Best Practices in Supply Management Journal

64th Edition, March 2014

Articles In This Issue
"Beyond Strategic Sourcing...Gaining Greater Value"
"Mediation in Contractual Disputes...An Inside Look"

Founder Appearances and Job Opportunities.

 

Upcoming Founder Appearances:

March 7 - 8, Mark Trowbridge will present a  workshop on 'Innovative Practices in Technology Contracting' for NAPM Alaska at the Coast International Inn in Anchorage. He will also make a presentation on Advanced Negotiations for the group at their monthly dinner meeting the first evening.  You can learn more by clicking Conference Link 1 

March 17 - 18, Mark Trowbridge will present our two day workshop titled Supplier Performance Management at the Doubletree Hilton in Kuala Lampur, Malaysia. Readers can learn more about this conference by clicking on Conference Link 2 

March 28 and April 4, Bob Dunn & Mark Trowbridge will present a 'CPSM Bridge Exam Preparation' workshop in partnership with ISM Northern California.  Details are available at Conference Link 3 

Month of May, Mark Trowbridge will be one of the ten CPOs and featured consultants (such as the CEO of IACCM) in an online learning 'Siscuss' symposium on the topic of 'Procurement Transformation'.  Click here for registration information Web Symposium Link 

May 31 - June 3, Mark Trowbridge will present a three day workshop on 'Innovative Practices in Technology Contracting' at the JW Marriott Resort in Dubai.  Click here for registration information Conference Link 4 

Our company's founders often partner with ISM, NCMA, APICS, CAPPO, and NIGP affiliates to present day seminars and dinner event keynote addresses.  More than 100 presentations have been made to local affiliates during our history.  Please Click Here to arrange a presentation for your chapter's 2014/2015 fiscal year.  Note - We now offer CPSM/CSM exam preparation training workshops.
 

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

Senior Sourcing Leader, Southern Wisconsin Area.  4 - 8 Years of Sourcing & Contracting for BPO (Business Process Outsourcing) and Professional Services.  Base Salary Between $100K and $110K.  Excellent Bonus and Benefits Package.  Relocation Package.

- Contracts Manager (6 - 12 month contract assignment), North San Francisco Bay Area, California, Financial Services Company.  Annualized contract compensation between $95K and $115K USD.  Must be locally-based.  

- Capital Project Sourcing Manager, Oil/Gas Experience.  Dallas Texas.  Base Salary Between $115K and $130K.  Excellent Bonus and Benefits Packages.  Relocation Package.

- MRO & Services Sourcing Manager, Oil/Gas Experience.  Dallas Texas.  Base Salary Between $115K and $130K.  Excellent Bonus and Benefits Packages.  Relocation Package.

- Director of Procurement, Greater Sacramento, California.  Experienced governmental procurement leader with strong Capital and Operational procurement and contracting skills with background in progressive municipal procurement.  Base Salary between $95K and $125K.  Strong Benefits Package.  Relocation Negotiable.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

This electronic journal is now distributed bi-monthly to over 13,000 Supply Management Professionals around the globe. Note that our educational articles are 'in depth', unlike most online publications.  We hope you enjoy this edition. Feel free to forward to your SCM colleagues!  And keep SPS in mind when your organization needs top quality Supply Management Consulting, Employee Skills Testing & Training, P2P Efficiency Reviews, Cost Reduction Support or SCM Staff Augmentation/ Recruiting Services.

 

 

"Beyond Strategic Sourcing...Gaining Greater Value" - by Mark Trowbridge - Principal, CPSM, C.P.M., MCIPS

It was surprising to learn that mine is among the 1% most-viewed LinkedIn profiles. That's somewhat scary (since I didn't think I knew that many people). But my SPS colleagues and I do a lot of training for Fortune/Global 1000 companies and travel globally to make keynote presentations at supply chain conferences. And I do participate in several online forums regarding procurement topics...

 

Recently, it's been interesting to see numerous LinkedIn group discussions arising between supply management leaders, focused upon what leading procurement groups are doing to provide value after they've been involved in "strategic sourcing" for several years.  These online thread discussions mirrored questions Strategic Procurement Solutions has received from client organizations seeking to take their sourcing organizations to an even higher level. 

