Author Archives: Charles Dominick, SPSM - Next Level Purchasing

Poor Communication = Poor Supplier Performance, Part VIII

In the last post, I described how price adjustment clauses are commonly misunderstood and end up causing pricing problems between buyers and suppliers. So, what can you do to ensure that price adjustment provisions are adhered to when math isn’t everyone’s strongest skill (especially suppliers)? Here are some tips: Write out the price adjustment method in words in your RFP and contract Include a formula in your RFP and contract Demonstrate the calculation of a new price at a pre-bid … More

Poor Communication = Poor Supplier Performance, Part VII

In this penultimate post of this eight-part series, I’m going to help you understand the subtleties of using escalation clauses. Wait.  There’s a problem already. Do you know what it is? Well, think about the term “escalation clause.”  What does that imply? That there is only one way for a price to go:  up. And, as we saw in late 2008, prices for many commodities can go down.  Way down. The last thing you’d want is for your supplier to … More

Poor Communication = Poor Supplier Performance, Part VI

After reading the first five parts of this series, it may seem that all you have to do is communicate properly and you’ll always get what you want, when you want it. Well, you will indeed avoid much of the heartburn that less educated buyers experience.  But even if you apply everything you’ve learned up to this point, there still is a risk of your expectations not being met by your supplier. You see, there is a term called Force … More

Poor Communication = Poor Supplier Performance, Part V

At the end of Part IV of this series, I talked about a reason to be nervous about a contractual excerpt such as “Seller will ship goods within 24 hours of receipt of order.”  In that post, I ranted about ensuring that 24 hours meant 24 hours and not one business day. But, that’s not all that makes me nervous about it. I also get nervous when contracts specify lead time based on shipping and not lead time based on … More

Poor Communication = Poor Supplier Performance, Part IV

While the first three posts in this series focused on specifications as the main source of misunderstanding between buyers and suppliers, there certainly are more areas of potential friction.  Fortunately, there is one skill that can help you avoid such friction. Now, when one thinks about skills that lead to better communications, the first skills to come to mind are usually speaking skills, writing skills, and the like.  Well, there is a less obvious skill set that I feel is … More

Poor Communication = Poor Supplier Performance, Part III

In the last post in this series, I wrote that a good specification was the key to avoid unfulfilled expectations from your suppliers.  And I listed a few of the many possible components of a good specification:  the product/service description, physical characteristics, performance characteristics, and compatibility requirements. And I was just getting started. Then, I said that, instead of needing a 40-page specification for every purchase, you may be able to substitute one simple thing. What is that one simple … More

Poor Communication = Poor Supplier Performance, Part II

In the first post of this series, I indicated that when a purchase fails to meet an organization’s expectations, it is often like a restaurant patron being served dog food.  This post will describe the role that good specifications have in ensuring that the goods and services that you order meet your organization’s expectations. You see, a good specification is often the difference between those purchases that go successfully and those that are rife with disappointment.  Every purchase has some … More

Poor Communication = Poor Supplier Performance, Part I

Think of your favorite restaurant. Why is it your favorite restaurant? Probably because the food and service consistently meets or beats your expectations, right? Well, imagine going into that restaurant one day.   You’re in a rush.  By the time the server approaches your table, you haven’t even had the chance to look at the menu.  You know if you say you need a few minutes, it will be at least five or 10 minutes before he returns. So when he … More

You’ve Renegotiated – Now What?

In recent months, the commodity bubble has burst and the global economy has slipped into a recession.  The prevailing procurement strategy has been to renegotiate contracts and take advantage of lower cost opportunities. But, if this recession is like every other recession in modern days, there will be a recovery and a return to economic expansion.  This means that upward price pressure will be rearing its ugly head before you know it. In the past, a popular negotiation technique in … More

Proving Yourself Should Be A Welcome Challenge

At what age do you want to retire? How old are you now? OK, so that leaves you how many years until retirement? Guess what?  That is the exact same number of years you have left to prove yourself in sourcing. I’ve met many a sourcing professional who is tired of having to prove him/herself over and over again.  But that’s the nature of the beast. No matter who you are or what you’ve accomplished, every sourcing project has an … More

The Open-Minded Sourcing Professional, Part II

It’s no surprise:  sourcing professionals in huge companies tend to produce more effective negotiation results than sourcing professionals in smaller companies. I’ve also observed that sourcing professionals in huge companies tend to occasionally be one-dimensional in their negotiation style compared to sourcing professionals in smaller companies, who have to be more creative.  Hey, the “if-you-don’t-want-to-lower-your-price-I-have-five-suppliers-begging-me-for-the-business” line works, so it is hard to argue with that approach. But what if you were in a smaller company?  How would your negotiation style … More

The Open-Minded Sourcing Professional, Part I

Adam and Eve are purchasing agents. They are introduced at a meeting of their local purchasing association. Over dinner, Eve asks Adam: “Hey, did you get that new negotiation book called ‘Getting To Yes?’” She says it is really helpful to her work as a purchasing agent. Adam replies, “No, I didn’t get it. We don’t negotiate in my purchasing department, so that doesn’t apply to us.” Imagine that conversation. It could have happened. (Actually, I still run into purchasing … More

The Path To Becoming A CPO, Part II

In Part I of this series, I shared some interesting statistics on the qualifications of today’s Procurement Vice Presidents and Chief Procurement Officers. In this Part II, I’ll share with you some additional findings on CPO qualifications. These findings were gathered by examining 13 of the most publicized CPO hirings in recent years. Specifically, these are the CPO hirings we looked at: Company | Date BP plc | 2005 Chevron | Jan. 2005 Sara Lee Corporation | Mar. 2005 Tyco … More

The Path To Becoming A CPO, Part I

The most recent Next Level Purchasing annual survey of over 1,900 procurement professionals revealed some fascinating results on many topics. One of those topics was the college education and procurement experience required to get to the chief procurement officer level of an organization. We categorized our research according to five levels on the procurement chain of command: junior buyer, buyer, procurement manager, procurement director, and CPO/Procurement Vice President. First, let’s explore how important a master’s degree appears to be as … More

Don’t Be The Sourcing Lone Ranger

Why do cost savings estimates differ from actual cost savings achieved? Often it is due to the fact that cost savings estimates are based on the assumption that 100% compliance will be achieved. But, sadly, the 100% compliance assumption is rarely accompanied by an actual plan to achieve compliance. One of the techniques used to ensure compliance is building a sourcing team consisting of stakeholders from throughout the organization. This results in more awareness of the contracted supplier as well … More