer” over and over. Purchasing Training - Stop calling end users "customers"

    How did this word come about?  Calling internal people who generate demand the “customer”?  And when I hear that word used in our profession, everyone knows exactly what it means.  Nobody questions it either.  Why?

    Think about the definition of a customer.  Actually, step back for a second, and think about why you were hired.

    Purchasing is one of only three parties inside of a company that is authorized to commit funds to external companies.  The other parties are Corporate VP’s and above and also procurement card holders for relatively trivial transactions.

    But the vast majority of dollars, and therefore the corporate road to TCO, goes through purchasing.

    So rewind back to the definition of the customer….in OUR profession.  If your job is to drive maximum profit and to minimize TCO for the company, then who should your allegiance be to?  Who should it really be to?

    To answer the question, your allegiance should be to the people way up the food chain who are on the hook for TCO.

    Who are these people?  That would be the taxpayers in the public sector and the board of directors and stockholders/owners in the private sector. End of discussion.

    So let’s put this “customer” expression to bed.  The person who generates demand internally is the END USER.  They are the DEMAND GENERATOR. They *are not* the customer.

    So guess what happens when you call the end user the customer?  “The customer is always right,” isn’t that what they always say?

    Well, in our profession, if the customer was always right, we’d be overnighting everything, we wouldn’t challenge anything, and purchasing would rubber stamp all customer decisions.

    On top of that, now you have to start doing customer satisfaction surveys, and I know for a fact tons of you out there are being forced to do just that.  And your management wants all these customer surveys to have off the chart results, right?

    So how do you get your “customers” to give you off the charts results on customer surveys?

    Well, you overnight everything, you don’t challenge anything, and you make sure the customer takes full advantage of their apparent right…..wait for it….wait for it….  to always be right.

    I have always said that our entire profession is broken.  Just completely broken.  I’m not tooting my horn when I tell you that nobody does what I do.  I don’t teach how to do what you are already doing, only a lot better.  You can read any antiquated purchasing book out there to learn that. You don’t need me.

    I teach why most everything we’ve been taught to do as purchasing professionals is about as counter-productive as can be, and what you need to be doing differently, starting yesterday.

    Although I spend almost all my time teaching in one form or another, I’ve never actually viewed my job as teaching.  I create change.  That’s what I do.

    But of course, commitment to change requires dance partners.  You have to be willing to dance with me (that is a really terrible visual, and I apologize for that).

    Here’s what I really meant:  I want you to start policing all purchasing professionals starting now, including yourself.  Repeat after me:  “I will never use the word ‘customer’ again.  From now on, I will call them ‘end users’ instead”.

    Being an end user instead of a customer means that part of our job is to challenge, and sometimes the end user won’t get what they want, because you are doing the right thing for the company or agency.  And they may not be totally thrilled about it either.

    I’m not suggesting to have an adversarial relationship with end users.  Far from it.  We should absolutely strive for a collaborative and productive relationship that involves two way dialogue, as well as give and take where appropriate.

    But sometimes you have to take a tough stand with end users, and taking a tough stand is not easy.

    You have to have thick skin to be in our profession.  If you can’t analyze the facts and know when to say “NO” to end users, you are not cut out to be a purchasing professional.

    Don’t despair though.  Purchasing professionals aren’t born with these skills.  You can develop them.  You can be a world class purchasing professional, actually.  I’m here to help you.

    You’ll never hear me stop saying this:  We’re in the best profession in the world.  Now go out there and make something happen.

    ***************************************

    SPECIAL OFFER – 100 Save $100! We’ve reserved 100 – $100 discounts for readers of this Purchasing Training Newsletter. You’re going to save $100 off our extremely popular Power Purchasing Pro purchasing training membership when you are one of the first 100 to take advantage of this huge discount offer. 

    Go to: https://purchasingadvantage.com/power-purchasing-pro to see what you’re going to get with this purchasing training Membership. After you click the “Add To Cart” button, click on the “Have a coupon? Click here” button and enter the Discount Code: SpecialToday and save $100 today.

    Hurry and beat the crowd and grab your Membership now! Power Purchasing Pro Membership

    ***************************************

    Talk with you next week!

    Omid G