Pretty much each & every one of us (as individuals and organisations) now make a conscious effort to do our bit for the environment and “Go Green” wherever possible. Not only do our “Go Green” actions benefit the world we live in and potentially reduce costs for us but also makes us feel good inside – giving us that feeling that we, as the superintendents of our ecosystem, are making a difference.
I’m sure that most of you will have already put practices into place within your home environs with regard to recycling and saving energy by switching to energy saving bulbs and turning off power that is unnecessarily left on stand-by, but have you considered instilling comparable measures within your logistics Supply Chain.
As our attitudes towards the environment changes, what methods could you implement to offer a “Greener” Supply Chain solution?
Here we take a look at 5 ways which could improve your Supply Chain’s eco-efficiency:
1. Take a view from a different prospective of your company and deliberate your current actions. Do you consider your company to already be embracing a good standard of eco-efficiency? How can we expect others that we collaborate with to hold and preserve a high standard of “Go Green” ethos when we, ourselves, do not follow.
2. Evaluate your current use of machinery and packaging and assess where you can make reductions by introducing more energy proficient equipment and the use of recycled packaging products as well as decreasing the volume of packaging your items require. Recent studies indicate that over 50% of goods on store shelves are packaged in recycled paperboard.
3. Use a comparison site to review your business energy prices and see where you could potentially make savings.
4. Inspire your staff to promote green resources and infuse systems which encourage a “Go Green” attitude throughout your workforce. Why not implement an “idea” box for your employees to make suggestions of how & where they feel changes could be made to reflect “Greener” processes.
5. Restructure & modernise your logistics to minimise emissions. Can you make better consumption of your vehicles by combining the shipments of more than one client on a particular route in each load?Could you deliver a higher quantity of resources per load to reduce your truck movements? Contemplate the use of low carbon transport such as rail, barge or sea together with hybrid vehicles for means of transport by road. Full information is available for advice on methods to “Go Green” within your business transportation methodologies via http://www.epa.gov/smartway/
Being environmentally friendly should be high on your list of priorities in the 21st century, but without the knowledge of how to shape a “Greener” supply chain, you can’t realistically or practically reach your end objective. Investigate how you can co-operate with other companies, within your circle of business, how working together could result in the reduction of waste. Details on how a business can contribute to a more sustainable economy can be sourced via the UK Government website.
This guest blog was written by Marcia Thompson and originally posted in the Procurement Professionals LinkedIn group. It has been redistributed with their permission. Read more on Procurement Professionals LinkedIn group at: http://linkd.in/1uupe8p or Twitter: @ProcurementProf
Many years, in a restaurant in Ankara, Turkey, I made a faux pas when I was offered tea, or çay in Turkish. I replied in the little Turkish I had learnt. What I said was “no tea”, which I meant as no tea for me thanks. But apparently this was interpreted as “there is no tea”. This caused major confusion as saying there is no tea in Turkey is the same as saying there is no pizza in Italy or no vodka in Russia. The more the waiter tried to convince me that yes, there was tea in his restaurant, the more I said “no tea”. It took a few minutes to sort it out and my friends, the staff and I laughed about it.
Whilst this example of a language misunderstanding was minor with no harm done, how many mistakes are made on a regular basis without people being aware. Compounding this lack of awareness is “Google Translate” where people blissfully assume that the translation of words is correct and that the other party to the communication meant to say those words.
According to Wikipedia, effective communication occurs “when a desired effect is the result of intentional or unintentional information sharing, which is interpreted between multiple entities and acted on in a desired way.” (source – http://en.wikipedia.org/wiki/Communication). Now I have to stop and wonder if readers with English as a second or third language – for the purpose of this article, I will say “ESL (English as Second Language) readers” – can understand that sentence. In “plain English” (English that is easily understood), effective communication is when the message received is the same message as the one that was sent.
Lost in translation
“Google Translate” is a translation tool that should be used with some caution. It ignores tone, regional differences, gender bias, perception, history, jargon, abbreviations and noise, et cetera. Basically, all of these factors filter the information received and are potential obstacles to effective communication. I deliberately chose noise as the last factor.
