How to Be Strategic in Public Procurement and Government Contracting

By Joseph Sandor posted 13 days ago

  

strategy.jpg

It seems like every purchasing/acquisition leader I talk with (in both the private and public sectors,) as well as many or most of the practitioner-directed literature I read discusses their organization’s transformational journey. In my experience, most purchasing/acquisition organizations claim they are two to four years into a journey of radical transformation. They argue that the strategies followed by the recently departed CPO were woefully inadequate to meet the demands of the future. These radical transformations are invariably accompanied by sweeping organizational changes intended to move the organization from tactical to strategic procurement (whatever that means). Change is not only required but is almost always brutal: less than half of the current staff can make the transition. But, hey, it's tough love and only the strong survive.

Though common, this approach to reorganization and right-sizing is a delusional journey. Rather than weeding out underperformers, it only serves to diminish critical supply knowledge, create bogus savings accounting, and reduce morale. Moreover, as a static, zero-sum game, the transformation is unvaryingly focused on a single company: Suppliers are not included in the vision except as sources of price reduction despite the lip service to total cost of ownership, collaboration, and improved asset productivity.

Here’s a prescriptive list that contrasts the differences between tactical and strategic. It also defines the distinction between collaborative and combative supply management transformation. Although hard to sell to senior leadership and even harder to do, right-hand column activity and behavior is the only way to promote genuine supply network transformation that can create and deliver absolute, sustainable competitive advantage.

Zero-Sum – Tactical/Operational

(Moves network costs with little, no or negative revenue impact or network profitability. Negotiation inherently combative)

Non-Zero-Sum – Strategic

(Eliminates or reduces network costs improving network profitability and / or enhancing revenue. Problem solving inherently collaborative)

Combative to, at best, cooperative (Porter)

From cooperative to collaborative (Deming)

Negotiate from a power dominated position

Create opportunities through mutual dependence

Efficient “rights” Quantity, Place, Time & Price

Effective “rights” Thing & Cost

Extend Payables

Reduce waste & network TCO

Combative negotiations

Collaborative problem solving

Hold harmless clauses

Reduce lead-time & enhance flexibility

Transferred warranty obligations

Improve manufacturability & design

Imposed performance fines

Accelerate continuous improvements

Extracted concessions

Increase speed to market

Redundant audits

Advance innovation

Vendor Managed Inventory

Reduce network inventory

Tactical Focus – assign / affix guilt

Strategic Focus – problem solving

Price

TCO

Auctions & bidding

Cost models

Arms-length & Punitive

Collaborative

Poker chip (delivery, quality, inventory, admin)

Game changer (NPD, CI, interdiction & innovation)

Efficiency

Effectiveness

Avoid risk

Monetize risk

Firm optimization / inter-firm competition

Network optimization / inter-firm collaboration

Vendor Compliance

Supplier-driven Innovation

Procedures and standards

Relationships

Vendor performance measurement

Supplier development (enhance 360º performance)

Relative

Absolute

Save

Prevent

Quantitative Goals

Processes & Leadership


Image Courtesy of Pixabay

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