Ha-ha! Very funny! I bet everyone else (not procurement, of course) thinks, that procurement is all about numbers, cost and budget reductions, limitations, taking away fun and bullying suppliers. Surprise! It is not only that! First of all – its people who work as buyers of all sorts. And most of them do have sense of humour which helps at work a lot.

So how does it work and why should you smile and laugh more at work?

Humour has a lot of benefits:

• Is joyful to yourself and others.
• Keeps things light and breezy.
• Increases employees’ morale and motivation, atmosphere at work.
• Makes embarrassing moments funny (like this one here – when I completely messed when Portuguese won European football championship).
• Helps with sales: builds relationships and keeps things in perspective.
• Blocks stress: increases endorphin and blood flow in general, relieves tension.
• Helps bonding – interpersonal, among team members. Sharing life stories, experiences which were funny, letting others learn from your misunderstandings – all of this brings people closer together.

There can be a lot of different types and forms of humour: verbal humour, physical humour, comedy in print. It is always important to choose best way to express yourself: as in any communication, there are some rules around it.

Do’s:

•  Observe colleagues expressions and reactions – the joke in your head sounds funny, but people are different.
• Keep it clean, short, subtle – jokes are different, people are different. So unless you know the people you are talking to very well – better safe than sorry.
• Respect customers, employer, co-workers. Not much to comment – there is a place and time for everything. We come to work firstly to work.Customers, employers are people paying your salary. And unless you are a professional comedian – you are not being paid for joking all day.
• Count to 10 and participate in moderation. Especially on the moments when you feel like “biting” someone with sarcastic joke – stop and think. And count to 10, if needed, until the urge passes.
• Choose your wording, timing, audience carefully.
• Practice.
• Make mental notes. Just like I did during a meeting with engineers. We were discussing some spare parts suppliers’ changeover and they were concerned about their response timing possibilities. One of the business requirements was that the new supplier has a “hotline”. Only the engineers used different name. They said “o-sh*t-line” (fine, fine – I did not invent this word). There and then, it was an amazing moment of laughter and a silence breaker, which helped people to express their main concern aloud.
• Select practical jokes VERY carefully. From being improper and distracting they can lead to health and safety disasters – and nobody is going to think it is funny.

And another part – don’t’s:

• Sarcasm. No excuse for abuse.
• Put up with insults.
• Don’t be the only one laughing. Or – the only one not laughing.

Another powerful tool is a smile. Smile to people and they will smile back. I practice this a lot. During negotiations, simply in office or on the tube. During negotiations I can ask most serious questions. A question like “so can you tell me then where does your company earn profit, if you claim that your margin almost does not exist?” from a grumpy buyer could be perceived as a form of aggression. While if you do it with a smile – it will be a game of words, not an expression of aggression, but the question will still be there.

Sometimes people get confused – they are no longer used to people smiling at them for no reason. Try this exercise: during your morning commute (especially in crowded places), instead of trying to drill a hole in your phone with your eyes, lift them up, make an eye contact with a stranger and smile. I do that. Yes, i get different reactions. However, most of them smile back.

Most daring experiment that me and my team did with humour was presenting a very serious subject on a quarterly assembly of all centres of excellence. Imagine a hundred people sitting in the auditorium and waiting for a subject “Resisting supplier price increases” to be presented. And what do they get? Check this out…

The message was delivered very successfully. The feedback about that subject was best ever. The content was still serious and good. But at the same time it was not just an ordinary boring presentation:

• our team had the best time ever while preparing the subject.
• people in the audience related to the subject very well.
• it was energizing, different, memorable – successful communication.

Procurement can be and is fun! Happy Friday everyone! Keep on smiling!

I must admit I am not the biggest fan of fluffy things in the world. Theories, tools, systems by themselves are neither good or bad (that is why i say “fluffy”). It is about what you do with them and how good you are in what you do. Claiming, that a company has SRM in place or that you have supplier evaluation and feedback system in place does not mean much. “So what?” is a crucial question to answer. Does it bring benefits to the business? Does it REALLY make a difference?

