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Horsemeat and procurement principles

February 18, 2013

Will the European horsemeat scandal at last lead to a rebalance in procurement measurements?

Yesterday the debate turned to whether the food chain is being threatened by a focus on price. According to the head of one major retailer, it is the only basis on which business can be won.

Over the last couple of years, the voices calling for less focus on price and more on value and outcomes have increased in intensity. Many – including those within the Procurement profession – have grasped the negative effects of an unrelenting focus on input costs. This focus simply does not generate long-term cost reductions – and it results in many unwanted outcomes.

The European horsemeat crisis would be a rather ironic catalyst for change, but certainly welcome. The constant push for lower price as the only way to win contracts inevitably drives unscrupulous behavior. But which side truly lacks morality in this situation and how should we alter measurements to secure better results?

A second aspect of the horsemeat affair is that we are immediately into the blame game. This is also typical of poorly managed procurement systems, in which performance management is often a post-mortem rather than an active and collaborative discipline.

2 Comments
  1. A belated thought on this. Toyota became one of the most efficient and lowest cost manufacturers by NOT focusing on cost. What they did was to understand what drove the costs, and then focused on improving the drivers.

    Price is an outcome, a result, and only focusing in price is like driving using the rear view mirror. No wonder so many deals based on a narrow price-focus crash and burn.

    IH

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