Many ESL readers, and even some native English readers, would read “noise” as something we hear but actually “noise” can also be used to describe irrelevant information. The Oxford English Dictionary defines one meaning of noise: “in non-technical contexts: irrelevant or superfluous information or activity, esp. that which distracts from what is important” (source: http://www.oed.com). Interesting that this definition uses “esp.”, which could create some confusion, or indeed “noise”. Esp. could be interpreted as an abbreviation for Espana for Spanish readers and if you google “esp.” extrasensory perception is ranked the highest definition. In a google search for “what does esp. stand for: http://www.abbreviations.com/serp.php?st=ESP.&p=7, there is a list of 158 meanings for esp., but the one that the Oxford English Dictionary meant, “especially”, is listed on the 7th page. It could be a real challenge for ESL speakers to work out something as simple as this one abbreviation is (for native English speakers) and it is a great example of how Google Translate, or even Google Search, can’t be relied upon to assist with complete understanding.
English is the most commonly used language for business purposes between people from different countries. As more interactions and transactions are carried out, esp. (J) online, it can be easy to assume that everyone that is communicating in English has a common understanding. Even native speakers can have trouble communicating with each other.
So what is the solution? Well, basically all of the parties to the communication need to check that they have understood the communication. It is better to do this sooner rather than later. How depends on the type and purpose of communication. In Procurement, it could be that the supplier needs to demonstrate they have understood the specification of a good or service. This could be a sample, photo, drawing or anything that clearly shows they are delivering as required by the specification.
A second opinion could be helpful, for example someone else reading a contract to ensure understanding of the terms and conditions. Calling the other party to discuss the contents of a written document can also be useful. Whatever the situation is, don’t assume that Google Translate will be able to translate your words 100% effectively. There are many words in English that have two or more meanings. Native English speakers are used to it and don’t realize how many there are.
As an example, I am going to leave you with my interpretation of the word blue:
colour like as the sky, feeling sad, fight or argument, genuine (as in true blue), mistake, the name of someone with red hair (also known as Red), and royal (English royals are said to have blue blood).
If you’re a procurement professional, then you probably hear the word collaboration more than you’d like to. Collaboration has rightfully earned its place in the hall of fame of executive buzzwords. But as most practitioners know, the reality of collaboration is often unglamorous.
So why this gap between the ideal world and reality? One root cause is that very few people actually follow collaboration best practices. The side effects of ineffective collaboration are further magnified when different departments within an enterprise have to work together, which is often the case when procurement is involved.
The truth is that collaboration works if and only if the answer to all of the following questions is a resounding YES:
1. Is collaboration necessary?
Too often, committees get formed and the overhead of having to communicate to several (overextended) people often outweighs the benefit of their participation. Ask yourself whether you really need others’ help or input.
2. Does everyone know what they’re doing?
How many times have you been in a meeting where half the participants look disengaged or confused? Collaboration is an active process and everyone needs to be all in and know what they are responsible for delivering. And this needs to be true at every point throughout the project lifecycle.
3. Is the end goal clear to everyone?
Often, collaborative projects kick off with a grand vision, but weeks later, the harsh realities of having to deliver by a certain deadline often muddle that vision. This causes confusion (at best) and severe productivity loss and frustration (at worst). Ask yourself whether you know where you’re going. If you don’t, then the odds are that you’re not the only one.
4. Does everyone know what the action plan is?
This is especially critical to complex projects with multiple stakeholders from various departments (which covers most Procurement projects). This type of project requires constant reallocation of resources and more than a few last-minute changes to the grand plan. Has the entire team been made aware of these changes? And more importantly, does the entire team know what the plan of action even is?
5. Are we actually using the right tools?
Despite the recent rise of collaboration and social media tools, most procurement professionals rely on email and Microsoft Excel to manage an increasing number of highly complex projects. Whatever the tool, it must be easy enough to understand at first or second glance, and it must add value immediately. The benefits of leveraging social technologies to collaborate effectively are huge.
A recent McKinsey study titled The social economy: Unlocking value and productivity through social technologies makes the case that social technologies can aid collaboration and improve the productivity of interaction workers by 20 to 25 per cent.
Bottom line – collaboration can be incredibly valuable and almost always results in a superior work product and better outcomes for all if practiced correctly. Next time you start a project, don’t forget to review the five questions above!
If you’re a student of negotiation (and, as a procurement professional, how could you not be a student of negotiation?) then you should have a well-thumbed copy of Richard Fisher and Bill Ury’s “Getting to Yes” within easy reach on your bookshelf. Fisher and Ury literally wrote the book on what is termed “principled” or “interest-based” negotiation (often simplified to “win-win” negotiation). When asked “what’s the best way to negotiate?” most academics will point you to this approach.
