One of the more curious outcomes of the times we find ourselves in has been the strangely perverted priorities I see people setting themselves. At a time when all the economists in the world tell us we’ve seen nothing like this since the 1930s, you’d think we’d all be preoccupied by the really important things in life.
Instead, it seems that the trivial issues of the day are taking precedence. Look at the headlines in most major Western newspapers and what will you find? Swine flu, political scandal and popular talent shows that may be popular but contain little talent.
Such misplaced concerns have found their way into most walks of purchasing. A recent conversation with a contact of mine was dominated by “air rage” – not the sort brought on by too many beers on a charter flight, but by the extortionate prices for business travel that are forcing him to travel premium-cattle class to the US. I hate paying extortionate sums for my colleagues to collect frequent flyer points they never use, but I haven’t had my travel budget cut (yet) so am still able to turn left as I get on board. I’m told you can turn right, but I’ve never tried.
Later, we got on to discussing some huge contracts that we had both let at about the same time last autumn. The market we were in is dominated by three or four major players, they’re selling equipment built about 30 years ago, the demand last year was outrageous and they made hay while the sun shone. Well, they would, wouldn’t they?
I shared my plans to go back and renegotiate; the worst outcome would be I leave disappointed but with honour intact. He maintained that a contract is a contract, missing the point entirely that a 1 per cent saving on that deal would allow him to buy a whole aeroplane – and probably the airline, too given their current state of affairs, thus solving his travel woes at a stroke.
I had a similar conversation with my boss. She comes from a background rich in moving things around a lot. As such, she’s keen we take on responsibility for moving lots of things around. I’m not averse to handling “fulfilment” (what used to be logistics, and before that distribution), but right now it’s worth the square root of diddly squat to us.
I tried to move the conversation on to bigger issues, such as looking much further ahead. I think it might be time to start buying long in selected categories. Put simply, there is an awful lot of an awful lot of stuff around right now. Steel mills shut in with stack yards full, oil tankers full to the brim queuing outside ports, consultants working short weeks and, a sure sign of desperation, my local supermarket selling three for the price of one on packs of barbecue meat.
So maybe it’s time to buy ahead a little. The risk is the market falls further, and it’s probably a fool’s game to call the bottom because you only see it later. However, summer’s coming so I filled my freezer on the basis that four packs of meat for the price of one seemed unlikely. So what about some big bets on a couple of major categories?
No, it seems it’s got nothing to do with long-term cost planning, make-or-buy strategies, leveraging our balance sheet, or creating and capturing competitive advantage. She wants to focus on the warehouse operation because her operations budget has been cut. There might just be a whiff of opportunity to shave a few percentage points off an already marginal business.
But that’s a whole lot more important than focusing on the big stuff that could allow us to buy the whole outsourced operation. Don’t confuse me with the facts, I’ve already made my mind up.
Jim Frankley (not his real name) leads a purchasing function in a Fortune Global 500 company. He can be contacted at email@example.com