Premier Foods procurement strategy going from bad to worse

Last year I wrote about the procurement strategy of Premier Foods which has suddenly become a hot topic and now looks as if the chief executive has been coerced into setting aside.

Initially the rationale of the Premier Foods procurement strategy was to supplier reduction and a focus on strategic suppliers. The objective wasn't necessarily wrong but the implementation was flawed in both rationale and implementation.

Now to add to that confusion the chief executive has said "in my view that is just one of many kinds of discounts. It's an investment on growing our business and that's entirely appropriate". That seems a massive shift in last year's justification! Did the chief executive understand the 2013 rationale? Was there any Board buy-in to the risks of what could happen and the potential fallout which has now led to adverse national press and media converage?

Gavin Darby, the chief executive, to me, has made things worse by stating:

If the optics of this scheme for some people feel uncomfortable, I'm happy to move on and move the scheme to a more traditional discount .. we would just say we have an invest-to-grow campaign, we want people to come with us to invest in our business and that would be reflected in a discount soon the terms they have offered in the past.

If Premier Foods had wanted "[suppliers] to come with us" they should have thought a bit more about how they would bring the supply market with them.

Darby seems to forget that some of last year's suppliers appear to have now chosen to opt out of supplying and some who did pay-to-stay never received any business anyway. How will Premier Foods go about negotiating the new discounts with those firms? Let's face it Premier Foods have now lost the initiative and common sense would suggest that suppliers should just refuse to budge on discounts.

Setting all that aside, we have yet another example of procurement damaging brand value and I assume adding to remedial costs associated with retrieving reputation.

Then we have the issue of do they really understand the concept of strategic supplier management? Sadly, I fear, Premier Foods are working to their own recipe and it has a remarkably bad taste.

Nelson Mandela's memorial lesson for procurement

With the focus of the world's media on Nelson Mandela's memorial, it would have been assumed, not only that the security for the world leaders was going to be exceptionally tight, but also that those delivering any 'front-of-house services' would have a gone through a rigorous assessment to demonstrate their capability. Yet, somehow, the platform party included an impostor, a fake sign language translator.

This is the stuff you just couldn't make up, not only was there a serious breach of security (the fake was standing beside Obama behind the security screen) but, if there was some sort of procurement exercise to provide translation services, it broke down completely. Mind you, there was also an official translator on stage although no-one seems to have questioned what was going on.

So we have the procurement of security which seriously failed. It failed not only in that the fake was on stage, but also it appears no-one has the faintest notion who this person is. That's pretty damming stuff.

But to make matters worse, the fake was only waving his arms about and no-one in the 'signing' world has been able to read a word of which he signed. Serious as this saga is, the clip is worth watching as it is very entertaining:

12 Dec: PS so now it has emerged this was a procurement failure - a company with a poor history of performance and no evidence of checking qualifications.

Premier Foods redefine strategic suppliers

How would you define a strategic supplier? To me it's a supplier who is core to business success, and one you really need to keep working with. You would also embed them in your procurement risk management and have effective contract management in place. You may not want the supplier to know they're strategic as that places them in a greater position of bargaining power.

That said, today's Mail on Sunday suggests that Premier Foods, the UK's largest food manufacturer, is adopting a more strategic approach to its suppliers. There will be a reduction in suppliers of approximately 50%. Surprisingly they have written to suppliers and given them the option of becoming a strategic supplier - very odd. This new approach to dealing with the market will introduce a formal supplier appraisal process. I don't know whether or not that means Premier Foods didn't previously have a supplier appraisal process in place but it's scary, given the attention to food supply chain failures over the last year, if this is a first for Premier Foods.

Anyway, introducing this supplier appraisal process will incur costs - strange that it won't lead to cost reductions - and to cover those costs suppliers are being asked to fork out £5,000 plus VAT.

It would be interesting to learn of Premier Foods procurement strategy:

1. What will they do if some, or all, of the real strategic suppliers decide that they do not want to pay?
2. How do they know that the supply base of 3,299 is too large and 1,650 is just right?
3. Is this really the first time Premier Foods have introduced a supplier appraisal process?
4. Have the profiled the supply risk?
5. Does payment of £5,000 by a supplier mean they successfully navigate the supplier appraisal process, and, if they don't, will the supplier receive a refund?
6. Will other forms of accreditation be acceptable to Premier Foods?
7. What will the selection criteria be for 'preferred supplier' (Premier Foods strategic supplier) status? 
8. If Premier Foods didn't have a supplier appraisal process in place previously, did they have contract and procurement risk management processes in place?
9. Is the strategy to designate all suppliers as strategic?
10. What do Premier Foods plan to do if their strategic suppliers start to expect faster payment terms or even payment on delivery?
11. What is Premier Foods policy if their own customers impose an obligation to pay for supplier appraisal - will Premier Foods pay? 

