Price Sharing

One of the things that we deal with all the time in purchasing is exactly what to share between suppliers. Should you share a competitor’s pricing with another company to try and get better pricing for your company? This is more often than not the question at hand, so is this really ethical or in the true nature of fair business practices?

There are a few ways to go about working through situations like this and not skirting the ethical lines. One way is to take the pricing of one company, lower it by 3-5% and then share that pricing to a competitor to see if they can match or beat it; this is one way to get the best pricing for your company and also not share the actual pricing from the original company. The other way is to share the pricing from one company to another and not provide the name of the company or the mark-up structure. If this is done correctly, it is extremely difficult for a company to determine who each other are during the bid process.

Some companies are downright ruthless when it comes to this practice and have no problem sharing another companies pricing, products and mark-up structure to make sure that they get the best price for their company. While this is one way to do business, it does not create a level of trust between the company and their supplier partners and can come back to bite them in the end if the relationship ever sours, which can and does happen. It is really up to your department and your company’s purchasing policy as to which way to go about this. There are arguments to be made on each side, sharing pricing does often lead to the lowest price for the products, but is it ethical and does it lead to the best relationship with your suppliers? If you don’t share pricing, many times companies will just give a bid price and then will lower the price during an actual negotiation once they are awarded the business, so it can take longer to get the negotiated price that could have been offered right from the beginning.

How does your company currently negotiate pricing, do you share pricing between competing companies, or does the company maintain pure integrity and negotiate pricing on the back-end (after the supplier is chosen). Do you agree that both ways can work for the benefit of the supplier and the customer?

Performance Reviews

Many companies handle performance reviews very differently and I can only speak from personal experience, but it seems as though more and more companies are subscribe to the fact that if reviews are tied to merit increases, then performance reviews have to be “right-sized” to fit whatever the budgeted salary number is for the year… When that time of year comes around, do you feel accomplished or dreading the meeting with your direct manager?

I understand the budget and P & L process; but if someone in the department is a superstar and rate 4 out of 5 on a review and a 4 is supposed to be a 4% increase, then this person should not be re-ranked as a 3.25 out of 5 because the department can only afford a 3-3.25% increase. Companies experience this type of constraints all the time when it comes to salary adjustments on an annual basis, but then why not change the method behind it and make the salary adjustment a “Cost of Living” increase or annual raise instead of tying it to a performance review? Has your company done something like this before or have you been part of these budgetary conversations before?

Another aspect that I have heard before for performance reviews is the idea my Sr Management that no one deserves a “perfect score”. It harkens back to the idea, that if someone is a 5/5 then they have nothing left to learn and should move on from the current position because their performance will eventually decline because they are bored or dissatisfied with their job. This is an opinion that is really hard to define and/or measure. Example: One of my direct reports was a person that came out of retirement because they were bored and just wanted a job where they could come in everyday, do their work and leave without any of the management stress, long hours or political aspects of the job; as a result this person was the best employee that I have ever had the pleasure of managing. When it came time for their annual performance review, I had no problem giving this person a 5/5 on the scale I was given by my company. Once I handed it to the VP of my department, I was promptly told that no one should ever score a 5/5 because then they have nothing to improve upon; once I made the argument that this person didn’t really need to improve all sorts of things happened, questions like why wasn’t this person running the department, was I a poor manager and not able to make tough critiques of my people? Why can’t someone just be really good at their job… These are things that will frustrate me, as it seems businesses use performance reviews as a tool to hold people back to a certain degree.

I have no problem telling people the things that they could improve upon, but on the other side, I also want people to know when I think they are excelling and looked at as an example to the rest of the department. Guess I was just not allowed to do that when it mattered and money was on the line.

Do you agree with your company’s performance policy is legitimate, fair and truthful?  If not, what would you do to improve this if given the opportunity?

Expert or Jack of all Trades?

If given the choice, would you rather be a “Jack of All trades” (master of none) or your department’s SME (Subject Matter Expert) in a vital role to the department? What arguments can be made for each side and which has more longevity for a company? Each of these questions has a larger meaning and can be used to a person’s benefit in their current position or used to expand their visibility in the job market. We have all worked with each type of these people; while there are many more categories to place people in; this blog I am going to focus on two of them.

Someone that is described as a “Jack of all trades” is someone that I picture that has experience in all types of different disciplines, but may not be an expert in any one of them. This person has a broad understanding of operations, accounting, technology, etc… but if your office uses Oracle, this person is probably not the Oracle expert. One of the many benefits of being a person like this is that it gives you the ability to get involved in many different avenues of business without a particular label, but the downside of this is that many companies are looking for experts in particular fields to be part of their company. Without being an expert in a particular field, it may limit your opportunities for positions with more of a narrow scope; but I would argue that many VP’s, COO’s, and CEO’s are more of the “jack of all trades” people to handle the responsibility to handle every facet of the a company vs just the technology or financials.