There are companies who implement tools because someone “said so”. It might be certification organisations, big customers, auditors. Others rush to adopt new systems, because they are chasing the fashion: competitors, “market”… “Just because” can also be a reason. The systems become deeply embedded into the company. Well, at least, drawers of the desk. And the biggest benefit it brings – prevents from more systems and tool being implemented into the same drawers – because they occupy space.

On the other hand – do you need SRM in place to treat your suppliers like human beings, like business partners – with respect and honesty? Probably not. If you really put effort into any relationship – it works. It works better, when communication is proper, when information exchange is consistent and open, goal-oriented.

And here is the trick – as soon as you start working hard with a bigger number of suppliers to maintain and develop relationships, to achieve mutual goals – you start needing help. This is when tools and systems come into hand. They are there to help you do the job that needs to be done. Or the job that you would be doing anyway, without even having a system.

Let’s get back to the initial question: can we measure “good relationships”? Do they give any benefits?

Let me give you an example. We were having negotiations with global services company.  We needed several Europe-wide spread businesses to be put on the same pricing matrix – let’s call it “special”. Unfortunately, two of our twenty-many locations had signed a deal before the central procurement got their hands onto the subject. Therefore the supplier’s global account manager implemented the “special” pricing for everyone BUT those two (biggest spend) locations. Where is the “good relationships” you ask? Well, one of our team members had good relationships with the supplier’s local account manager. He did not use any systems or tools – simple calls, honest conversations, open position regarding the overall situation. The outcome was very creative: the local account manager proposed to review the contract that was signed three months ago and was supposed to last for three years. She could not put “special” price list in place – because it would have to go through central sales team for approval and we were once rejected there already. However, she agreed to match the prices of the “special” price list. In other words – we got everything we wanted, but under a different name. And everyone was happy. So here is your answer – Ka-ching!

Do you have any samples of situations when good relationships with supplier brought you benefits? Please do share them in comments!

Thanks for reading!

 

 

I love technical staff. Engineers, architects. Who doesn’t, right? But procurement has always had special relationships with engineering. Sometimes it goes all wrong, but sometimes – the other way around. Working together can bring benefits where nobody expects them. This blog is about one of such occasions: finding standard pieces in bespoke piece of equipment and benchmarking the margin that the main contractor is making.

Reducing costs and leaning supply chains is a challenge not only for procurement department. Technical department, logistics, operations – everyone is under pressure.

CAPEX is always one of the most difficult categories due to complexity of the projects and people involved. It is difficult to benchmark the price of the equipment if it is bespoke:

• If it is somewhat standard, you can try to find some information from your colleagues, working in other markets.
• You can always go for “material weight value” strategy and negotiate hard.
• Another option – google. Google will tell you “market standard” markups and profits (only due to the quantity of information it is up to you to decide if you want to believe 12%, 6%, 3%, 0,5% or “cost only” margins – there are no “standards”), which, again, you can use for negotiations.
• “Should cost” model. Be ready for good sales people in engineering / constructions companies. If you choose to push them for “costs only” pricing model and reduce their prices, motivating with “being overcharged”, prepare for a push back. They will ask you, what do you think “real cost” is. Therefore, studying cost models will give you better understanding of true costs AND will keep all your arguments within reach.
• Decomposition. I used this one recently and had quite good results – please read on below.

It is rarely a case, that the main supplier (contractor) will manufacture all bits and pieces that go into the fully assembled unit. And the items, that they will use – surprise! – are very often standard. If you can get hold of the item breakdown list and price against items that were not manufactured by main assembler, you can have insights into their general pricing policy. An example follows below.