There are five central guiding principles to this approach.
Separate the people from the problem. In other words, seek to decide issues on their merits rather than the emotions, fears and egos of the negotiators
Focus on interests, not positions. Fisher and Ury assume that almost all disputes can be resolved with principled negotiation because, when you cut through the positions adopted by negotiators to their actual interests, they are often more easily reconciled
Invent options for mutual gain. By working creatively and collaboratively around the interests, negotiators can achieve outcomes that deliver gains to both sides.
Insist on objective criteria for decisions. The classic examples quoted here are the purchase or sale of something like a house or a car, where there will be plentiful benchmark data available pointing to the “fair” price for the item being traded or an independent appraisal can be carried out.
Know your BATNA (best alternative to a negotiated agreement). Your BATNA is the best outcome you can achieve if you don’t do this deal. If the proposal on the table is as good as or better than your BATNA, the deal is worth doing. If it isn’t, it’s not.
There are definite advantages inherent to this approach. If you genuinely have scope to negotiate this way you can engineer “all gain” deals which add value to both sides. In some cases, correct and thorough preparation on both sides and conscientious commitment to maintaining an atmosphere of curiosity, creativity and collaboration can result in deals which represent increased value to both sides and are the foundation of strategic partnership in business.
In a previous Procurious article I wrote that “win-win” is a myth, so you may be wondering how I reconcile that view with the idea of engineered, all-gain deals. “Win-win” is a term that is bandied about so much it has lost all meaning. All too frequently it’s used by one side or the other when they’re winning something, but haven’t given any real thought to what the outcome does for the other side. Engineered, All-Gain deals are only possible when both sides are genuinely curious enough to understand the other side’s underlying interests and candidly share their own. Sharing that information makes both sides vulnerable to the other, so an environment of trust and authentic commitment to the long term is vital. Business relationships like that are like marriages, and it is no more appropriate to talk about who won what in such a relationship than it is to call a winner in a marriage.
So is interest-based negotiation the best way to negotiate? My answer would be “sometimes”.
Let’s start by looking at this idea of calling interest based negotiation “principled”. Does that imply that all other kinds of negotiation are unprincipled? That’s a dangerous value judgement to make! Let’s use an example to explore this question. “Joe” is buying a house.
Joe’s budget is £500,000
The asking price for the house is £510,000
The vendor (unbeknownst to Joe, of course) needs £455,000 from the sale
The identical house next door sold last week for £489,000
Getting to yes-style, “principled” negotiation theory dictates that Joe should work with the vendor to find the deal that best suits both their interests and is fair to both, possibly taking market benchmarks into account. Under these conditions, you might consider that a settlement around £490k is fair and principled.
Instead of doing that deal, Joe uses an array of questioning skills, market knowledge and tactics to establish that the vendor could do the deal at £455k and wants money fast. Joe then uses that information to apply pressure on the vendor to close the deal for £460k, thirty thousand pounds less than the “objective”, “fair”, benchmark price. Recognising that he’s never going to see the vendor again and therefore there is no value in a warm or trusting relationship, Joe uses every available lever to push the vendor down to a price that is closer to their walk-away point than the middle of the range.
Joe’s negotiating methodology is the antithesis of Fisher and Ury’s approach. He deliberately makes the person the focus by using the pressures on the vendor to create leverage. He focuses that leverage entirely on meeting his own interests to the greatest degree at the expense of the vendors’ and makes no attempt to come up with options for mutual gain. He ignores the objective criteria, focusing instead on the subjective pressures in the vendor’s head. Finally he closes a deal, keeping the lion’s share of the value in the deal for himself. So does that make Joe unprincipled?
If you’re tempted to say “yes”, ask yourself why. Certainly Joe is unlikely to enjoy a warm relationship with the vendor after the deal but why should that matter? He’s never going to see the vendor again. So if you did answer “yes”, is it possible that you just don’t like Joe? Maybe he seems greedy. Maybe you have some sympathy for the vendor. Viewed in isolation, Joe’s approach might seem aggressive and selfish. But let’s say Joe has a family, ask yourself this; who has more right to Joe’s £30,000; the vendor or Joe’s kids? They can’t both have it. Viewed that way, you might conclude that by pushing the vendor to accept the lowest possible price and saving himself enough money to put one of his kids through University without debt, Joe’s actions are entirely principled.
