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Supply Chain Success – A Marketing Slam Dunk?

October 14, 2008

In e-sourcing forum, Charles Dominick highlights the reluctance of many Marketing groups to acclaim the success of their Procurement organization as a source of competitive advantage.

The point he makes is interesting and in my experience, sometimes valid. However, as a negotiator from the other side of the fence (sales contracts), i have a different view on why companies are sometimes hesitant to boast about procurement success.

When I negotiate, if I highlight the quality of the procurement group’s efforts – at driving lower prices, or generating superior reliability, or cutting lead times – then it is certainly correct that customers value this. So of course the immediate question (from one of those talented procurement professionals sitting opposite me) will be “So where are those benefits reflected in your contract?” They immediately turn my achievements around on me to look for ‘superior’ terms and conditions or lower prices.

Now that is fine if I can indeed demonstrate that I do offer better terms – shorter lead times, higher damages for failure, lower cost of ownership, superior guarantees or service levels. But few Sales organizations have this level of competitive intelligence – we rarely know in detail what competition is offering or what they may be desperate enough to match. So making these boasts means I had better have verygood market intelligence and also that I have extremely good supplychain integration – by which I mean true flow through from market requirements down to the very lowest level of supplier.

Second, in today’s inter-connected world, many of my major customers are also my major suppliers. It is not always smart PR to suggest that I am somehow screwing my customers – yet that is the way that Procurement success stories will often be read, especially when so many of them still gravitate around driving lower costs.

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