 

A common theme in these leaders' comments centers upon the fact that the practice of Strategic Sourcing achieves greatest value when first applied to spend categories. But once the low hanging fruit has been plucked the first time, we have to climb higher and higher into the trees to find additional benefits.

 

This article will suggest five ways to generate benefits after strategic sourcing has been done the first time around:

 

Method 1 - Make Sure It Was 'Sourced' Right the First Time: Often, the first time strategic sourcing principles are applied to a spend category the organizational culture didn't allow full leveraging to occur. Trust in procurement was still being earned the first time, and our internal customers nixed more adventurous methods. But now that we've been managing that spend category for the full term of the initial contract, our internal customers may be willing to exert greater leverage to achieve additional results. We also should have much better spend data to apply to a new strategy, since procurement has been overseeing the performance of the current suppliers. So use these advantages to identify techniques which should have been applied the first time around.

 

Method 2 - Don't Just Do the Same Thing Again: It is unlikely that taking a spend category to market again in the same way it was first "sourced" will generate additional benefits. Recently, I was training a large governmental group in a three day long workshop titled Expert Strategic Sourcing for Government™. An audience member asked about their required policy of bidding every expenditure category upon expiration of any major contract.

 

I reminded the lady (who directed procurement for four major universities) that Albert Einstein once defined Insanity as "Doing the same thing over and over again and expecting different results". The audience then agreed that bidding something out the same way again would likely result in higher prices. So we jointly developed a strategy to change the parameters of re-competing the category by further consolidating the supplier base, incorporating additional volumes, and lengthening the resulting agreement. The new sourcing strategy would achieve better results than the first time around.

  

Method 3 - Re Analyze the Marketplace: Never assume that a marketplace is the same as it was when last sourced. Mergers occur between key suppliers. New firms enter or exit the marketplace. And technological changes can transform an industry. An essential stage of the multi-step strategic sourcing process is to evaluate the marketplace, using tools like the Porter's Five Forces Model. Proper identification of changes in a marketplace can allow us to approach it with a new sourcing strategy that will achieve improved results.

 

Method 4 - Collaboratively Leverage Key Supplier Relationships: If a strong supplier relationship(s) has been developed during the initial strategic contract term, consider expanding/extending that relationship in exchange for negotiated benefits. Many suppliers are eager to extend good agreements by giving concessions they initially strove to protect.

 

Method 5 - Expand Focus Upon Supplier Management: While strategic sourcing should certainly remain a key part of a procurement group's focus, top groups are refocusing their efforts into Supplier Relationship Management (SRM). A pro-active approach to SRM not only ensures the capture of benefits identified through Strategic Sourcing, but it can often increase cost savings by between 5% and 12%.

 

Strategic Procurement Solutions helps clients improve their overall performance.  We do this through our 360o Supply Management Efficiency Reviews, Procurement Transformation Project Support, and Onsite Training Programs, such as Expert Strategic Sourcing™ (3 days), Strategic Sourcing for Government (3 days), and Supplier Performance Management (2 days). For information about any of these  services, please contact Info@StrategicProcurementSolutions.com

 

About the Author - Mark Trowbridge, CPSM, C.P.M., MCIPS is one of Strategic Procurement Solutions founders. His 28 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, for Bank of America (then, the USA's third most-profitable company). During his final two years with Bank of America, Mark's areas of responsibility 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 topics, with articles appearing in publications like Supply Chain Management Review, Inside Supply Management, IFPSM's eZine, eSide Supply Management, and Strategic Procurement Solutions' own Best Practices in Supply Management Journal.  Mark's  is among the top 1% Most-Viewed LinkedIn profiles.


 

"Mediation in Contractual Disputes...An Inside Look"- by Robert Dunn, MBA, C.P.M., Principal

In good faith, procurement professionals frequently enter into contracts with suppliers; confident that the contractor will perform its obligations in a timely, quality, and cost-effective manner. In the vast majority of cases, that is what occurs. But sometimes things may go wrong...

 

Any good agreement should contain language for the resolution of disputes. The best contracts often create a structured escalation path designed to resolve disputes as early as possible.  