Life (personal and business life) is complex. We all balance complicated and often conflicting principles and duties and it is tempting, in the stress of negotiation, to lose sight of who’s interests you are there to serve. As a matter of principle you owe yourself the best deal possible. You owe your stakeholders the best deal possible. You owe your counterparty only what the circumstances of the deal at hand dictate that they are due, at the lowest possible cost to yourself.
Saying “It’s always best to adopt an interest-based approach to negotiations…” is correct in academic terms, but in the real world you have to qualify that by adding “…when you can”. As a negotiator you have other options available to you and they will be valid some of the time. In selecting which approach you adopt, I offer you a single guiding principle that works for me;
“Adopt the approach that will deliver the greatest benefit to yourself and the interests you represent”.
If circumstances allow an interest-based approach, this one principle will guide you to that approach. If not, this principle will help to focus you on doing what is necessary.
This is the fourth article in a fortnightly series from Gordon Donovan.
Captains’ blog (well there is a space theme to this one….)
You may have read recently about NASA issuing an RFP to resupply the international space station.
It reminded me of a couple of quotes from John Glenn:
“I guess the question I’m asked the most often is: “When you were sitting in that capsule listening to the count-down, how did you feel?” Well, the answer to that one is easy. I felt exactly how you would feel if you were getting ready to launch and knew you were sitting on top of two million parts — all built by the lowest bidder on a government contract.”
“As I hurtled through space, one thought kept crossing my mind – every part of this rocket was supplied by the lowest bidder.”
In a previous article I talked about the supplier selection process and the use of cultural fit rather than the traditional supplier selection methods, for some projects. I wonder how they would cover the cultural issue with this one. Would Romulans and Klingons be prohibited for instance? Would the Jedi be able to use the force to deliver the goods?
This leads us nicely to an article about the draft report into tenders for the Australian government.
In summary the article and report states that “Tender documents have traditionally been written prescriptively and with an overarching focus on value for money. While risk management and value for money are both important considerations, too narrow a focus on these factors can constrain choice, innovation and responsiveness in the government-commissioned provision of goods and services.”
Will this lead to a change in evaluation criteria in general for use of tenders, will this lead to more thought about the way of interacting with the supply market in general? I wonder what innovations NASA could tap into?
On the subject of evaluation criteria a recent blog article by Kelly Barner highlighted that sometimes trying to do the right think in evaluation (in this case diversity actually backfired. She stated that:
“In 2013 the Massachusetts State Lottery Commission awarded a contract for $5 million in advertising services. Like many public sector agencies, the lottery commission has diversity targets and required that a portion of the work be sub-contracted out to a minority- or woman-owned supplier.
The lottery commission evaluated all bids on cost and presentation as well as the diversity requirement. The contract was awarded to a firm that did not earn the highest score for cost or presentation but did commit to sub-contract 0.24 percent of the contract’s value, to a woman-owned supplier. The firm that earned the highest scores for both cost and presentation was, itself, a certified woman-owned business and therefore did not commit to sub-contracting work to another business.
Had that company been awarded the contract, 100 percent of the $5 million would have been awarded to a diversity supplier that also scored highest in the price and presentation criteria, and the state would have gotten a better result for less money.”
There has been a rash of benchmarking reports released recently:
More and more companies are addressing sustainability to align with their business goals
Company leaders and all others increasingly see sustainability as a top CEO priority.
Companies’ current approaches to reputation management vary by industry
The reputation-management activities viewed as most important are not necessarily the most pursued
Sustainability ‘leaders’ set themselves apart through target setting and a clear strategy
Organizations excel at creating a culture and direction for their sustainability programs, but they struggle with elements of execution.
The last point on the Mckinsey report talks about creating a culture which brings us full circle back to where we started, and to round-off this piece I came across this article from Procurement Leaders.
In it Steve talks about creating a cost conscious culture, which reminded me of something my organisation discussed earlier this year at our CPO forum. How to create that culture, Chris Lynch the CFO at Rio Tinto gives his 14 points here.