During one of the brainstorming session with technical department we were discussing everything that came to our minds. Suppliers, types and categories of spend, purchasing and contract renewal calendars, people and processes. And we found some repeating names. Conveyor system supplier was buying belts from the same belt manufacturer that we also had as a strategic supplier. We asked conveyor system supplier to work with us to find some improvements in supply chain for that piece of CAPEX equipment. When you get replies, that “managing director is uncomfortable and fears to damage relationships”, you realise – there is more to this than just that. At the end, this exercise brought us better control and visibility and… 20% savings – after negotiating down from initially required 25%.

Thank you for reading – if you are still here. Please do share / comment if you liked it or would like to know more.

 

This post is only relatively about buying. It is about a thing that you CAN NOT buy – the time. How worried do you get, when you see your phone (laptop) battery running out and have no spare battery / charger / power source? For me every single percent on those moments is the worth of gold. Recently I had to make some decisions and evaluated time importance. I got slightly worried.

I’m 35. Say, i want to retire at 65. In such case, every six months of my time are worth 1,6% of the rest of my full career. Look at it from a different perspective. Every career has a maturity cycle. I would like to think i will be at my best all the way through to 65. Have you heard the phrase “statistically plausible, but highly unlikely”? Right. Let’s get back to reality. Say, I will be at my best until 55. That changes the value of my time: suddenly every 6 months are worth 2,5%. Every year – 5%.

Think about a business case you are writing. Pieces of equipment you are buying. Private equity investment you are consulting. Most of them have one or the other shelf life. Have you been in a sourcing project for a piece of equipment, which lasts 3 years when life expectancy (yes, for the piece of equipment) is also 3 years? For me that now sounds strange.

Time puts a very different perspective to everything. Sometimes, the worst thing to do is to do nothing. Not to make the decision. If you make the decision and it turns out to have been not the best – you can always fix it. You will never be able to turn the time back. Stop and think. It is Monday. How much can you do before Friday?

Super-duper-all-inclusive-lifetime-premium warranty. Sounds familiar? I’ll give you another example: most daring warranty agreement that I have seen (and, by the way, the items bought were commercial refrigerators) was 17 days. Yes. S-e-v-e-n-t-e-e-n DAYS!

I’ll try to save your time and put logic simply. The company did the research: break-down frequency during the lifetime of these units. and they found out, that if there is anything wrong with the item itself and the fault lies with the manufacturer, 95% of all breakdowns happen in the first 17 days. Afterwards – if the maintenance is done properly – the unit works as it is supposed to work. While the “Super-duper-all-inclusive-lifetime-premium warranty” costs additional €500 per unit. And that is 10% of the price. That means, 95% of 500 Eur are simply spent to cover the risk of events that have a 5% chance of happening. Company chose to save €475 for each unit. And a lot of millions annually.

I have seen some some tender evaluations, where additional scoring is given only for longer warranty. Do not get me wrong – sometimes it might be a smart thing to do. For instance, you do not have data about the break-down frequencies, reliability. Or you have exactly the same items for exactly the same price and one of them offers a much better warranty terms.

But, whatever you do, do not take for granted, that longer warranty is worth more money just “because”. Questions are the tools available for everyone. Ask “so what?”. Thanks for reading, if you are still here. Hope this serves as an idea for your future buys!

 

 

No, not that simple norming from team development model. The other one – which is also called predetermined time standards, automated microelements projecting and work norming, estimates, stop motion analysis and similar. Yes, buyers have to be a little bit of everything – operations or manufacturing specialists including. And yes, this is how you bring benefits to your company. 

Time, cost and quality are three primary factors to determine overall budget. The number, that procurement specialists aim to reduce. Very frequently, when you are dealing with low cost tasks (cleaning, maintenance), hourly cost is protected by laws and there is not much you can do. So where do we find benefits?

Option 1. Challenge “quality”. If you are looking into cleaning contract – you will most likely review areas to be cleaned, frequency of works, potentially – procedures, which are offered to you by the supplier. And that is a very strong tool to be used. I have seen contracts, where simple management staff chairs are beeing “deep-cleaned” off staines three times a week. Would you not have doubts about such assumptions? 

