Mega-Negotiations

 
Mega Negotiations Story

https://www.amazon.com/author/tomdepaoli

Here is a story about a strategy we used which I called mega-negotiations. We were very lucky that all the elements fell in place and we had hungry suppliers. The size of the negotiations gave us strong leverage.
These were the ground rules we established for a $5 billion dollar bid of supplier work for major expansion of chemical plants.

1.   There would be only one round of bids. We urged the suppliers to give the bid their best shot. We didn’t have the time to manage multiple bids.

2.   We announced that we would, in many cases, narrow down the areas where we had two preferred suppliers to one, unless we had a good business reason for keeping two.

3.   Although we had negotiated some significant total-cost-of-ownership savings in the current contracts, we were open to enhancements from the suppliers and distributors.

4.   We told the suppliers that we would not accept their standard spare parts packages as we had in the past. We would challenge their typical spares packages, but would be especially open to creative ways of them controlling and managing the spares at minimal or no cost to us.

5.   OEMs (Original Equipment Manufacturers) could work with distributors to propose any addi­tional creative services to provide us.

Believe it or not we saved over $1 billion with this approach. We were stunned.

       Dr. Tom DePaoli  www.apollosolutions.us











Contact Dr. Tom = thomasdepaoli@yahoo.com drtombooks.com for newsletter sign up https://drtombooks.com/contact/ My Books link: https://www.amazon.com/Tom-DePaoli/e/B003XSV1IQ

How to Convince Top Executives of the Value of Purchasing

 

How to Convince Top Executives of the Value of Purchasing

Purchasing has continuously demonstrated their impact to the bottom line of an organization. It has been well documented and universality recognized. Then why do many companies refuse to take advantage of this cost saving resource? Why do executives still remain skeptical of purchasing’s value? In many organizations purchased materials and services account for over 50% of the cost of goods sold; yet purchasing is often relegated to a bureaucratic mundane dungeon of clerical functions.

Some of the fault lies in purchasing itself. Purchasing personnel are notoriously inept at marketing and selling their ideas and suggestions. They are often a harried bunch running around from firefight to firefight. Most do not even have a good or comprehensive communication plan.  They fail to “toot their horn” or market their successes. Purchasing fails to tell their story compellingly and neglects to sell its importance. Other departments either ignore or politely humor purchasing. Purchasing remains the chief cost driver or cost saver for many companies, yet often purchasing is remarkably under resourced and underappreciated. 

One-way to sell purchasing’s importance is to empower as many other employees as possible to participate in purchasing especially on cross-functional sourcing teams.  Involving as many personnel in constructive purchasing activities educates them on the value and importance of purchasing. This is a bottom-up approach to educating employees on the value of purchasing. It encourages them to contribute their ideas about improving services and products. Purchasing needs to strongly persuade other departments to participate in purchasing processes and decisions. Purchasing all too often fails at what I call the empowerment of employees and internal public relations.

But what can purchasing do about the top executives or top-down? Many executives have stereotype views of purchasing. One of our most successful methods to convince top executives of the value of executives is to encourage direct one-on-one collaboration with executives of your suppliers; especially ones who you are partnering with suppliers who realize the relationship is long-term. Exchanging ideas at this level not only yields great results, but also expedites decisions and removes bureaucratic barriers to success.

The fact is that purchasing also runs its own Research and Development (R&D) department. Suppliers, in collaboration with purchasing, are perhaps the most cost effective R&D function in a company. Jointly they often come up with leaps in technology and transformations in products. When they cooperate they can transform a company and its products. Breakthroughs that occur via this method should receive as much publicity if not more than those developed internally! 

In summary getting purchasing valued for its great contribution to revenue; requires both a bottom-up and top-down approach. Empower as many employees as possible to participate in purchasing and solicit their ideas and suggestions.  Set up one-on-one executive exchanges with your supplier executives. Finally, systematically create a strong marketing plan to communicate your successes.

Dr. Tom DePaoli

Contact Dr. Tom = thomasdepaoli@yahoo.com drtombooks.com for newsletter sign up https://drtombooks.com/contact/ My Books link: https://www.amazon.com/Tom-DePaoli/e/B003XSV1IQ

How Can a Purchasing Professional Get “Street Cred” in Their Company?

By Dr. Tom DePaoli

Most purchasing professionals have skills in purchasing, negotiations, and the materials or services that they buy. Many have certifications. They have dutifully enhanced their skills in all these areas and pursue continuing education. Unfortunately what many organizations value are operations skills, or what they know about the core business and the customers.
Some purchasing professionals have come up from the ranks or gained operational experience in other internal jobs in the company and they are fine, but most often this is not the case. The challenge for the purchasing professional is how to gain respected credibility when they are often swamped with other priorities and crises.
One of the best sources may be a supplier or distributor who is willing to take the time and discuss your competition. You will be surprised about how much knowledge they have. They are especially valuable discussing the Voice of the Customer (VOC) and your customers concerns. Often they supply your customers.
Since many purchasing professionals have a material or service specialty, my advice is to get out on the shop floor or area where your folks actually use the material that you source. For example, when I was in charge or purchasing wires for a paper-making machine, I went out to the paper machines and actually observed the crew tear off a new wire and put on the new one. Yes it was wet and hot but I soon got a sound understanding of their issues and concerns. Another way is to actually go on service calls with your service technicians and observe and listen. This is usually unfiltered and sometimes you receive unflattering feedback from the customer.
One of the best ways is to conduct internal training with the purchasing department. Have engineering or customer service give you training on your products and how they work. Have them gear the training to the purchasing department. We asked them to design a training manual targeted to us and they gladly did this by just modifying the existing one. The best instructors know how to make the complicated simple and present the customers point of view. One of the best courses I attended was Papermaking for the Non-papermaker which avoided all the confusing technical argot. Another way is to have department meetings where fellow purchasing professionals share what new knowledge they have gained about your products and services. This is an especially good approach because it is relatively non-threatening.
Nothing flatters operational or shop floor personnel more than going right where they work, and asking them to train you about their job and duties. Showing a genuine interest goes a long way in establishing your credibility and getting their cooperation in the future on purchasing projects such as sourcing.
Finally getting “street cred” is not an instantaneous process. Respect does not occur overnight. You will have to take the time and effort to build up your reputation as a purchasing professional who can be trusted more, because they truly understand the core business.
.

Dr. Tom DePaoli

Contact Dr. Tom = thomasdepaoli@yahoo.com
 drtombooks.com for newsletter sign up https://drtombooks.com/contact/ 
My Books link: https://www.amazon.com/Tom-DePaoli/e/B003XSV1IQ