I had an opportunity to watch some hilarious sourcing videos recently that I discovered on a sourcing blog by Citro Strategy.
The three scenarios depict the actions of “hardball negotiating” procurement approaches, that are translated into negotiation scenarios that individuals in the consumer sector would never dream about using! (Actually, I’m sure that anyone who has worked in these environments has probably seen some of these issues before!) The video takes the viewer through some of the typical arguments used by procurement, applied in a consumer setting.
What is funny about each of these is the subtext that procurement uses in each instance to justify their demands for a lower price, that make no sense and are in fact insulting to the provider/supplier.
Restaurant Scene – procurement often uses the argument that they don’t have “the budget” for the requirement that they just contracted for. In this case, the purchaser notes that what they paid for is similar to what they purchased at a “taco stand”, an allusion to the practice of benchmarking. The server notes that he ordered a filet, and the response is “but they are both cow!” Again, the distinction of trying to tie commodity prices to an upscale product or service is not appropriate, and is a way to try to chisel down the supplier.
Video Store – the purchaser tries to again get a “deal” on a full-price video, but claims he doesn’t have the money to pay for it. He works every angle, including trying to create a “partnership”, but in reality not seeking to offer any type of benefit in return, other than a vague promise to give the supplier more potential business in the future.
Hair Salon – the purchaser is seeking to get something for free – highlights, but will only pay for a trim. She claims that this is a “test”, an incentive to try to innovate and bear all the costs, with the somewhat vague referral to future business that may or may not occur. This happens when procurement tells suppliers to “run a pilot project” for free, and then I’ll let you know if you get any more business.
What makes these videos disturbing, however, is the fact that these tactics are often readily adopted by buyers seeking to drive down cost, without understanding the total cost associated with the product or service that the supplier must bear. Improved RFQ’s and better defined statements of work can help a lot to alleviate this situation. There is a great piece on developing good RFQ’s that readers should look at on Cirtuo Strategy Hub.