In an environment where others are adopting supply chain financing this is certainly a novel strategy but is it a clever strategy?

Let me tell you a story on robust supplier appraisal

On Tuesday we learnt that some of our education policy thinking appears to be shaped by what looks like unreliable evidence - the sort of approach which looks selective as opposed to robust. It is ironic that we want more useful research as an outcome of universities yet in trying to achieve that outcome we are using, what some might refer to as 'Mr Men evidence'. The sad thing is that whether or not you agree with the Education Secretary's views, his credibility has now been weakened, whereas a more robust approach would have strengthened his case.

Gove has also weakened his argument for education reform and could be perceived as hypocritical when he discusses critical analysis. We need to have an education system which encourages more critical analysis, particularly for the next generation of procurement practitioners. We need practitioners who can look at comparative research and evidence, identify weaknesses and then take an informed view - we need procurement practitioners skilled in critical analysis, particularly in the area of supplier appraisal.

Let me give you an example. I recently had sight of a supplier appraisal which considered suppliers past performance. References were requested. Assuming the supplier was able to provide three reference sites of delivering similar work, they passed!  No effort seemed to be expended in validating the references. Reliable and robust evidence?

While I used to think asking a supplier for three references sites was a nonsense, based on the assumption that no one would be daft enough to provide a bad reference site. That was until I came across a supplier who did just that and was surprised when in the debriefing I fed back the bad reference. But how can we be sure a past customer doesn't bare some sort of grudge and disproportionately reflects the poor elements of what the supplier thought was an excellent service. Reliable and robust?

My view is that we need to ask for a comprehensive list of all the similar contracts provided, over say  three years, including their values.  Then, subject to the risk associated with the procurement, select a  random sample and interview those who can speak with authority on the past performance. It may not be completely robust but it is significantly better than the 'Mr Men' approach some practice.

Of course one of the easiest ways of improving supplier appraisal is having good historical records of the quality of service your own organisation has received in the past. Time and time again i have seen poor past performance being overlooked and only 'remembered' when Tender responses are received. Organisational memory has a role here as has easily accessible and reliable records. Here too we find a bizarre example from the Education Secretary, who, in his evidence to Wednesday's Common's Education Committee, advocated a radical new approach to ''O' levels' which replaces the existing A, B, C, etc. grades with a numerical system. An 'A* grade' would therefore be spilt to become 'Grades 1 and 2, 'A grade' would be spilt to become 3 and 4, etc.  We would also see greater focus on end of course exams and the demise of coursework. By gove, isn't that the system under which my own 'O levels' operated in 1973? If only we had really good history lessons things may be improved - no, I don't mean in the education system, I mean in supplier appraisal.

Procurement policy on blacklisted construction workers?

Scottish construction workers protested on Friday about the discovery of a blacklist of 'trouble maker' employees'. I had previously discussed the blacklisting and asked why procurement should interfere if a potential employer opted to bypass 'trouble makers'.

However, what the protest has brought to light is that, when you scratch a little below the surface you find that the definition of a trouble maker, in this case, also relates to some who raised concerns about health and safety. That's a much more serious issue, as not raising concerns about health and safety could lead to liabilities, delays in project completion and serious injury or even death. Silencing the trouble maker in this case amounts to something similar to silencing NHS and other whistle-blowers. Yes, I think we all agree that whistle blowing policies are a good thing.

However, the protesters are calling for a ban on public sector contracts being awarded to firms that have used the blacklists. How on earth would that work? Would it be legal? How would you answer one of your political masters if you were asked to advise? How would you advise your Board if you were in a private sector organisation committed to responsible procurement?

I can't really see any scope for the public sector to avoid using those involved in the blacklisting as it is quite probable that a number of the issues just aren't relevant to the subject matter of the contract. Yet, I do think there is scope for every public sector organisation to consider within the selection criteria the need for a whistle blowers policy. Would that not be a more pragmatic way to solving the problem and yet avoiding the direct risks of related potential increased delivery costs through site closures, etc.. and duty of care?