On the flip-side of this, many would argue that your future is brighter if you are an expert in a given discipline such as a brand of software or accounting. This person is essentially the GO TO person for anything to do with their subject, but for some that can get very daunting and their focus can become so narrow that they no longer see how what they are doing is affecting other areas of the business. While it is hard work to become an expert in anything, these people do add a very valued service to their company whether it is support or leadership on their subjects.

Many of us have worked with someone who is considered one of these two types of people and if you could choose, which would you be or do you consider yourself on of these types. I have worked with both and I can say that I have learned more from the “jack of all trades” type person than the “expert” unless it was something I was trying to learn on their particular topic. It seems as though the knowledge I gained from the “jack of all trades” person was broader and could be used across a few different disciplines of business which has been helpful throughout my career.

Food for thought!

Project Completion

Are you ever really done with a project? Sometimes the answer is yes, but more often than not, it is No! Once projects are completed, then they become a living part of the company and have to be continually monitored and kept up to make sure it is a contributing part of the company. If you are a project manager for a construction company, most times once the project is built it is considered complete and you move onto the next project; but then that project becomes an office, hotel or restaurant that is part of a larger organization and needs to be properly run to become a good investment for whatever company planned the investment.

I was recently part of a project management team for a new hotel for my company. While I was not heavy on the construction side of the project, I was involved in making sure much of the equipment and supplies were in the building by day one so that the hotel could start serving guests. Now, just because the hotel is open does not mean that I will step back and wipe my hands of that hotel, it just means that my role has now changed and I am part of the operational support of that hotel as I am with all of the other properties under the brand I work for. My role no longer is focusing on the initial orders of the property or determining what is in the boxes that arrive, but now I help to ensure that they are using the right suppliers, products and getting the best pricing available under our other national programs.

So to answer the question above, I believe that the answer is a bit mixed. Yes, a project can end, but if you take ownership of a project and see it through to its’ “completion” you will never truly be done with the project because you will continue to monitor it and make sure it is successful. So, yes you may be done with one aspect of the project but never done with the project altogether. True project managers are a special breed of professional and having to separate themselves from one project so that they can focus on the next, especially in the hospitality industry when the properties are constantly running from day one!

When was the last time that you were part of a project team? Did your investment in the project end the day the project was up and running or did you continue to watch the project grow, fail, etc…? If the project failed, do you think the failure could have been prevented if the project management team stayed invested beyond completion?

Conflict

Throughout your career, how have you handled conflict in the workplace? We will all experience it at some point and it can be a real drain on your mentality, energy and drive in at the office if not handled correctly. There can always seem like there is a cloud hanging over your desk or every time you walk by the person’s area that you are having conflict with. So what is the best way to handle it?

One of the ways that I have seen conflict resolution work is when two people can talk to each other without getting defensive or accusatory and just discuss they ways that either of them or both feel as though there is conflict. Now, as all of us are aware, this really is base case scenario, not all meetings go this way. Most meetings will turn quickly and people will take things personally and be unable to separate something going on in the office as not something “they did” instead of something that “just happened”. More often than not, conflict in the workplace comes down to miscommunication; someone said something about someone else, a task wasn’t completed and blamed on someone and the expectations of the task were never clearly communicated; therefore the lack or miscommunication is the cause of the conflict. If the people can sit and discuss this without accusing people of things and not going after someone personally, this can resolve the conflict that came mistakenly.

Most of this may be too glass half full for some people and may seem a little too simplistic. While I would agree in some cases, I still stand behind the fact that most conflict I have seen arise in the workplace is cause my something ether not said at all or said to the wrong person. There can be a case made that conflict is a true representation of wasted energy and if the issue was addressed at its’ core early, there would have been time saved.

Is there anyone in your office that you have a “conflict” with and if so, would a simple meeting, conversation help solve the conflict?

Supplier Selection

One of the most important things about Sourcing and Procurement is finding the right suppliers. While every company will have items that they say are superior, it really comes down to selected the best company that will partner with yours, determine what products best fit your needs and make sure that they are there to help you through any issues when using their product.

When working for a hotel company, you can deal with everything from food, beverage, linens, towels, napkins, salt & pepper shakers, furniture, fixtures, ice machines, refrigerators, and so much more. This does not even begin to scratch the amount of categories that a purchasing professional will handle for a large hotel company. While at first glance, this may not seem like a lot of categories; in reality there will be around 10-15 subcategories within the categories noted above. Like Meat, Seafood, Produce, Coffee, etc… these will need a specific company to provide the products within the subcategories and sometimes it will be more than one company providing these products.