Strangely couldn’t find any mention of interplanetary co-operation on either of them…
For readers in Australia, I will be attending the CIPS Australasia conference in Sydney on 15-16 October and if you wanted to catch up please get in touch via the usual channels and I’ll be delighted to grab a coffee. Alternatively you can follow me on Twitter as I’ll be live-tweeting the highlights during the conference.
As ever you can subscribe directly to the sources I have identified here (nothing is my copyright), and if you wanted to discuss please feel free to contact me via Procurious, or follow me on Twitter.
Fitness trackers are proving big business; if you need proof, just know that the likes of Nike, Sony, Fitbit, and Samsung have already jumped onboard the somewhat profitable activity train.
The Jawbone UP24 is another from this particular stable, in so much as it’s an activity tracker designed to be worn on the wrist.
Design and appearance
The Jawbone UP24’s unobtrusive nature makes it perfect for those just dipping their toe into the activity tracker waters. If you’re scared of making a statement, and instead are looking to make small, gradual changes to your lifestyle, then this could be the fitness band for you.
For the fashion-conscious among you, the Jawbone UP24 is available in a variety of colours – namely: red, navy blue, lemon lime, onyx, persimmon, and pink coral.
A selection of sizes (small, medium, and large) ensures you’ll get the best fit – there’s not much of a difference in weight between the models either. The UP24 weighs in at 19g, 22g, and 23g respectively.
The band itself is made out of toughened, textured rubber. And we had no concerns when it came to wearing it for long periods of time, as the rubber happily possesses hypoallergenic qualities (skin irritation be gone – hurrah!)
Charging is achieved via a 2.5mm connector (think headphone jack in all but function) – this isn’t your standard USB charging cable. But you’re only looking at around 80 minutes for a full charge when connected.
How does it work?
The UP24 couples a Tri-axis accelerometer with some natty algorithms to passively track and quantify your steps, distance, active and idle time.
By taking into account your age, gender, height and weight, the band can also calculate the number of calories burned during a period of activity.
The band itself tracks your movement and sleep, but elsewhere the UP app will keep tabs on your meals and mood.
This is Jawbone’s second activity tracker – the original Jawbone UP lacks the newies’ Bluetooth Smart syncing (useful for viewing your data in real-time).
A lack of built-in screen means you’ll still be reliant on your mobile – but you’ll likely bump into a lamppost if you’re constantly distracted/keep-checking your wrist. Suffice to say, this omission isn’t exactly a deal-breaker. Plus, the band doesn’t rely on an ever-present connection – you can happily go about your business without using your mobile as a crutch. When you get the itch to analyse your movements, simply make sure you’re within reach of your Bluetooth-enabled device and press the button on the band to sync all recent data.
Currently none of the fitness bands in the marketplace offer any form of location-tracking. If you’re after a solution that plots your run/route, a GPS running watch may better serve your needs.
In terms of record-keeping, the app puts in a sterling effort. Your steps (or progress towards the daily goal if you want to think of it that way) are displayed in the form of a helpful chart. Plus you can deep-dive to get a better look at specified time-periods, should you so wish.
Sleep is also displayed in this way – the chart will break your slumber down into heavy/light periods, duration, if you woke at all, and how many sheep you counted before nodding-off…
A little encouragement goes a long way… The UP app offers-up daily recommendations to help encourage healthy living. Whether these be around water intake, reminders to go to bed earlier, or you’ve just been inactive for too long. The band can be programmed to deliver vibrating reminders, which is useful for encouraging you to get up from your desk, and give your legs a shake. Coupled with the band, it’s like having your very own motivational speaker on your wrist…
The iOS version of the UP app also allows you to track caffeine.
If you already use apps like RunKeeper, MyFitnessPal, etc. you can import data into the UP app and delve into the minutiae of your activity.
I took the UP24 band along with me to Seville. In such muggy climes it would’ve been foolish to do ‘too much’, but in the gaps between siesta and a hundred mouthfuls of tapas I managed to put in more than my recommended daily average.
During my tenure with the Jawbone UP24, news of a significant update was announced. The update brings with it increased battery life (a full 14 days – up from the 7 days fresh out of the box). Updating the band will erase all current activity mind, so make sure you’ve recently synced your Jawbone before carrying it out.
Like what you’ve heard? Price-wise you can get your hands on the Jawbone UP24 for around the £105 mark in Europe.
This is the third article in a fortnightly series from Gordon Donovan in which he ponders ‘is now the time to be reasonable?’