Option 2. Challenge “time”. How many times have you checked all seventeen (or however many) pages of the contract and analysed it line by line? And I cannot blame you – especially if those contracts are worth £100k a year while you have other things burning which are multimillion deals. However, there are differences. Some suppliers will tell you very precisely all the numbers. Area to clean; norm of area, cleanable in one hour; and a calculation of manhours needed to do full cleaning according to the agreed SLA’s. Others will not. Others will just give you the round number of FTE’s (full time equivalents), that you “need”. Do not take it for granted, challenge, if you can. This is where understanding about work norming comes to help. Many times it is not difficult to do a common sense check to understand, that “desk wiping” takes 1 minute instead of 15. 

This post is not here to make you think that you now need a sophisticated system to check your  contracts. Companies are different. A solution, which is good for company A, will be completely useless for company B. And it is our call to choose the right tool. 

If you are in services based area, you might want to google ANABES, MTM-1, MTW-1, MODAPTS PLUS. Especially, if you are looking to acquire a lot of repetitive, low value work. Think about IT systems, where a “small” part of testing can be valued in several millions. If you are not – expert judgement will always be good enough. 

And don’t get me wrong – option 3 is always there: If you notice, that you are being charged unreasonable fees or prices – that is the first and fastest thing to go for. 

Again – thanks for reading! Please do comment if you have different views or find this useful! 

Do you know how easy it is to preach various truths to others? And how hard it is to actually live according to them when no-one is watching? That is one part of the story. Another is expert judgement. To be wise enough to know, which habits are there for a reason and which could or should be changed. To be wise enough to distinguish, which rules are there to avoid bigger problems and which are there purely because “it was always like this”.

As a procurement specialist, I always say, that the most expensive words are “we have always done it that way”. I did not invent them and this is no news for any professional. And yes, that was the trigger for me yesterday. 

I came for a regular visit to my hairdresser’s. You know – root touch up, some trimming. She was asking me about colours and tones and I asked for my normal blonde. When she asked the magic “why?”, I said – “because I always have it this way”. The difference was, that this time I actually heard myself saying it. And, of course, at that moment my principles made the decision for me: CHANGE! Whatever happens, you cannot have it the old way. To cut the story short – from now I have purple hair. And no, no photos attached.

Thankfully, it is just hair and I’ll get over it. But take a moment to think how many samples like this you can find in your business:

• Implementing new purchasing system for the sake of simply implementing it (because your pride does not allow you to not implement something. Because everyone is implementing something – why would not you?).
• Buying new piece of equipment because “sales said so. And it have always been like that”. Or on the contrary – not buying it, because your principles suggest you to break the closed circle. 
• Extending contract only because “the supplier has been here for ages”. Or… Not extending the contract purely because of the same reason.

A lot of decisions are based on feelings, emotions, principles. And that is normal. We are humans. As humans, we also have brain. Therefore, thinking is (should be) human. Thinking before acting, that is. Unless you are ready to face the consequences – whatever they are. Purple hair, for instance!!!

Have a nice friday!

I still sometimes read some posts which are asking what exactly Procurement gives to the company. I am in Procurement for sixteen years and yes, sometimes I also ask myself if being a good specialist in Procurement is enough. If I stay here, can I continue on earning and justifying my salary?

I had a look back at what I did so far as “only” a Procurement specialist. And here it is! Dear Procurement specialists, do not let anyone tell you we bring no value to a company. If you ever have doubts about what you can bring as an input for a business – here is a reminder list for you.

