Posts Tagged ‘reciprocal trading’

Sometimes greed is not with the procurement professionals themselves, but with their business counterparts under the same roof.  Our other lines of businesses are getting desperate over meeting their sales targets, and before long, they are eyeing my supplier relationships.  They demand to see my supplier list.  They accuse procurement for not doing their jobs for them.  They want to take advantage of the suppliers’ vulnerability by pressuring them to buy from us.  I don’t think our suppliers are dumb, but it is my duty to set some records straight and to protect my relationships the best way I can think of.  I made my feelings of the topic clear in Part One, and it’s about time I share my two cents worth on what’s the best way forward.

Setting the record straight

In case there are people who start throwing the patriot card my way, I start off by stating that I am all for supporting the revenue targets of all businesses of the company, and I am more than happy to provide relevant assistance to all, but only in an organized manner in view of the limited resources I have and within my team.  In other words, I can’t handle frequent ad hoc requests from just about anyone.

Protecting the company’s best interests

Our supplier list is a critical asset of the company and it makes us what we are today.  We treat all supplier relationships very seriously and in fact we are the only department/function entrusted by the company to maintain this list.  We should not and will not share this list with other internal and external bodies solely for the basis of sales solicitation.  Possible misuse of this list may include:

1) suppliers getting confused over multiple decision makers of the company and hereby jeopardize their confidence of their contractual relationships with us;

2) individuals mistakenly sharing the list with our competitors or other suppliers hence leaking vital proprietary information that will adversely impact the company many folds over the potential sales opportunities;

3) suppliers having the wrong impression that they are forced to buy from us before they can be qualified for renewal or future business;

4) suppliers making accusations at the company that they are penalized for not buying enough from us versus their competitors;

5) suppliers using their buying power to leverage their negotiation power on us, thus demanding higher selling prices.  User departments may fear that their prices are being compromised just because they have been subsidizing other departments who are actively pursuing sales opportunities with the supplier.

Laying the ground rules

How should we then proceed? 

1) Procurement should be the mediating party since we have been trained to balance differing requirements, priorities and needs while aiming for maximum benefits of the company as a whole.  We have been impartial in the past and we shall continue to do so. 

2) Sales departments need to share with us their revenue targets, major promotional plans of any, target sectors, top 30 targets of the year, respective target sums, etc., with procurement assuring confidentiality.

3) Procurement can then work out a plan, prioritizing with the sales teams, of each target’s feasibility and next steps.

4) Sales departments should also develop a standard template for procurement to send out mailings to the targeted accounts, identifying the contact points of the businesses and stating whatever discounts or perks they can enjoy being existing suppliers of the company.

5) Procurement will remain involved in the background as in most cases the relationships with the targets lie with us rather than with the sales departments.

6) Procurement will be kept informed by the sales departments of the status, success and failure of the attack plan, so that we can log down our value-add to the sales departments and to the company.  There shall be management recognition of everyone involved over the entire collaborative process.

Needless to say, before committing to the above, each procurement organization needs to assess how much spare resource they have supporting this effort.  It does take time and diligence.  I have gotten quite substantial affirmations of the above plan in different organizations, as sales teams usually are impressed as to how the whole matter is thought through and professionally executed.  It also helps to set accountabilities for everyone involved, and not only for procurement.

Of course, to be honest, all I really wanted was to get them off our back!

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Any true strategic procurement professional will realize that today’s sourcing decisions are becoming way more complicated than before.  The supply market is shrinking because of increasing mergers and acquisitions everywhere.  Our requirements and specifications are getting so much more demanding that traditional mom-and-pap vendors are no longer equipped to service us.  To make it worse, I have been encountering pressure from vendors threatening to use their purchasing power on us, in order to gain leverage on securing our business.

How so?  They, or their subsidiary companies or business units, are also buying from my clients.   My neighboring product sales teams are knocking on my door asking me to give concessions in my buying decisions, in order for them to make a sale.  There you have two competing forces on the table, within the same company, and supposedly working for the common good of us all. 

This is where each of us may take a different stand.  I am now put in a difficult position where I am supposed to save costs for user A, while sales team B is putting pressure on me to consider the bigger picture for the company with potential revenue at hand.  Some of my colleagues choose to co-operate as much as possible with sales team B, and I have nothing against that.  What I need to ascertain is that our ethics and code of conduct should never be compromised.

Not every company has a Reciprocal Trading policy.  I personally will not give anyone preferential treatment just because of any potential benefits we can bring back.  It is not something concrete that I can put in the bag, and frankly not something I can control either. Otherwise my procurement recommendation becomes redundant.  I admit that such treatment could be well warranted, which I would recommend senior management to get procurement detached from this decision altogether, and in turn handle the whole matter in a business partnership discussion, instead of complicating a conventional sourcing exercise.

One can easily imagine the amount of sensitivity and scrutiny this could bring if the other vendors discover the reasons why they lose out.  They can sue us and charge the company of suspected corruption.  Whenever I sense potential gray areas, I need to stop and be careful of how to proceed.

The fact of the matter is that this is condoned by even the biggest global corporations that I have worked for, and I have been consulting with compliance and legal all along looking for clear guidance and answers.  There has not been a very clear answer from everyone so far.   

No matter how dignified everyone is trying to label the whole deal of reciprocal trading, the only thing I know is that it leaves a bad taste in my mouth.

I like to go with my first instincts, whenever I am in doubt.  Fingers crossed.

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