One of the banes of contract is the term “reasonable”. For many of us the first time we have been introduced to this concept is via Carlill v Carbolic smoke ball when one of the judges (Lord Justice Lindley) suggested that:
“Another meaning, and the one which I rather prefer, is that the reward is offered to any person who contracts the epidemic or other disease within a reasonable time after having used the smoke ball”
Springing into the 21st century we have now got contractual terms that says reasonable or best endeavours, but what does this mean. Recently I came across a couple of decisions and pieces which seek to put some further rigour around it.
First is an article in Supply Management that seeks to understand what a “reasonable “notice period for termination is.
This case states that a reasonable period would be subject to 5 key principles namely:
each decision must be made on its own facts;
what amounts to “reasonable notice” should be ascertained at the time at which the notice is given;
consideration should be given to the general circumstances and practices within the relevant trade;
any specific circumstances existing at the time of the contract should be taken account of;
the degree of formality in the relationship is a relevant factor.
Next was a case in Australia that made it to the high court. The case centred on a gas supply agreement. The agreement obliged the sellers to use “reasonable endeavours” to make available a supplemental maximum daily quantity of gas.
The court outlined three observations about reasonable endeavours clauses in general:
they are not an absolute and unconditional obligation.
the extent of the obligation is conditioned by what is reasonable in the circumstances.
some contracts with a reasonable endeavours clause contain their own standard of what is reasonable
In a couple of recent articles a lawyer friend of mine has written about the differences between nest and reasonable endeavours (in Australia there does not appear to be any practical difference between the meanings of these terms).
And in this article she goes onto discuss a specific case which gives us the following learnings
The words “reasonable commercial endeavours” mean that a party is obliged to take steps reasonably available to it to put it in a position to fulfil the obligation
If the party does take steps, but is unable to fulfil the intended outcome of the clause, the clause does not require that the party go any further
So what does all this mean?
You need to be specific rather than relying about the criteria of the obligation and how the clause should be followed (describe an example of the steps required maybe?)
Think about how changes in market conditions or the commercial landscape will be dealt with
If you are going to use best or reasonable then don’t use a ‘reasonable endeavours’ clause AND a ‘best endeavours’ clause within the same contract. Pick one set of terminology and stick with it.
Above all, early engagement with the legal team is important to help in managing the risks that come with this.
In other words you have to know what you want, what you really, really want! And while you’re at it, refer to this article in Supply Management…
As ever you can subscribe directly to the sources I have identified here (nothing is my copyright), and if you wanted to discuss please feel free to contact me via Procurious, or follow me on Twitter.
In this first part of a two-part article, Hamish Petrie – former VP of People and Communications for resources giant Alcoa – offers advice to professionals at all stages of their career by encouraging the use of ‘career anchors’.
Hamish currently writes for the Business Times in Melbourne. Read more about his story here.
Career planning discussions start at an early age now during high school years as young people struggle with the question about what they want to do with their lives. This is an impossible struggle as no one can conceive how seemingly minor events will change their lives.
When I first started working as a shift metallurgist in a small tin mine on the west coast of Tasmania, I could never have conceived that 32 years and 20 jobs later, I would be sitting in a corner office on Park Avenue in Manhattan as Vice President of the world’s largest metals company. Life is full of twists and turns and chaos, so how can you prepare yourself to manage your career?
Today, there are some generally accepted models for career planning that can be very helpful in starting the thinking process about your career. Generally, these models have four steps that include knowing yourself and your life priorities, exploring alternatives, deciding on a direction and then acting to implement this plan. The very first step in determining your life priorities is the most important, and it can be the most difficult. Aside from thinking about your personal values and strengths, it really forces you to think about what sort of job design and people interactions suit you the most.
While working at MIT’s Sloan School of Management in the 1970’s, Professor Edgar Schein developed the concept of career anchors, where the anchors represented an amalgam of personal values, talents, and preferences. These anchors shape the decisions that you will make about what is most important to you, in both your career and life.
This model has evolved now to define nine career anchor themes including technical or general management competence, autonomy, security, creativity and lifestyle. When I reflect on my career, I lacked the specific technical competence for any of my last fourteen jobs so it is very obvious that my career anchors were creativity and general management competence. Luckily, my family supported me with the frequent relocations necessary to take on each new career opportunity. The key outcomes of analysing your own career anchor is that you are most likely to be happy and satisfied when you can work in a job which is aligned with your personal anchor.