What would your recommendation be?

Are you ready for Procurement Visibility: ProcureTruths

I wonder how many of you have come across Glassdoor; a website where potential employees can identify a particular organisation, the typical salaries paid to their varying levels of staff, what questions were asked in interviews, others experience of the recruitment process and what those who were successful in the selection process subsequently thought about working for the organisation. Some really interesting insights and all free of charge.

It came as quite a surprise to someone who recently wanted to discuss a 'compelling opportunity' with me, when I explained that the comments on Glassdoor made it clear to me there was little value in progressing the discussion.

I can see how Glassdoor could be used as part of procurement research in providing useful insights on bidding firms. Of course as Peter Smith rightly implies have we information overload?

However, visualise a similar service for the supply market, let's call it, 'ProcureTruths'. Perhaps ProcureTruths already exists unbeknown to me (please enlighten me if you know of it?).

Nevertheless, let's visualise that ProcureTruths, provides potential suppliers with information on specific buying organisations, say:

1. Key decision makers in the procurement process;
2. Procurements influence over spend;
3. Typical questions asked during the procurement process; 
4. Organisational tendency to maverick spend;
5. Buyers qualifications and currency of training;
6. Understanding and application of procurement best practice; 

Staggering from Burgergate to Zimmergate

Retailers buy on consumers behalf beef which is to be of a suitable quality. The retailers have a supply chain and rely on third parties to provide the beef. The quality is set out in a specification, and behind that there is an assumption of risk management and contract management. The beef turns out to be wrongly labelled and we have a national scandal. The 'Godfathers' of the mafia are cited as potentially at fault, then we discover it, as much as it may be attractive to export blame, the finger starts to point locally.  Most of us are aghast and the fear is our health may suffer. We give it a name 'Burgergate'.

But substitute some of the words: Social services buy on the needy's behalf personal care which is to be of a suitable quality. Social services have a supply chain and rely on third parties to provide the care. The quality is set out in a specification, and behind that there is an assumption of risk management and contract management. The personal care turns out to be wrongly labelled and we have a national scandal. Potentially your father and mother are the victims, the finger starts to point locally.  Most of us should be aghast and the fear is our health may suffer. That's what I'd call 'Zimmergate'.

What's worse Zimmergate, for want of a better description exists as the Care Quality Commission has now found. 26% failure to meet the quality standard, reluctance to complain, failure to listen to the families who tried to raise concerns. Of course this isn't the first time we have considered the dependency of the elderly on good procurement. Is it right we could it be more concerned about the content of 'cheap burgers' and call that a scandal in need of urgent attention?

Let's leave the last word to The National Pensioners Convention General Secretary, who seems to have some useful suggestions for public procurement:

"Local authorities have a responsibility to start commissioning services on the grounds of quality - rather than for the lowest price. Contracts should only be awarded to those who can guarantee that staff are properly trained and qualified to do the job - and the idea that services can be provided in blocks of 15 minutes at a time has got to stop."

We need an urgent 'COBR like' response to food procurement

I'm sure you have guessed what's coming, yes, another food procurement disappointment, this time relating to not just a failure to deliver Halal meat, but to make matters worse to discover in that within the Halal labeled food were found traces of pork. Not good. What do we do now? This is getting pretty serious.

One of my friends is a devout Muslim and I can understand his food vigilance - he places trust in those who prepare his food and confidence in their assurances.

My daughter has a serious peanut allergy. Since she was very young we have gone to great lengths to protect her from peanuts. Wherever she goes, her epi-pens have gone with her (I hope). We've spent years asking airlines to protect her from exposure from peanuts when she's on board (I'm sure you've heard the type of announcements which have caused her to blush). When we go out for meals we place trust in those who prepare her food and confidence in their assurances.

Globally, we have also been concerned with food security - "both physical and economic access to food that meets people's dietary needs as well as their food preferences".

A few years ago I was involved in the Public Sector Food Procurement Initiative. It was a serious, cross-Whitehall strategy to help the UK economy. In all the meetings I attended I just cannot recall any discussion suggesting a lack of confidence in food standards or that what was procured would not be received to specification. Ironically, every meeting included a detailed review of risks to the Programme. UK food procurement has a significant contribution to make to the economy.

How things have changed. We now appear to be stepping into the abbess in terms for food procurement risk.

