Negotiation for Purchasing Professionals - Book review

It's over 20 years since I l bought Steele, Murphy and Russill's handbook on negotiation, 'It's a Deal'. I found that book really helpful and practical. 20 years is a long time, so I didn't think I was being too extravagant investing in Jonathan O'Brien's 'Negotiation for Purchasing Professionals'. To be honest I needed no persuasion given that O'Brien's previous book, 'Category Management in Purchasing' is the definitive text on the subject.

'Negotiation for Purchasing Professionals' does not disappoint. What we have is a toolkit ready for use. The book effectively outlines the 'Red Sheet' method, complete with all the templates. Don't get me wrong though, this is not one of those clumsy, disjointed clutter of diagrams and models; no it is comprehensive and yet easy to read.

Working in a multi-cutural organisation I found the chapter on 'Negotiating across cultures' particularly good. While not the focus of the chapter, in many of today's businesses, with cross-functional teams drawn together across the globe, who have to negotiate as one-team, I thought the chapter made a useful contribution to effective team working.

I thought O'Brien was also excellent on 'power' and 'game theory'. While these chapters are written in the context of negotiation, I think they are useful reading, regardless of whether or not negotiation is in your mind. I suppose the same could be said for the chapter on body language which could provide many hours of enjoyment in 'people-watching' but just as easily a complex. O'Brien has a real skill in making concepts and theories pragmatic. Having said that, O'Brien has also creating a step-by-step guide to stacking the odds in your favour, right down to meeting and greeting!

Without doubt this is a book for every procurement practitioner.
   
Now just in case you want to get a copy of the book for yourself, at a decent price, order direct from Kogan using the code NPP and you'll save 25%!

Testing mini-break shopping and considering the options

The wonders of the web and absentmindedness of those who provide visibility of pricing on it never cease to amaze me.

I wanted to have a quick break linked with returning my son to his student flat in Edinburgh. A quick search found very attractive accommodation which suited us very well on Visit Scotland's website. Visit Scotland revealed a price of £x for four nights in a family room with our 16 year old daughter. However, trying to book I was redirected from Visit Scotland to the accommodation provider's own site. Unfortunately, that booking portal had the inconsistency of a maximum age of 15 for a child. Nevertheless, the websites both yielded the same price. I despatched a quick email to the accommodation to confirm availability but was offered a rate 24% higher than both Visit Scotland and the provider's own site.

Naturally, when I asked them to check their figures against both their own and Visit Scotland's website, the price was reduced.

There was always a slim chance I would be able to beat the web price through the email but why on earth would they price dearer?

Nevertheless, we had a great break but, much as I have a fondness for Scotland and my assumed historical roots, by way of price comparison, is there not something wrong when I can book a mini-break in Berlin, flying from Dublin and staying in a really good hotel, significantly cheaper than a car-ferry from Northern Ireland to a guest house in Scotland?

What will CLG Committee recommend on tackling fraud and corruption?

Last month we discussed the perceived rise in procurement fraud and corruption. On 11 November the Communities and Local Government Procurement Inquiry took evidence on tackling fraud and corruption. This was the third of oral evidence sessions, two of which I have already discussed. I expected the evidence to go some way to answering the following questions:

1. Is fraud in local government procurement increasing or decreasing?
2. Is corruption in local government procurement increasing or decreasing?
3. How does UK local government procurement compare with the world best in tacking fraud and corruption? 
4. What would an effective strategy for tackling fraud and corruption strategy in local government procurement look like?
5. In what ways are councillors part of the problem and the solution?

Unfortunately those questions weren't asked. Why?

Do the incumbents of government contracts have an advantage?

On Tuesday I discussed the NAO Memorandum to Parliament on the management of strategic suppliers. I now turn to the parallel Memorandum on the role of major contractors in the delivery of public services. This is slightly different though in that it aims to stimulate public debate.

As usual, an excellent report from the NAO with plenty of useful insights for procurement practitioners.

I have little to contribute to that debate, however, I do think paragraph 1.9 in the report is worth discussion:

Incumbents can be seen by procurement and policy officials as he easier and softer option. Across the 15 applicable services we looked at as case studies for this memorandum , seven had been retendered at least once, with four of the most recent competitions being won by new providers.

I don't agree that procurement and policy officials would have a preference to the incumbent, and I doubt if the success in retendering demonstrates they do.

Incumbents have many first mover advantages and would be expected to do well in a retender as they should be able to identify scope for inefficiencies and have a greater understanding, possibly than the client, of the client's needs. The incumbent will also know where the emphasis can be placed in pricing strategy and where demand is lowest.

Retail clothing buyers to make a difference through contracts?

I think we all felt the stain of shame with the deaths of so many low paid garment factory workers in Dhaka some months ago. Even Michael Fallon, a government minister, summoned the great and the good of retail procurement to take corrective action.

It's not remotely clear what actually changed but here's a suggestion.

Given the UK debate on the cost of living and whether the living wage should be mandated in government contracts, that the average wage of a garment factory worker in Bangladesh (making UK High Street brands) is only $39 per month, that police have just used rubber bullets and teargas to quash a protest of 400,000 garment workers seeking a monthly wage of $100 (£62) which led to production stoppages in 200 factories, that the Garment Manufacturers and Exporters Association have just rejected the recommendation of the Bangladesh Minimum Wage Board to pay a rate of $67 per month, why don't UK High Street retailers collectively place a contractual obligation on their suppliers to pay the minimum wage agreed by the Bangladesh Minimum Wage Board, backdated to its date of recommendation? Is that too much to demand? Too much of a Christmas present? Too reasonable? Too responsible?

P.S. 14 November 2013 following the intervention of the Bangladesh Prime Minister the Garment Manufacturers and Exporter Association have accepted the Board's recommendation. UK buyers should still enforce adherence through contracts though otherwise there's a risk that implementation will not take place. 

Strategic supplier management in UK government

On Sunday I discussed Premier Foods novel approach to strategic suppliers. Yesterday, the National Audit Office published a Memorandum to Parliament on Managing Government Suppliers - an interesting publication for anyone concerned with strategic procurement approaches, regardless of the sector you work in.

Margaret Hodge, Chair of the Public Accounts Committee, is clearly not happy with what the Memorandum has highlighted, nor that of its sister report on the role of major contractors. Both would have been of particular interest had their conclusions been fed into the PASC Inquiry on public procurement so it will be interesting to see 'what happens next?'

40 contractors have been identified as 'strategic' and collectively they consume 25% of the government's total spend. The suppliers are identified as strategic on the basis of extent and profile across central government and potential added value, but not necessarily spend or risk.

There still appears to be confusion on roles, responsibilities and accountabilities between spending departments and the Cabinet Office. That strikes me as something which needs to be addressed urgently as it could lead to suppliers playing one off against the other and causing gaps in strategic supplier management. At the present spending departments are the contracting bodies, yet both the departments and suppliers are subjected to Cabinet Office interference without accountability. Of course there's nothing unique about this and it's not a problem unique to the public sector either.

But then we also have the potential for dysfunctionalism with the Cabinet Office's focus on short-term savings while departments can be expected to have a wider view.

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?