If you are on the flip side of this process, where you are making decisions about candidates for a job, then it is well worth exploring each candidate’s career anchors. Technical competence is very important in some jobs, like brain surgery, but for many jobs, it is not the most important factor, so taking a risk with a candidate can be very rewarding. Luckily, I had many bosses who were prepared to take a risk with me although I lacked specific knowledge about their job.
Have you ever looked at all the perfectly good, almost brand new cars on the forecourt at a car dealership and wondered where they came from? If you haven’t noticed what I mean, let me give you an example. If you search a certain Prestige manufacturer’s website for an “Approved Used” example of their best-selling model you’ll find you can have a choice of around 200 cars, all under six months old with around five thousand miles up, priced 15-20 per cent lower than the cost of an identically specified brand new car. So who are all these people who buy brand new cars and return them before the first service is due? Someone has to be losing money here, right? Or is something else happening?
A friend of mine used to work for a company that had a particularly odd company car policy. He had, at any given time, two brand new premium brand cars on his drive. He would keep them for three months or six thousand miles and, when either of those milestones was reached, drop the car off at the dealer and pick up another one. Coincidentally, my friend’s employer was a wholly owned subsidiary of the car manufacturer whose products he drove. See where this is going?
So here’s a question; why would a car manufacturer build cars to just to run them themselves for a few months and sell them at a big discount?
The answer, if you haven’t guessed, is to maximize the margins they can make on all the cars. The manufacturer makes a decent margin selling the car at the “nearly new” price. If they didn’t, they stop making so many cars. But they need to sell cars at the “brand new” price point for two reasons. Firstly, because there are people who will pay it (this is particularly perverse when you consider that those people typically have to wait for the car they ordered to be built rather than drive a car away from stock). Secondly, the existenceof the “brand new” price point gives the “nearly new” buyer the satisfaction of feeling they got a great deal. If the narrative in the buyer’s head is something like “Wow! This car is basically brand new and I’m getting 17 per cent”, they will be satisfied. If that buyer doesn’t believe that they are getting a great deal, they will push harder for even deeper discounts. The price of the new car acts as an anchor – setting the expectation of the buyer and offering them the satisfaction of a deal if they secure a discount on that price.
Why does this matter to us procurement folk? Well, it turns out that anchoring is one of the oldest and most effective techniques in negotiation and the processes, technologies and strategies we have adopted have made us extremely vulnerable to it. To understand how, it helps to revisit the basics.
Even the simplest negotiation has a range of possible outcomes. The buyer comes to the table with a maximum price that they are prepared to pay. The seller comes to the table with a minimum price that they are prepared to accept. These are their respective walk away points. Be clear on this; your walk away point is your worst case scenario deal. You would do that deal, but it represents a bad day at the office. What you really want to do is get the best possible outcome, which, in a simple price negotiation is the deal as close as possible to the other person’s walk away point. Too many buyers lose sight of this, and one of the reasons for that is the extent to which they become anchored on the seller’s price. When that happens, the buyer stops thinking about how they are going to get to seller to accept the lowest possible price and starts thinking instead about how they are going to get the Seller to come down to a price they, the buyer, can live with. Instead of focusing on getting more, they’re relieved to get just enough.
Procurement’s reliance on the tender process makes us particularly vulnerable to this. We offer the seller the opportunity to put their price on the table first and they gladly accept it. When the proposals come in they’re typically more than the Buyer wants to or can pay. So the buyer’s goal becomes to secure the best supplier at a price they can live with.
Procurement people do a lot of benchmarking. Again, this process can be extremely damaging if you fall into the trap of benchmarking un-negotiated prices. If you assume that all bidders open with a price that is inflated to give themselves room to move and offer you “deal satisfaction”, then the “benchmark” price may merely be least ambitious opening position. I know plenty of buyers who have been happy with “saving” 5 per cent by getting the highest quality bidder to contract at the price of the lowest quality bidder. I’ve seen that change in price described as a cost avoidance saving of 5 per cent. But if, as is perfectly possible, the successful bidder’s walk away point was 10 per cent lower than their opening bid, then the truth is that the buyer overpaid.
How, then, do we combat this? Here are three simple steps;
Get them anchored on YOUR price.