1. Strategic partnerships between departments. We cannot work without other parts of the business. Someone has to prepare specifications and business needs, someone has to manage budgets, someone has to implement everything. Procurement, just like everyone else, has to take part, and, if needed, promote teamwork. Not only within the department, but cross-functionally as well.
2. Confidence to investors and creditors. Being very pragmatic – not having Procurement function at all increases credit interest rates for your company. Procurement is one of the most important champions of transparency in the business. Even if it is not on the benefits or savings list – it is just another value that Procurement brings.
3. Innovation. Procurement people have (almost?) the biggest exposure to the external information. Suppliers, manufacturers, exhibitions, training sessions. When used properly, such information brings direct cash benefits. I have seen quite a few KPI systems where one of the lines is “Benefits from implemented innovations” (initially, on Procurement goals’ lists and then cascaded down to supplier score cards and improvement plans).
4. Productive workplace. Just like everyone else. It is teamwork, after all.
5. Risk identification and mitigation. Procurement can identify risks in many ways. Risk, related to suppliers. Risk, related to non-compliance. Risk, related to market changes. General project risk. Planning in advance is an advantage, which allows to mitigate (or otherwise manage) the risks.
6. Compliance to various laws and regulations. Import regulations, Greenhouse gas emissions regulations, quality requirements – and it is just a start of the list. Non-compliance costs money in form of fines, delays, fees. If you would really want it, you could actually quantify it. Or, if you are already having issues with the amount of fees you are being charged (for instance – delays in returning railway wagons, costing 100 Eur each day) – any improvement, done by procurement, is a benefit to the bottom line.
7. Benchmarking. I have myself created several operational KPIs for the factories and businesses. Procurement has the possibility to ask for and get the information from supplier. More often than not they will have knowledge, various “rules of thumb”. Procurement, bringing several sources of information into one place, can create new KPIs for other departments, can adapt them to our own activity (for example – bringing in project management principles into procurement projects). Also, Procurement is in the position to obtain information and benchmark the performance of the business against industry standards.
8. Savings – profit. Various sources of it: cost avoidance, price reductions, demand management, value engineering, budget savings, etc. Main performance indicator, associated to procurement. Not the only one, by far.
9. Cash flow improvements. Payment terms optimisation (!!! not pure extension whatever the price, please keep in mind), inventory turns increase – very straightforward quantitative benefits.
10. Social responsibility. By demanding the suppliers to comply with policies, which are important for the company they represent, procurement people extend the reach of good initiatives by few tiers. Not always easy to quantify, though.
11. Agility, speed. Troubleshooters. Yes, that is exactly what procurement people are. Learning from that, they build in agility into the specifications and contracts.
12. Diversification and business flexibility. By giving suggestions, we can fine tune specifications in a way it gives flexibility for future business opportunities. Machinery, being able to handle more than one type of material. Software, which can be applied to solve more than one business need.
13. Automation. Linking internal systems with supplier systems. Automating internal processes. Bringing in best practices, seen elsewhere.
14. Market insights and knowledge: suppliers, competitors, trends. Quite simple this one, right? Information from suppliers, relating directly to our company. Information from suppliers regarding our friends and competitors.
15. Networking and PR. Could there be any better PR than award winning Procurement function, when you are trying to hire people for your company?

Everything or nothing at all. If a company chooses to employ good people – whichever department it is – they will bring benefits in all and every possible opportunities. If people are not chosen carefully… procurement or not… nothing can save the day.

I know I am not going to become more popular by admitting this, but here it goes… I am not a football person. I am a basketball person. But I watched the games, enjoyed the victories and nice moments, read articles about the game. I discovered one, which made me think. We all can and should learn from football.

Here are the lessons:

 1: How to strike a ball from outside the box. No, you don’t need to strike anything. That is not that lesson. It is about performing better from less comfortable situation. Sometimes it can be decisions, made with less certainty. On other occasions – influencing a decision maker over few intermediaries, simply because the person is too far away (either geographically or on hierarchical ladders). Rarely do we get to act from the sweetest comfort zone spot.

 2: How to hit a volley. And now – in English and in a simple way: a volley means air-borne strike for goal. Slightly more difficult, more visual way to score a goal. Simply said, we all become better, more skilled. Even if you are not considered a star of your profession (that is, if others do not perceive you to be one – I am pretty sure we are all our own stars. At least it should be this way), you can still learn and use more sophisticated tools. Especially “air-borne” KPIs, reports, goals. Right?

