Good Procurement Practices Massively Lower Costs
Internal discussions about procurement tend to focus on cost above all else. The procurement department exists to beat down suppliers and ensure that they get the best price or to enforce policies and procedures intended to curb waste, fraud, and abuse. An interesting study from researchers at Yale University, Columbia University, and the University of […]
Reverse Auctions Are the Superior Procurement Approach
For business-to-business buyers, what is the best way to buy something? Looking at it from the other side, what is the best way to sell something to a business-to-business buyer? Well, as an economist, I naturally defer to the answer, “it depends.” I need more information to answer. First, what does it mean to say […]
Suppliers Don’t Respond to RFPs Because They Think They’re Rigged
A Request for Proposal (RFP) is a reverse auction. Unlike a regular auction in which there is a single seller and an audience of buyers bidding up the price of the item, in a reverse auction there is a single buyer facing a crowd of suppliers bidding down the price (and/or increasing the quality) […]
In Procurement, Value Isn’t Price and Price Isn’t Value
Imagine a new procurement officer named Jill who joined an established manufacturing company recently. She has been put in charge of her first project. She needs to purchase 1,000 pounds of Grade C Copper. It’s a commodity. She needs to guarantee its delivery to the company’s factory in North Dakota on a specific date: November […]
Joint Procurement Does Not Have to Be Slow
Every large sourcing event is now a team event, as we wrote about previously in “Procurement Is a Team Sport,” quoting Gartner: “The typical buying group for a complex B2B solution involves six to 10 decision makers, each armed with four or five pieces of information they’ve gathered independently and must deconflict with the group. […]
In Procurement, Margins Are More Important than Cost Savings
The conventional wisdom about procurement is that cost savings are the fundamental priority. One sees this emphasis all the time. Here is Procurement Magazine referring to the 2023 Hackett Group survey: “Procurement’s main priorities for the year include ensuring supply continuity, combatting inflationary pressures and reducing spend cost.” Who could argue with the importance of […]
Competitive Sourcing Leads to Diverse Sourcing
Deloitte found in its 2023 Chief Procurement Officer survey that the top three priorities were: driving operational efficiency, enhancing ESG/CSR, and digital transformation. ESG has become more important over time. As recently as 2021, improving ESG ranked only seventh on the list of priorities. Society is changing. The contemporary enterprise must adapt and evolve to […]
Procurement Is a Team Sport
Procurement, especially for complex purchases, involves groups of people from different functional areas within the buying enterprise. Here is Gartner: “The typical buying group for a complex B2B solution involves six to 10 decision makers, each armed with four or five pieces of information they’ve gathered independently and must deconflict with the group. At the […]
Interoperability Is a Force Multiplier for Procurement
In science fiction movies and television everyone speaks English. Often, there is a convenient poetic device called something like the “Universal Translator” that enables beings from wildly different backgrounds to communicate. Human Being H can speak to Vulcan V. Through some magic, H hears English and V hears Vulcan. How boring would shows like Star […]
How to Rescue a Failed Digital Procurement Transformation
Digital transformations of procurement fail just like any other digital transformation: frequently. There is a way to turn these situations around, though. What Is Digital Transformation? Here is CIO: “Additionally, companies often forget that a digital transformation is doing two things at once: digitizing your backbone as well as automating and simplifying by ideally, reusing components […]