We all need to eat food, yes, prisoners and those with food allergies too. We all need to buy food to feed ourselves and our nearest and dearest. The horsemeat discussion was able to be side-tracked through the discussion of "at that price what do you expect?". We have now reached a different position - a public sector institutional food procurement failure.

3rd 'tear' Apple ploy

If you have the joy of working on a Mac, then you also have the luxury of their own publicity machine hitting you in the face every time you log on. So today you could just search on Apple Supplier Responsibility 2013 Progress Report and hear of all the good work they've done during 2012. The report was published yesterday and discusses the 2012 audits - definitely worth reviewing.

Now we have already discussed some of Apple's problems yet I hadn't previously picked up their child labour problems. Children as under the age of 16 working on our precious Apple toys. To Apple's credit they uncovered the problem. The trail is complicated as it was Apple's supplier's supplier was at fault; a third tier supplier of labour to a factory (p.18). Shenzhen Quanshun Human Resource:

"conspired with families to forge age verification documents and make the workers seem older than they were."

A big plus for Apple picking this up but I wonder how long it had been going on and what corrective steps have been taken to protect against this in the future? I also wonder how many other firms would have picked this up - we recently discussed weaknesses in food supply chain vigilance. The decision to stop using the factory may have only added to the hardship of the families involved and shifted the problem, while using Apple's infamous creativity may have set the standard for others.

Yesterday I raised issues regarding British Gas approach to responsible procurement - a disappointing start to 2013.

Calling the kettle black & Taking Account of Bidders' Past Performance

I just don’t get it. There was the fanfare of MP’s calling for a blacklist of poor suppliers based on perceived performance failures of one supplier (who shall remain nameless) but subsequently went on to win many contracts. Then this week brought uproar when the construction industry were alleged to have a blacklist of staff who had demonstrated poor past performance. Do we seriously want organisations taking on staff with a history of poor performance or are we expecting them to rely on the rhetoric and additional costs of making it easier for employers to get rid of poor performing staff. Would we want to procure from organisations which had poor preforming staff?

The recent Procurement Policy Note - TakingAccount of Bidders' Past Performance, euphemistically called 'Action Note 09/12', would answer, ‘no’.

The Policy Note is concerned with taking into consideration a suppliers past performance, and by implication, the past performance of the suppliers’ workers! Is this a case of ‘the pot calling the kettle black’?

What I just don’t get is why did we need a Policy Note to set out, only for contracts over £20m, that suppliers past performance should be considered. Call me naïve but the EU procurement rules have never prohibited taking into consideration a potential contractors relevant past performance.

Does the need for a Policy Note imply that central government procurement has not previously

Procurement due diligence

We have discussed the problem of 'fake experts' before. We have also questioned the value of professional qualifications when non-procurement staff are appointed to CPO positions. Indeed, only yesterday we raised concerns as to whether we can rely on the robust checking of qualifications and experience by headhunters and interim placement organisations. So readers of this blog should recognise the need for healthy scepticism.

You may therefore be astounded that, yet again, professional credibility has raised its head. Unbelievably, we have just learnt that the inquest into the death of singer Amy Winehouse has now had to be set aside and started from scratch again - you've probably guessed what's coming - yes, because the Coroner was not appropriately qualified. The coroner did not match the criteria of either five years as a qualified medical practitioner, or five years experience with the Law Society. To add to the bizarreness of the situation, the unqualified Coroner was appointed by her husband, who has now resigned as a result of not 'thoroughly checking' that his wife met the basic criteria. Those words 'thoroughly checking' straddle the procurement world too.

I will not revisit my earlier blogs. However, I will share some of my experiences of procurement 'thoroughly checking' credentials.

I once completed a supplier evaluation which included the rejection of one supplier. My report went to a meeting of the Board but at that meeting, which I wasn't attending, one of the Directors stepped in and said he had now received additional information which justified over-turning my recommendation and reinstating the supplier on the Shortlist. A subsequent costly challenge, inquiry which ruled against us, and allegations of corruption taught us a clear lesson - make sure you thoroughly check the claimed facts, even if they appear to come from a reputable source!

I have also completed third party Due Diligence on a number of proposed contract awards - surprise, surprise, when thoroughly checked there were flaws, with those included on shortlists who should not have been, and those not included, who should have been.

I have also seen, time and again, taking answers on PQQs at face value, including amazingly the acceptance of cited reference sites without even bothering to check (NB not 'thoroughly') with the referee!