So what are some of the main requirements of a good supplier? One, is do they have the product you are looking for, what is the quality of that product and how quickly can they get it to you? What is the cost of the product from them, if they send the wrong product will they send another order to make it right or do you have to wait for the next delivery, do they have minimum order sizes? These are a lot of the surface questions that are asked that will determine how to select a supplier that fits your company’s needs.

Companies will try a number of tricks to give off the appearance that they are the best supplier for your specific needs and there is one trick I have seen used by a number of suppliers, especially in the food and beverage world of suppliers; substitutions… This is when you order a specific product and they do not have it so they send a substitute item, but usually the sub item is ether a lesser quality or something to just get you by but doesn’t quite fit your recipe or needs. This is a way that the supplier can say they are filling your orders and servicing your needs, but not actually to your needs.

Supplier selection is a real art in the procurement world and takes some time to learn the right questions to ask of them to make sure you are selecting the right one. If the right supplier is selected, it can reduce the amount of orders, cost and time the purchasing person has to spend on them; if the wrong supplier is selected it can cost a company more money in time and effort managing that supplier than getting the actual products.

How many of your suppliers have you really vetted?

Preparation

Over the past few blog postings, the subject of the blog has shifted a bit from Sourcing and Procurement to other topics such as being a boss and leadership. From this point on, I will be doing little bit of shuffling between sourcing and procurement and general business topics such as the previous two blog postings. There is really only so much you can say about sourcing and it begins to get repetitive and frankly, pretty boring.

That being said, the blog topic for this week is PREPARATION!

I am in the process of opening a new property (Hotel) for my company and we are currently scheduled to open on Monday July 24, 2017 (YES, SIX DAYS!!!!) and we are working at a break neck pace trying to get items in so that the kitchens can make food, groups have items for their breaks and guests can enjoy an adult beverage come Monday July 24th.  We are in the process of setting up pars, building up the store room and working with the restaurants to determine what will need to be housed for them outside of their storerooms (located in the restaurant). So what did it take to get us prepared and ready for this to happen? Simple answer, nothing goes according to plan when opening anything new, although purchasing can help and be an integral part to opening any new part of a business whether it is a branch, outlet or secondary office. The sooner purchasing is involved the smoother the opening of that space will be.

To this point, the sooner that business requirements are established for the new property, office, etc… that is when purchasing should be part of the team. I have run into numerous occasions where desks and furniture were selected based on a design for a property and then come to find out it is a 12-18 month lead time and replacements are non-existent. No matter how beautiful something is, if you can’t get a replacement quickly it will be no good and of little value for your company. This is an example of input that your purchasing team could provide as the project team can rely on as they are making their decisions for the new area.

Every new office, branch of business or property will have growing pains and their suppliers will experience those with them; this will also show your company who the suppliers are that you can actually count on and not just those that are there when your business is operating smoothly. All in all, if your company is in the process of creating a new area, whether it is an office space, outlet, branch or expansion; I suggest getting your purchasing teams involved in the process as early as you can. It will help with supplier negotiations, assurance of supply, cost, schedule of deliveries, sourcing and all the other things that seem to be forgotten when a company is caught up in the excitement of expansion.

So next time you are part of a meeting discussing plans to grow the business, get someone from the purchasing team involved. May be an integral part to make sure everything “goes according to schedule”!

Leadership

What is leadership?

This is a hard topic to dissect and discuss, because everyone has a different take on what actually defines leadership. There is also a big difference in just trying to nail down what leadership is and what it means to be a leader in the business world. I don’t think it takes the most out-going or extroverted person to be a great leader in the business world, it can help but it can also hurt since most times the most outgoing people do like to crave attention on themselves, it is difficult for others to share in that spotlight as part of the team.

I think it comes down to some real simple traits to be a great leader in business, no matter the industry that you are in.

Take Ownership: If you have an idea or are given the chance to lead a project, take ownership of those things, invest in them, continue to grow them and ultimately take pride in what you have done. There will be things that you wish you could have another shot at, but if you learn from those moments, that is another way to strengthen yourself and improve for the next time.

Be Accountable: Hold yourself to the same standard that you hold others too. If you have people that work for you, whatever you expect from them, be the example for them to follow. If you make a mistake, tell your team what happened, and see what could have been done to prevent it or avoid it. Don’t be afraid to share that experience and keep the finger pointing to a minimum. No want likes to hear the BUS coming.