 

The typical path usually consist of several progressive steps, such as:

 

Level 1 - The head of sales for the supplier will meet with the director/manager of procurement to discuss and resolve the dispute.

 

Level 2 - If unsuccessful, a person at or above the Vice President level of each party meets with the other to discuss and resolve the dispute. Sometimes the contract may require that this meeting occur face-to-face to give the interaction the greatest likelihood of success. Sometimes legal counsel for each party participates in this exchange as well, with various results.

 

Level 3 - Only if these meetings are unsuccessful does the contract allow Dispute Resolution move to the next level, which is either litigation (through public courts) or arbitration. Once a dispute passes to Level 3, neither side truly "wins" the dispute. A broken supplier relationship, lack of contractual performance, damaged reputations, ruined careers, and significant legal costs often accompany the decision to pursue litigation or arbitration.

 

Each of these levels is truly worthy of its own article. But this article will explain an additional stage which many companies are now adding to their Dispute Resolution pathway...that of Mediation.

 

Mediation is an additional level which precedes Litigation or Arbitration. It involves a third party who meets confidentially with the two contractual parties to review the dispute and discuss their perceived positions. Often the mediator is a retired judge skilled with facilitation capabilities designed to help the conflicting parties constructively resolve their disagreement.

While court hearings (litigation) are public, mediation should remain strictly confidential. No one but the parties to the dispute and the mediator knows what happened. Confidentiality in mediation has such importance that in most cases the legal system cannot force a mediator to testify in court as to the content or progress of mediation. Mediators should destroy their notes taken during mediation once the event has finished. The only exceptions to such strict confidentiality usually involve actual or threatened criminal acts.

 

Mediation increases the control the parties have over the resolution. In a court case, the parties obtain a decision, but control resides with the judge or jury. Often, a judge or jury cannot address creative solutions that can emerge in mediation. Thus, mediation is usually more likely to produce a result that is mutually agreeable for the parties.

 

Parties to mediation are typically ready to work mutually toward a resolution. In most circumstances the mere fact that parties are willing to mediate means that they are ready to "change" their position. The constituants are more amenable to understanding the other party's side and work on underlying issues to the dispute. This often allows the preservation of the relationship the parties had before the dispute.

 

Good mediators are trained in working with difficult situations. The mediator acts as a neutral facilitator and guides the parties through the process. The mediator helps the parties think "outside of the box" for possible solutions to the dispute, thus broadening the range of possible solutions.

 

There are two types of mediation used with regards to procurement matters in a commercial setting. The first (and most-used) type is "Facilitative Mediation"; whereby the mediator facilitates an interactive discussion between the parties and helps them to arrive at a mutual agreement. In this role, the mediator acts much like a marriage counselor.

 

A second type is "Evaluative Mediation"; whereby the mediator (in this case almost always a retired judge or attorney) asks each side to present their facts regarding the dispute. The communications are presented to the mediator, who then reviews the facts and lets the two parties know how they would decide the matter if in an actual court situation. This style of mediation is used infrequently, but can be useful in emotionally tense situations. Understanding the strength of their case before launching into litigation can be a sobering awakening for argumentative executives.

 

Disclaimer - Strategic Procurement Solutions' informative articles should not be construed as legal advice. Readers must discuss content with their own legal counsel to determine possible application to your own environment.

 

Strategic Procurement Solutions help clients in the private and governmental sectors optimize their Contracting Management practices. We work with procurement leaders and their legal counsel to develop template agreements, clause libraries and fallback language. We also evaluate contracting management processes, system utilization, and techniques. Finally, our skilled instructors train procurement audiences with onsite workshops like Strategic Contracting™ (2 days) and Innovative Trends in Technology Contracting™ (2 days).   More information can be requested at Info@StrategicProcurementSolutions.com 

 

About the Author:  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 also worked with major corporate and governmental clients in the consulting industry for the past 18 years, and was one of the founders of Strategic Procurement Solutions.   Robert has worked on major procurement initiatives in North America, Latin America, Europe, and Asia.  He is a noted author, with recent articles in eSide Supply Management and Strategic Procurement Solutions' own Best Practices in Supply Management Journal (the latter of which is now distributed to over 13,000 readers).

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