Best Practices in Supply Management Journal

55th Edition, July/August 2012

Articles In This Issue
"Becoming Standard to Achieve Procurement Excellence"
"So You Think You're Strategic...?"


Upcoming Founder Articles & Appearances:

Mark Trowbridge  wrote an article for ISM eSide Supply Management's June Edition titled "Negotiate Like a Master".  Click here to visit that ISM article site.

Mark will  present a three day workshop Strategic Contracting & Technology Agreements at the (5 Star) JW Marriott Hotel in Kuala Lampur on September 10th - 12th.  Find out more by clicking Link to Malaysia Conference Information

Two interviews with Mark Trowbridge were published by Buyers Meeting Point.  To view each article, you can click BMP Interview #1 Link and BMP Interview #2 Link

Job Opportunities:  We are currently helping clients fill the following SCM career opportunities.  Contact Strategic Procurement Solutions through our website if interested...

-  Marketing Sourcing Manager, Service Sector, Madison, Wisconsin.  Base Salary Between $85K and $110K USD, Excellent Bonus and Benefits Package.  Relocation Negotiable.

- Supply Chain Major Project Manager, Texas, USA.  Global Oil/Gas Company.  Must have upstream project experience.  Base Salary Between $150K and $200K USD, Excellent Bonus and Benefits Package.  Relocation Negotiable.


- Supply Chain Major Project Manager, Western Europe. Global Oil/Gas Company. Must have upstream project experience. Base Salary Between €133K and €163 EURO, Excellent Bonus and Benefits Package. Relocation Negotiable.


- Technology & Operations Contract Manager, Financial Services Sector, Northern San Francisco Bay Area, USA. Permanent Hire Position, Base Salary Between $85K and $115K, Excellent Benefits and Bonus Package. Relocation Negotiable. 



- Technology & Professional Services Sourcing Leader, Upstate New York, USA. Permanent Hire Position, Base Salary Between $75K and $90K, Excellent Benefits and Bonus Package. Relocation Negotiable.   


- IT & Business Services Contracts Manager (3 - 7 Month Contract Position), Northern California - Financial Services firm.  $125K Annualized Contract compensation. Candidate must be within daily commuting distance of North SF Bay.




















































































































































This electronic journal is now distributed bi-monthly to nearly 11,000 Supply Management Professionals around the globe. We hope you enjoy this edition. Feel free to forward to your SCM colleagues!  And keep SPS in mind if your organization ever needs top quality Supply Management Consulting, Employee Skills Testing, Training, P2P Efficiency Reviews, Cost Reduction or SCM Staff Augmentation Services.



"Becoming Standard to Achieve Procurement Excellence" - by Mark Trowbridge - Principal, CPSM, C.P.M., MCIPS 

Some procurement professionals fail to understand the benefits that come from "standardization" of the products and services they are responsible for acquiring.   They often don't challenge their internal customers to simplify and streamline the selection of products they require. And thus, procurement may source/bid a spend category...but not materially improve category performance.


This article will describe the procurement benefits of standardization, and several methods a procurement group can facilitate this for their organizations...


A great example of standardization is one US domestic airline which has often outperformed its rivals. Amongst other competitive practices, Southwest Airlines has realized significant benefits from "standardizing" its aircraft fleet. They primarily operate just one type of aircraft (Boeing 737 aircraft.). What has standardizing done for their supply chain performance...? 


First, standardization simplified training requirements for pilots, crew, and technical/mechanical personnel;


Second, standardizing allowed the reduction of spare parts and maintenance equipment at maintenance hubs and airport locations;


Third, it enabled the airline to buy larger quantities of select parts and materials, due to commonality of use among entire fleet;


Fourth, standardizing allowed redundant supplies of maintenance parts to be available at majority of serviced airport locations, making resolution of emergency repairs (including "AOG" - Aircraft on the Ground) more timely; and


Fifth, the carrier's inventory investment expense is drastically lower than if the airline operated multiple models from numerous manufacturers....each requiring a unique set of spare parts, diagnostic materials, schematic diagrams, ground handling equipment, etc.


The procurement team at Southwest has benefitted from the initial standardization of aircraft by their senior management. But some procurement teams are not always so fortunate... 


I spoke with a Chief Procurement Officer the other day, whose technology firm produces complex engineered equipment for their customers. One of their most expensive (multi-million dollar) products has many configuration options offered by the sales organization to customers, resulting in over 4,000 permutations! This variability in final product has created a very difficult procurement challenge for this firm's supply chain team...something they plan to simplify through standardization in the future.


Standardization can benefit service organizations too, as procurement seeks to simplify and leverage the products and services those organizations buy. Years ago, I directed strategic sourcing operations for one of the five-largest global bank holding companies. Our sourcing team found that the company was buying 330 different types of envelopes used in business mailings. Rather than just performing a competitive bid for all of these envelopes; our cross-functional sourcing team spent two months working with the company groups which utilized these various envelope types to standardizing and simplifying their requirements.


The team was successful in "standardizing" down to just 30 total envelopes. This obviously required the redesign of many of the mailing inserts which were sent out in these envelopes. When we then competed a five year requirement for these envelopes, we ended up reducing total costs by 26%!


