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Purchasing, or procurement, is one of the least efficient functions in our businesses. It is also the environment where much corruption occurs (we talk about this nearly every August in "Pulp Rats" month). Procurement involves the exchange of goods and services for money. Everyone gets funny around money.
I am convinced that so-called "arm's length" negotiations often waste money and result in the acquisition of something other than what the procuring party wanted. I am equally convinced that negotiated pricing, an implication that the effort is more open, wastes money, too. Then there is corruption, where sellers buy the business.
Governments try other systems. Health care is a good example; so are the procurement activities associated with military equipment. These all have reputations for poor and costly buying decisions.
I would offer that retail is the most open and transparent opportunity of procurement. Then I immediately think of two examples that shoot that premise down. The first is buying a car. The second is buying bathroom tissue or paper towels. Have you ever walked down that aisle and tried to comparison shop? It is an exercise in obfuscation created by our own industry.
Where markets are completely transparent--as in agricultural commodities--the farmers often seem to be on the end that comes up short.
Something closely akin to commodities markets are actual in-the-flesh auctions. I have always thought these to be a clean way to find the price of an item (except when the auctioneer has an accomplice in the audience running up the price!).
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Procurement involves psychology. It also involves knowledge, but it is one-sided knowledge. These two conditions are what makes it interesting as well as often inefficient.
Of course, procurement is also closely aligned with sales. I think, and I tell my sales people this as well: the second-best thing a buyer can tell us (the first being, we are going to accept your offer) is this: no. Many buyers hate to say no and string a seller out for a long period of time, wasting everyone's time. If you are going to say "no," say it early. Then I can move on to those that might say "yes" and quit wasting your time and my time.
We are going to explore several aspects of the procurement function this month, which is "Procurement Month" here at Paperitalo Publications. If you are involved in this function, I'll probably step on your toes sometime during the month, for there are enough flaws that we are all guilty of at some time or another, even when we are attempting to do a great job.
In the meantime, if you have a particular aspect of procurement that especially bothers you, drop me an email at jthompson@taii.com and I'll do my best to cover it.
Safety services are subject to flaws in procurement just like all other purchasing exercises. Be careful and pay particular attention when procuring these.
Be safe and we will talk next week.
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