Purchasing

In the uncertainty of the current economic environment, many traditional business practices and approaches are open to scrutiny and examination. Purchasing may take a closer look at supplier relationships with an eye towards reducing costs, maximizing efficiency and in some instances, merely sustaining the status quo.

There are many ways to evaluate supplier performance and contribution in an objective manner. At the same time, there are always subjective factors that come into play when considering the value of suppliers. When purchasers assess supplier value all of these factors influence supplier strategy decisions.

Nobody discounts the importance of steady, stable and reliable supplier relationships. However when there is a sharp focus on reducing the supplier base or increasing leverage with suppliers, what happens to the small, local but loyal supplier that ...Read More

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Now that the Super Bowl is a distant enough memory to forget or a vibrant enough one to remember (depending on who you were rooting for), I couldn’t help but think of the money that companies spent on television advertising. Counting pre-game, halftime, game and post-game there were more than 90 commercials. The cost for a 30-second spot ranged from $2.7 to $3 million. In my mind, there was little room for error if the ad generated only multiple viewings on MySpace or made it any one of the numerous Worst Of lists.

Interestingly enough in the Internet age even negative attention is good attention. Go Daddy’s previous spots were considered risqué or controversial. This year they stayed in the same vein with an ad featuring race car driver Danica Patrick. Whether or not you like the company or the ad itself, their website reported an incredible 2 millio...Read More

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I was just reading some observations by Charles Dominick of Next Level Purchasing with respect to changes in the world of purchasing over the past ten years. The format is like a David Letterman “Top 10” list and it is an easy, yet thoughtful read.

The entry that caught my eye was, “Purchasing Grabbed More Spend”.  Dominick references areas of spend such as fleet management, benefits and travel, that historically were “once sourced by other departments." How true, and perhaps it may still be true with some of these areas of spending in some companies. As with legal services, many companies believe that the procurement of human resources benefits and training programs are the domain of human resources professionals.

Yet if purc...Read More

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As 2007 closes and the holiday shopping frenzy winds down, my wish for 2008 is that common sense and good customer service will prevail, for a lack of both of these was evident in my holiday observations and through experiences related by others.

A friend once told me that the most disturbing part of an economic downturn was the disappearance of customer service, or in his words, “the expulsion of the words customer and service from the dictionary.” Recently, he purchased a new refrigerator and upon delivery, asked if the door handle could be reversed. Both deliverymen looked at him as if he had made an outlandish request. One answered that it wasn’t part of his job and the other said that he had no idea how to do it, suggesting that a call to the com...Read More

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Add high legal fees to death and taxes as inevitability in our life/work journey. It seems like the annual letter is the same, only the year changes; “Effective January 1st, our new hourly rate will be (fill in the blank). This increase is necessitated by rising operations and administrative costs. We appreciate your understanding and look forward to serving all of your future legal services needs.”

The next thing you know your outside counsel is billing you $450 per hour. What recourse do you have? Ordinarily, I might say your options are limited, but then I saw what Wal-Mart decided to do about it.

According to a blog post on The Wall Street Journal , Wal-Mart noticed that the salaries for associates in their outside le...Read More

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The recent first snowstorm of the year in New England rekindled all those ugly reminders of winter: traffic, ice, shoveling snow and cold winds. And being a purchasing professional, it also reminds me that I had better check up on that snowplowing contract.

Last winter, a Boston furniture company made headlines with a promotion that offered furniture buyers no-interest on their purchases if the Red Sox won the 2007 World Series. We all know how that turned out. Fortunately, the company had taken out an insurance policy to cover the payouts.

It’s highly unlikely that you’ve found a snowplowing contractor who would guarantee free services based on an annual amount of snowfall/accumulation, but it is a good time to review your requirements and expectations.

• What circumstances necessitate a response to plow, shovel or de-ice

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Over the past few months I’ve been immersed in software projects that include an e-procurement upgrade and an implementation of a new contracts management system. Throughout this time, two thoughts have kept running through my mind:

• Isn’t technology supposed to be an enabler?
• Is there any software that meets the need of services purchasing?

Having sold e-procurement solutions in the early boom days of purchasing enablement, one of its promises was that it would be self service. Ask anybody who has worked with an e-procurement solution about this notion. Why do we need buyers to release approved purchase requisitions in order to create a purchase order? How do we manage the contract review, editing and mutual signing processes online? Don’t get me wrong, e-procurement has delivered on its promises to facilitate or...Read More

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Just when I’ve been able to get the data and information from a service provider where I’m confident that I’ve arrived at the true cost to perform a service or deliver a project, my customer will say that cost isn’t the most important criteria for selecting a source. It’s tough enough struggling to understand cost, because unlike a manufactured product or commodity the real cost of a service can be elusive. Comparing labor rates of different service providers doesn’t hold all of the answers. Some providers quote projects with a blended rate. Some offer a discount based on volume, earned credits or similar incentives. And truthfully, it’s difficult to get through the maze sometimes.

Aside from this challenge, the question of how muc...Read More

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Or so it seems. I see a lot of consulting agreements where it appears the consultants are independent contractors and likely new to the consulting world. Why? Self-employment vs. employment in the corporate world can be more attractive in terms of work schedules and compensation. It’s easier for companies to contract with consultants than to higher full-time staff due to approval processes and costs. Former employees usually have a plethora of both domain and project-specific expertise. There is no learning curve and projects can be completed in a timely manner ensuring deadlines and budgets are met (usually).

This apparent win-win scenario is not without considerations of risk and liability. I know of an instance where a company wanted to contract with a former employee, and when the company did their due di...Read More

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As a follow up to my previous blog regarding the cost of meetings, I want to emphasize the significance of contracts with hotels. For some, these may be trivial. I’ve seen administrative assistants sign these contracts without even understanding the implications should unforeseen circumstances such as attrition and cancellation or even personal injury occur. 

Because the demand for hotel space is outpacing supply, it can be a challenge to negotiate hotel contracts, but nevertheless there are a few areas that require your attention:

Cancellation: Let’s face it, things happen. At a business conference I attended last month, a gentleman relayed a story about a hotel cancellation penalty of $3 million that was incurred by an overzealous market...Read More

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I was reading a business travel publication recently and there was a claim that meeting expenses for companies averaged between 1-3% of annual revenue. The numbers jumped out at me in thinking about the sales of large Fortune 100 companies. And then, I thought about my own experiences.

All of those day meetings, departmental off-site meetings at local hotels, sales planning meetings, incentive meetings, dinner meetings, customer meetings and educational meetings really add up.

Then there are the costs of hotel rooms, food and beverages, airfare, ground transportation, entertainment and all of those amenities such as internet access, health club and spa fees and golf, etc.

Individually the costs of these meetings may not seem like much, but collectively they add up to significant expense. I have meetings that have ranged from $250 ...Read More

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A recent article in the Mercury News observed that although India “remains the world's top outsourcing hub it faces an increasing threat from rival China because of India's high attrition rate, poor infrastructure and rising wages.” 

For the record,“According to its 2006 global outsourcing survey, Frost & Sullivan said India was the top hub, followed by China, Ireland, Singapore, Malaysia, Mexico, the Czech Republic, Poland, the Philippines and Canada.”

This study raises an interesting question: Does service quality vary by the country of origin? Is there a difference between a Russian software developer and an Indian software developer?

I have had limited experience with call centers that were o...Read More

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