Three tips for standardizing:


One.  To the greatest extent possible, utilize standard marketplace standards. The more you vary from industry standards, the higher will be the cost;


TwoLook at related downstream costs. For example, typical ERP application software often costs 100% to 150% of its license cost to install and configure, and another 18% - 22% per year to maintain (over five years, that's another 100% of the license fee). That means that it costs as much to operate equipment or software over five years as it did to originally purchase or license it. Failure to address all TCO elements (such as cost of maintenance, energy requirements, etc) at the beginning of a selection will result in inability to control those costs later on.


Three.  Standardize descriptions. Especially if you have internal inventory listings or utilize supplier catalog details in your eProcurement tool, inconsistent naming conventions will complicate procurement activities. Years ago, a major cruise ship company had separate inventory warehouses which supported different ships in their fleet. Each inventory had been built by separate teams of personnel, and thus identical items in six separate warehouses might have six variant descriptions and part number (for example, "Large White T-Shirt with Blue Company Logo", "White T-Shirt, Large, Blue Logo", etc). The firm utilized one of today's catalog cleansing technology tools to revise ALL of their part descriptions. These tools utilize Boolian search engine technologies (similar to what Yahoo or Google might do) to rewrite every product description in their inventory listing at all locations. Standardization of the description allowed the procurement team to better-source and manage a much-less complex listing of product items.


Strategic Procurement Solutions trains procurement groups around the world on the benefits of standardization in our Strategic Procurement Management Training™ (3 day) onsite workshop.    For more information about our Online Supply Management Skills Testing or Onsite Training Workshops, please email us at


About the Author - Mark Trowbridge, CPSM, C.P.M., MCIPS is one of Strategic Procurement Solutions founders. His 27 years in procurement leadership began in the Manufacturing, Airline, and Financial Services sectors...culminating in a role leading three-quarters of the strategic sourcing activities, and all of the contracts management responsibilities, of Bank of America (then, the USA's third most-profitable company). During his last two years with Bank of America, Mark's areas of responsiblities delivered a Quarter Billion Dollars in cost reductions. During the last dozen years, Mr. Trowbridge has worked in the consulting field with many leading corporate and governmental clients. His business travels have taken him throughout North America, Europe, the Middle East, Asia, and Malaysia. He is a frequent author on supply management topcs, with articles appearing in publications like Supply Chain Management Review, Inside Supply Management, eSide Supply Management, and Strategic Procurement Solutions' own Best Practices in Supply Management Journal. 



"So You Think You're Strategic...?"- Robert Dunn, MBA, C.P.M.

The last few months, Strategic Procurement Solutions has helped several client groups optimize their procurement organizations to better-achieve 'strategic' value. These transformation projects have optimized each organization's Procure-to-Pay (P2P) process, created a Strategic Sourcing methodology for spend category management, refined the supply chain organizational structure, trained personnel in procurement "best practices", and aligned the new organizations to optimally match communications with customer groups and the supplier community.


Readers who are automobile fans know what it means to "blueprint" an engine. The "blueprint" methodology doesn't just tune up an existing engine, but rather takes that engine completely apart and measures/machines each of its components to match optimal design. Only then is the engine re-assembled so it can run perfectly.


Too many procurement organizations "think" they are strategic. But just calling a group "Strategic Sourcing" or "Strategic Procurement" doesn't really make it so. An article I wrote in this publication (Has Strategic Sourcing Really Been Done? - 50th Edition) documents how wrong this assumption may really be.


CAPS Research (the research arm of the Institute for Supply Management) recently published their latest annual Cross-Industry Procurement Benchmark Report. This report identified how surveyed procurement groups reported varying degrees of control over their enterprisewide expenditures. By industry segment, this control varied between 48% and 92% of discretionary spend. The average organization reported that nearly One Fifth of "sourceable" companywide spending completely bypasses their procurement group!


I would suggest that more organizations really need to "blueprint" their procurement and supply chain operations rather than assuming they are having a "strategic impact". Procurement teams with skilled management can do this themselves, using external benchmarks and process flow mapping techniques. But other groups prefer to utilize an objective third party perspective of an external consultancy like Strategic Procurement Solutions.


Strategic Procurement Solutions often evaluates client companies' procurement and supply chain efficiency using our proprietary 360o Supply Management Efficient Review process. Our process takes just a few weeks, and evaluates many factors (including standardization opportunities) to identify key benefits for improvement which are presented to the client's management team in a detailed written report. More information can be requested at


Robert Dunn, MBA, C.P.M. is one of Strategic Procurement Solutions founders.  His 37 years in procurement leadership covered management positions in the Government, Technology and Financial Services sectors; culminating in a role directing all of BankAmerica Corporation's procurement operations.  He has served as President of two ISM/NAPM affiliates, and taught supply chain management at the post-graduate level for California State University - Hayward and St. Mary's College - San Francisco.  He has worked with major corporate and governmental clients in the consulting industry for the past 18 years.  Robert has worked on major procurement initiatives in North America, Latin America, Europe, and Asia. 


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