March 2016
By Wayne Stewart
Five years ago
I can still remember the meeting well. I’d been asked to represent a firm in its negotiations with a client to settle a new pricing deal. The meeting started off pleasantly enough with the senior Partner from the firm and the General Counsel waxing lyrical about the value of relationships and the importance of trust. Acolytes on both sides of the table nodded enthusiastically as if to reinforce the merits of each statement their leaders made.
Fifteen minutes in and the General Counsel looked to the senior Partner stating “Enough with the pleasantries, shall we let them get down to business?” And suddenly in a whirl of swivel chairs and suit jackets everyone left for lunch leaving a tired-looking procurement manager and myself to find some sort of agreement.
Before I could introduce myself the procurement manager kicked off our negotiation with “Well I’ve always thought an honest hour’s work deserves an honest hour’s pay so why don’t you tell me what discount you’re prepared to offer?”. In the good old days it really was all about price.
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Today
We were recently engaged to train the supply chain team for one of Australia’s largest corporates on how to engage in more productive relationships with their suppliers. To kick the project off we interviewed eight senior procurement managers about the goals they seek with their supplier relationships and the challenges that stop them in the pursuit of these objectives. I was fascinated to note across eight interviews the topic of price only came up twice (and once was to complain that one of the manager’s internal clients was focusing too heavily on reducing price with suppliers).
On another project we asked the procurement leaders of a global financial services firm what they needed to see more of from their suppliers. Surprisingly only one of the 12 suggested cheaper prices, the other 11 shouted “greater innovation” almost in unison.
These days it’s fair to say that firms, their clients and the procurement managers are still spending a lot of their time talking about price, discounts and tenders. On the surface things seem eerily similar but underneath much has changed.
Procurement is no longer the “Wham, Bam, Thank you Ma’am” expert of the corporate world. Successful managers are partners with their internal clients before, during and after the tender process. Procurement teams rarely have a singular focus on price, these days price is one of a number of supply chain risks that must be proactively managed. And Supply Chain Management has emerged as a distinct profession with an increasing number of Universities offering degree courses in these disciplines. Accordingly, the models employed by forward-thinking procurement teams have increased in sophistication thereby confronting suppliers with a new set of traps, and opportunities, to be navigated in their relationship building efforts.
Today the key problem is that many professionals and many salespeople are still living in the past. They approach procurement as if they were the cardigan-wearing, muddling middle managers of days gone by. And the result of this oversight? Too many RFTs, too low a win rate, too many adversarial price negotiations, and far, far too much frustration in managing client relationships and targeting new work.
There is a better way to profitable, growing relationships but you must start with a recognition that Procurement is evolving and you need to read their playbook to learn how to avoid the pitfalls, and how to realise the opportunities, that abound inside your largest clients.
About Wayne Stewart
Wayne Stewart is a world-class facilitator with a background that makes him uniquely placed to deliver this APSMA Masterclass. He is an experienced consultant who regularly works with many leading companies on projects across Australia, Asia, Europe and the US. In addition to his work enhancing the BD/pitching skills of professionals, he is also engaged to train procurement managers, and their leadership teams, on developing better relationships with their suppliers. Because he sees the supplier/firm interaction from both sides he has a unique perspective on where the opportunities, and threats, lie for professional service firms in the “Age of Procurement.”