Why are You Fighting with Procurement and Purchasing?
DISCLAIMER: The following article is a reality and a strategy, NOT defamation or a tactic.
THE CONCEPT: Why purchasing and procurement departments should be avoided, and how to do it.
THE REALITY: Purchasing and procurement are a way of life.
YOUR REALITY: Your total lack of C-level relationships makes your life a sell-from-the-bottom-up proposition.
HERE’S YOUR SELF-TEST:
- Are you relegated to “purchasing” as part of corporate policy?
- Are you prevented from talking to the person who actually uses the product you’re trying to sell?
- Are you making decisions as to how much profit you’re willing to sacrifice to secure the business?
- Are you bullied into “matching price” to get the order?
- Are you being TOLD what your price will be in order to “do business?”
Welcome to the club of losers. Not people, profit.
The purchasing department, or the procurement department, has one major job: To save their company money. Oh wait, let me complete that sentence as it relates to you: To save their company money, at your expense.
In general, when you deal with the procurement department and their people – keep in mind:
- They don’t care about quality.
- They don’t understand outcome.
- They don’t understand the need for service after the sale.
- They don’t understand productivity.
- They don’t care about morale.
- They don’t care about vendor relationships.
- They don’t care about vendor profitability.
- They don’t care about you.
- They NEVER look for the best, just the lowest price.
Procurement departments operate under the general principle of, and are measured and rewarded by: “We saved a nickel!” BUT the outcome of the “saved nickel” may be that everyone in the company is unhappy, the product is crappy and breaks down, the service response is slow. NOTE TO PURCHASING: It’s also likely the productivity, and low quality, and loss of morale, cost your company 500 times more than the nickel you saved.
There’s a “Rock, Paper, Scissors” game of business: CEO’s cover purchasing and procurement. If the CEO calls down to purchasing and says, “We’re going with ACME Widgets!” The procurement person says, “ACME boss? Okay boss!” And that’s it. No proposal, no bid, no price cutting, no “match this price.” No nothing. Just a purchase order.
NOTE WELL: This is only possible if you have a relationship with the CEO. Ouch.
ATTENTION PURCHASING: Here are a few recommendations that eliminate “lowest price” from the final decision:
1. Demand testimonials. Don’t just bid. Prove what you promise.
2. Create a “range of price” acceptance. If the price is within 10% of the lowest bid, the purchasing agent can (and should) choose what he or she believes is the BEST product or service.
3. Let your people test the product.
4. Let your people tell you what they want.
5. Let your people tell you who they want to do business with.
NOTE WELL: Independent third party purchasing groups should be TOTALLY avoided. The hotel industry is besieged by RFPs from bullying third party event planning companies that shield the customer, and only care about price. Hotels hate them, and are forced to eliminate most of their profit to book the event. And the ultimate customer loses respect, face, and is in total jeopardy of having a third rate event with a poor outcome. All in the name of “saving money.”
And “reverse auctions” are worse. They milk every cent of profit.
My two-word strategy for both of these is: “DON’T PARTICIPATE!” If no one played, they’d go away in a week.
The strategy to eliminate, or at least mitigate, the process of starting with purchasing, is to have a relationship with the person or people that direct them. You can be recommended and you can be the “standard” used for selection.
You can have a history of success at other companies based on quality, productivity, results, and profitability – and present proof of this as a price alternative.
You can have a social media presence that allows your customers to provide feedback.
You can write value-based articles that C-level people might read. This can get you in direct contact with decision makers.
NOTE WELL: These 750 words are not going to resolve the issue, and are certainly not going to eliminate the purchasing department. In most cases, purchasing and procurement are a vital part of any large company. The challenge I’m issuing is that it is NOT just a price decision. “Bidding” is a losing proposition. “Best” and “value” are the winners.
If you’re a purchasing agent and you personally need heart surgery or a hip replacement, do you want best, or lowest price? Best, or three bids?
Think about it.