3: How to strike a free kick. It also  proved again, that you cannot take things for granted. World’s best miss penalties. But everything evolves and something, that was once more an exception, now becomes rule. And a standard to all of us. Long time ago (pre-google era), information availability was listed as a barrier of switching between suppliers. Now, I would say, distribution or goods availability in B2B might still not be that flexible – but it is changing. Placing POs on the go, over the app is the new buzzword. Working with poorer data and getting better results. More and more often. We started setting higher goals. And we hit them more and more frequently. What’s next?

4: How to make a goal-line clearance. Sometimes it takes forever. Sometimes 22 people run around for 90 minutes with no real deliverables (goals). But sometimes you see one, who picks up the ball and turns into almost magical dancer – performer – warrior. With a ball between legs. And the person runs, twists, jumps, turns in a way only he understands in a high speed and finishes with an amazing kick and a goal. Differentiation. Between broad, structural vision and a tunnel vision. Both are good and needed – at the right moment. Seeing a goal and a way to get there. Not stopping along the way. Doing your best to really get there.

5: How to keep goal. Did nobody tell you at school that life is usually not only smiley-face stickers? Well, at least you can learn this from football. Yes, you will have attacks aimed at you. Yes, you have to be ready and prepared to deal with them. Sometimes, it is the winning point. You WILL have resistance. You will have people trying to use you. Yes, your suppliers will use every opportunity to increase their profit and your competitors will try to snitch your ideas. And you don’t get a sticker for it. Your preparation to deal with it is what matters the most.

 6: Age is just a number. Too young? Too old? Too new? Too old-fashioned? Who is the one to judge? Too inexperienced? Overqualified? We all heard most of these. Who and what did you choose to believe? Do not let others make your decisions. I know a girl who, from being sandwich bar operative dared to try and now is highway planning engineer. No, she did not need 10 years. She had all it takes and needed a little bit of trust. And four months to make her dreams come true.

7: David can beat Goliath. These days it is all about the speed in business, not about size. Your colleague might have few accreditations next to his name, and it took years to get them. These days, all you need is Google and a day to find and study latest trends, techniques, download free templates and tools. So you have a small team, even smaller budget but a big task? Relative. As long as you have brain and a will to deal with the task, there are always ways.

8: Don’t be a sore loser. That is another lesson we do not get at school. Well, we get to know that we don’t always get what we want. What we missed to learn is probability. It’s always 50:50. Every time you are on to something, you might win with the same frequency as you might lose. In fact, it is highly likely, that you will lose more matches than you will win. Again – your reaction to it is what matters. Learn and move on? Sit and cry? Moan and blame others?

9: It pays to be positive. Sometimes – quite literally. Like the guy who bet Leicester to win last football season in UK. With odds 5000:1. The Portuguese coach also believed. Even before the tournament. And, surely, throughout it. Not to mention all of the other benefits of being positive.

10: Keep going right to the end. If you are reading this, you have clearly learnt this lesson before. I would argue slightly: it is good to stick to the end, if you know when and where the end is. But otherwise… Sometimes it takes a second to score. If you create opportunities (if you really keep on creating them till the end), one of them can turn into a victory. If you really keep going till the end.

Those were the lessons I am taking with me from football. What have you learned from it?

 

One day, I swear, one of my “oopsies” will finish in rivers of tears… For today – it is just another joke and ten minutes of laughter which brings people closer.

I was dialling Portuguese mobile phone number, trying to call a sales director of a Portuguese factory for the first time. And, since all Portugal is still pretty much celebrating (or in hangover), I started the conversation by congratulating him with the victory. Smart move, you think? Think again!

The next words from him were… “Uhm… I am not Portuguese… I am French…”…

#immigrants #smallworld #irony #congratulations