It would be possible for me to also highlight the need for due diligence of the process itself. However, I do not think that is necessary as Peter Smith has provided the useful lessons of the West Coast Rail Franchise which I would encourage you to read.

Is there an aversion to due diligence in procurement? How good is the profession at 'thoroughly checking'.

Sometimes procurement has a lot more in common with unqualified appointments and Coroners than we would have expected!

Procurement risk management when the pips squeak

Achieve sales of 5m of launching iPhone 5. Share price reduced by 1/50^th. 5,000 police officers  called in for 10 hours, to supplement the existing 1,500 security guards, in order to quash a riot of 2,000 workers at your sole assembler's manufacturing plant. That’s quite a weekend. To make matters worse the riot was caused as a result of a dispute between one of the security guards and a worker – was it a contract security firm?  Sounds like an unbelievable case study exam question but that was last weekend!


Of  course the warning bells must have been ringing earlier when the supplier installed nets around its factory in an attempt to reduce employee suicides.
The volume of those ringing bells must have been deafening when it was learnt that the supplier’s new employees were being asked to sign a statement that they would not commit suicide. 


Foxconn, with a workforce of 78,000, is the world’s largest contract supplier of electronic goods – yes, they are the iPhone5 sole assembler, therefore Apple are strategically dependent on it for the manufacture of iPhones. The estimated cost of the components in the iPhone5 are estimated to cost $199 (for the 16GB model) while it sells for $650. Microsoft and Dell are also big customers. What happens in Taiwan does not stay in Taiwan.

This latest saga is not unique by far.  Fresh in the minds of readers will be the G4S Olympics debacle and hopefully my blog on not casting the first stone.  

Will Apple be scarred by this experience and punished by the market?  I doubt it.  However, what is clear is that supply risk management is not a well practiced theory.  Unfortunately, we can also expect supplier risk to increase in the current financial climate. 

Could supplier blacklisting backfire?

We have been aware of the UK central government plan to blacklist poor performing suppliers for some time. Today a new twist was introduced when the CBI, who frequently support procurement reform, entered the discussion and made clear they do not support the initiative.  The CBIs director general said:

"It's an unhelpful development, from our point of view. In 2010 the government came to suppliers and said, 'we want you to take a haircut and we want you to share your ideas'. We've taken a cut in margins and offered our intellectual property up to government to find better ways to operate more efficiently and this is what we got."

It is surprising given the traditional closeness of CBI to the government that they were not consulted upon and contributed to the development of this policy.

But what is more surprising is that the government CPO, Bill Crothers, believes this is the first time a company's record has been taken into account in the public tendering process.  Quite frankly I am both mystified and concerned

Commissioning on a wing and a prayer

We have been inundated with discussions around the Work Programme and the associated  communications debacle.  For example, the coincidental removal of what appeared to be inconsistent guidance from the DWP website and my own comments on the due diligence associated with the appointment the 'Tsar of Contract Manipulation'.  However, I now want to draw on some insights from an  excellent academic paper which strikes me as pertinent, namely Don Harradine's paper published in Public Money and Management.

Don explored a different DWP initiative, 'LinkAge Plus', and interviewed staff from DWP, a local authority and the third sector. His findings are intriguing and resonate with some of my previous blogs:

• Proposals were developed in haste for political expediency while funding was available and it is was therefore accepted they would be flawed;
• Pilots were agreed and funded partly to justify a political agenda;
• DWP were reluctant to probe potential third sector providers' quotation costs: "if they say they can do it for that cost, that will do me"; 
• Third sector providers though lacked sufficient financial expertise to understand the relative costs associated with service delivery;
• There was a lack of agreed definitions on some aspects of contract delivery, for example, what constituted 'a contact';
• Third sector providers acquiesced on agreement of targets just to obtain the funding, even though the targets were not understood.

We need to be wary of reading across too much from Harradine's research to other DWP programmes, but

Reducing prison inmate numbers and cleaning up crime

At a simplistic level there are some obvious ways of reducing the prison population, including:

1. Turning a blind eye to crime,
2. Reducing the number of custodial sentences,
3. Reducing reoffending, and
4. Making it easier for the prison population to escape.

It is with that in mind I was interested to learn that the Justice Secretary is outsourcing £2bn of prison service management.  Will that lead to a reduction in reoffending or an increase in escapes?

The short-listed bidders include some firms who lack any experience