A conversation with my teenage daughter…about Procurement

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Author: Tony O’Connor 

The following is a fair and true account of an actual conversation with my sixteen year old daughter.

“Dad, I’ve been wondering, what is it exactly that you do? I mean like, for a living?”

“I’m a procurement manager.”

“Pro – cure – ment? What the hell is that?”

“Well, it’s when companies buy things; the things that they need to do their business.”

“Buy things? So you spend your day shopping for people? OMG. That sounds great! But why do people even like pay you for that. I mean, let me do it!”

“Well, no, it’s a bit different. You have to buy a lot of stuff. Millions and millions and millions of dollars’ worth of stuff.”

“Oooooh. Yaaaaas…I’m in.”

“No. I mean, there are different considerations, and a range of added complexities, and competing commercial and operational objectives. And…”

“Could you PLEASE SPEAK ENGLISH.”

“Right, sorry. It’s a lot more complicated than, say, you buying a pair of shoes online.”

“How? Why?”

“Well, for starters, I have to always ensure that I get the best outcomes for the company in terms of value. I have to get the highest quality at the lowest price, or something pretty close to it.”

“So? That’s what I do every day on my iPad.”

“No. But I’m dealing in complicated markets, with many different product variations, and prices, and ways to buy them.”

“OMG! Have you ever, like, tried to buy anything online?”

“No. I mean, yes. But I also have to contend with salesmanship and ambiguity and all sorts of fuzzy stuff like that.”

“Salesmanship? Okay. Try buying make-up then.”

“Why? Is that tricky?”

“Well for example, Mum just bought a year’s supply of activated prebiotic dermabrasive facial regenerating cream. LOL.”

“Ah. I see what you mean.”

“And why can’t you just let the people buy the stuff themselves? What makes you think you can do it any better than they can? I mean, no offence or anything, but we have to tell you how to stack the dishwasher like every time that you do it.”

(At this point dear reader, I tried to regain my footing a little. I gathered my thoughts, took a deep breath, and put together what I hope was reasonable argument for my existence).  

“Look, there are bigger picture considerations at play. If you just let me talk for a minute I’ll explain it to you…”

“Okay, but please make it quick. I’ve gotta be at Veronica’s in ten.”

“Right. Well, firstly there is consolidation. If I buy ten thousand pairs of Converse trainers I’ll get a much lower price than if I buy just one. Obviously.

“Next, there’s process consolidation and efficiency. (Shhh. Don’t interrupt). A thousand people buying one pair of trainers each takes a lot lot longer than one person buying ten thousand pairs.

Then there’s standardisation. Just pretend that for whatever reason, everybody in my company has to be wearing exactly the same type and size of shoe to do their job. (Just pretend alright!) So, if a lot of different people do the buying, there’ll be all sorts of shoes all over the place. One person should buy for all. Got it?”

“Got it.”

“There’s also category knowledge. That means knowing everything possible about the type of thing you’re buying. You also have to know exactly what the company needs. And you put those two sides together in a process called a tender, and you assess the offers carefully, based on your thorough knowledge of the product area and the company’s needs.”

“So you’ve got to be an expert on what’s out there, like in every marketplace, and what the company needs in a whole lot of areas.”

“That’s it. Exactly. And it can get very detailed, at both ends, across a lot of supply categories.

You know when you go to buy a new phone? You have to weigh up all those cool features. Then you have to look at the data and text message allowances and costs. You have to choose a plan based on what you expect you’ll use. And then you have to quickly add everything up and compare Vodaphone and Optus and Telstra right?

“Complicated huh? So, let’s say instead of a phone you’re buying a computer program. Multiply the number of functions and features and price variations by ten, and instead of $50 a month the deal is worth $40 million a year. But if you get it wrong and the company can’t do its business properly, it could cost ten times more than that. I’m basically in charge of making sure we always buy the right plan.”

“You can do that??”

“Yes, I can do that. And on top of cost and performance I have to worry about risk. Imagine if, like I said, the company’s main computer system wasn’t right and we made bad products that hurt people. Or imagine if the company accidentally sent some employees into a cyclone or a terrorist attack. Or imagine if we got bad advice and employed a bunch of second rate senior managers that ruined the company. Or imagine if we just paid too much for everything and the company lost money and went broke.”

“Okay. Fair enough. But you just buy the stuff, in a tender or whatever, and then you can relax right? So what do you do all day after that?”

“Well, sweet pea, there are a lot of categories and quite a few tenders. And they all take time. But mainly, after you do the buying, you then have to manage and monitor things. Most of what we buy either is a service or includes servicing, and service comes from humans, and humans are fallible. We need to make sure they keep doing what they’re meant to be doing. As well as that, a lot of things need maintenance and ongoing attention; things like software, and motor cars, and plumbing. The suppliers are on contracts, and it’s my job to make sure everything ticks along year after year and goes tickety-boo.”

“Tickety-boo? WTF…”

“Sorry. It’s my job to set up and monitor all contractual SLAs and KPIs and ensure ongoing performance against the terms and conditions of the contract.”

“Goodbye.”

“YOLO.”

(For the purpose of broader application, the role of my daughter in the above conversation can be replaced with your Finance Director or CEO). 

 

Tony O’Connor has been Director at Butler Caroye Asia Pacific (independent corporate travel management consultancy) since 1998. For more information, visit: www.butlercaroye.com.au

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3 Comments

  1. Yes Well Explained to your child, But am still not sure if the Top Management too understands what PROCUREMENT is …………….

    Procurement is a High Pressure Job expected to Perform like a Magician at all time, It may be a Planning Failure or Bad Sales Forecast, Still the Procurement Head need to Make the things available to avoid Down Time & In-Direct Losses.

    Procurement is Surely not SHOE buying Online, But we surely BUY – BREAD WITH BUTTER for the Cooperate Companies, All Other Departments can overspend and Exceed the BUDGET, But the Procurement Head should operate below Budget and Show Cost Reduction Year after Year to prove that he is still Fit for his Job.

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