Be part of the TEAM: If you work in a department or have people that work for you, be an integral part of that team; not just a bystander or the person that “barks” orders. Get your hands dirty and show the traits that got you to the management position in the first place. All in all, don’t ask something of your people or your team that you would not be willing to do yourself.

Treat People Equally:  To me, this is one of the most important. I used to work for someone that would change their entire demeanor when an executive would be on their way to the department; more pleasant, laughter, and just a bit more a chipper outlook (which meant that everyone else that occupied that department didn’t warrant that type of behavior on a daily basis). Then, I worked for someone that would show the same respect to the building attendant in the hallway as they did the CEO. This takes no extra effort on your part, just a little bit of thought.

Now, this is not gospel into becoming a great leader, they are just some of my thoughts and ramblings on things that I value in leaders. Do you think that these are important qualities for a leader, what are some of the behaviors that you value, and what else do you think makes a great leader in the business world?

What kind of Boss are you?

I have spent many of my previous blog postings discussing ins & outs of various sourcing and procurement functions. This week I am going to shift my focus a bit and talk about becoming the boss who want to be; not just in the sourcing world but across any industry.

For many us, we have all had a great boss, someone we never felt obliged to go the “extra mile for” or follow in anything they ask of us. We have also had the typical definition of a “BOSS”, someone who just cares about what we can do for them, watches our clock and cares little for professional or personal development. I am a firm believer that professional and personal developments go hand in hand; I know that if I am making myself a better person through education or development classes, this is going to make me a better professional and boss also.  While there are bosses that subscribe to these practices, there are others that seem to think that shows weakness because if someone below them shows promise or potential it is more of a threat to them instead of a strength to their team or department. Most, if not all of us are either in this type of situation or have worked in a situation like this. The question is, what kind of Boss does your worst boss turn you into?

From what I have experienced, there are really two ways to go once you are presented with an opportunity to become a BOSS. First, you can take everything you learned from your worst boss and treat the people that work for you the exact same way. This is the trickle-down effect (rolls down hill) or the mind set of “I dealt with it and it made me a great manager, so others should deal with it too and it will make them stronger”. More times than not, this type of approach just does not work and the same way that you hated your boss, the people that work for you will feel the same way. The other way to respond is to take everything that you learned from your worst boss and do the complete opposite. Be the Boss that you wish you had and remember all the times that you felt like you weren’t heard, valued or good enough and make sure that the people who work for you do feel valued, appreciated and valued as a member of the team. Now, there is no way to treat all employees this way because not all employees are made equal; but then again not all Bosses are made equal either.

The question is, what kind of boss would your department or people describe you as and if able to see the results, is that truly the kind of Boss you want to be?

Sourcing of Raw Materials

As mentioned in a previous posting, the sourcing and procurement of raw goods and materials can be very different from sourcing goods and services. When sourcing raw good or materials, the most important fundamental part will be quality and the ease of transforming that raw part into the product that is needed for your business.

Raw material sourcing is critical to revenue and profit, because most of the time, raw materials are tied to commodities such as oil, wood, soy, wheat, etc… There have been times when I have been negotiating a pricing adjustment with a supplier that had pieces of their pricing matrix tied to a specific commodity market that had nothing to do with the actual product. Example, there was a time when I was negotiating a new contract for our company’s room amenities, when it came time to negotiating the price for the product I asked for everything that the supplier used to calculate their pricing and one of the factors was the PPI (Producer Price Index) for crude oil. While I expected oil to be part of the matrix, but it would have been soy, coconut or palm oil, crude oil was a bit of a surprise. Turns out the supplier was essentially using a “Fuel Surcharge” and the price of gas as a pricing factor for their fleet of trucks to get my company the product. This was negotiated out of the price of the product and we negotiated a separate part of the contract to include a pricing adjustment strictly for the price of gas, but not part of the product we were buying.

Commodities are tricky parts of sourcing because they are hard to account for and determine how much of that commodity makes up the material that you are sourcing. Also, if those commodities are not closely monitored, suppliers can hide pricing increases under the “increase in commodity” excuse.

The Sourcing of Raw Materials do share a lot in common with sourcing of goods and services as far as wanting to obtain the best product in terms of price, available supply and quality; but then the raw materials have some different factors that will come into play such as capacity (can this material still be purchased if your business grows), predicting the future demand from other customers and are there any geo-environmental issues with the material factor into your usage of that product.

There will be many factors that going into picking the right suppliers and partners of raw materials, but those companies will really have to become partners instead of just suppliers to make sure that your company is not getting priced gouged at each step and that their business will grow with yours!