Put your price on the table first. You will get more from your negotiations if your vendor is lying awake at night wondering how they’re going to move you from a place where they can’t close the deal to a place where they’re getting just enough to do a deal.
Some buyers will feel that, by opening the negotiation and putting the lowest price they can imagine the seller taking on the table first they will make themselves vulnerable and they are right. If you open your negotiation at the lowest price you think the seller will accept, you will probably end up paying more. Firstly because your assumptions will probably be wrong. Typically, negotiators (on both sides of the table) underestimate how much room the other party has to move before they reach their walk away point. Go with your best guess and you’ll probably open at a price that is better for them than their walk away point, and any concession you make from that opening will move you closer to your walk away. The answer is to open your negotiation at a position you know they can’t do. But that’s another post.
2. If they open first, don’t anchor on their price.
Their opening position typically has nothing to do with their walk away point. If they are any good; they have chosen their opening position based on their understanding of your walk away point. They should put a price on the table that they do not believe you can do, because they want you to be relieved when they offer you a deal that represents just enough for you. So ignore their first offer and make your extreme opening proposal. Anchor them on your best outcome.
3. Play a different game.
Negotiation academics call this style of negotiation “positional” negotiation. In a single variable negotiation (e.g. when you’re only talking about price), the only strategy available to you is to negotiate this way. You have nothing to trade but the other party’s satisfaction. If you want to negotiate differently, accept that you will need to find other things to trade.
In an interest-based or collaborative negotiation, you prepare by figuring out both parties’ interests in the deal and use this information to consider the full range of negotiable variables that could be brought to the table and traded. Identify the things you believe theyvalue that cost you, comparatively, less. Identify the things you value highly that you believe cost them, comparatively, less. Finally, identify the things that are of equal cost and value to both parties. For example, if you know that your counterparty needs to book a big deal before their year-end, you may choose to make timely contract signature and (depending on how they choose to account for deals). Contract duration variables in the negotiation because they are things that cost you nothing, but are key to the deal meeting their interests.
Preparing and executing an interest-based negotiation is not something you can do ad hoc. If you believe that this is going to be the appropriate strategy to help you get the most from the deal, you need to consider how you position, open and leave room to trade on all the conceivable variables in your sourcing process. There are four distinct negotiating strategies available to you. The details of each, and the framework for assessing which is appropriate and when, will be the subject of a subsequent post.
Finally, what good is this going to do you next time you go shopping for a premium branded German automobile? Think about preparing differently.
Start by checking out the prices of almost new, ultra low mileage examples of the car you want to buy on the dealer forecourt and use those as the benchmark price for a new car. You may not get the new car at that price, but you will get more than you thought possible.
This guest post was penned by Sarah Robey. Sarah represents a UK-based logistics finding service.
Making the magic happen
The 22nd European Athletics Championships in Zürich last month was a splendid success, both in terms of attendance and their overall social goals. The CEO of Zürich 2014, Patrick Magyar, said that in the final analysis they managed to increase children’s and young people’s interest and participation in athletics. Equally important, at least from a financial perspective, the games were an excellent opportunity to increase the visibility of Zürich in general, and assist in the marketing of the 2000 year old financial centre as a tourist destination and as a place of business.
As you surely know, staging an event such as this with world-wide aims and aspirations is no small feat of logistics. Six large evening and afternoon events, ten stadium sessions (and just shy of 81 per cent of sold out at that), six-figure crowds at the road races and a City Festival with nearly a quarter million attendees – Zürich 2014 was no small exploit, and the organisers should be proud.
CEO Magyar thanked his volunteer team for the hard work they did rising to the logistical challenge, as well as the local police, the City and Canton of Zürich, the Protection and Rescue Service and the Swiss Armed Forces. A few very important organisations were left out of the spotlight though. An event of this size could not take place without thousands of hard working logistics specialists and dozens of 3PLs and other logistics organisations. I’d like to give just one example of a company that helped make this event happen.
Organisation of one particular logistics company
Conceptum Sports Logistics, a German logistics company, was Zürich 2014’s official logistics partner. Over the course of the games, more than 1400 athletes and thousands more coaches and personal support personnel converged on Zürich. Conceptum was there to get participants, coaches, gear and equipment where they needed to be and when they needed to be there. Organising chaos is a logistics organisation’s bread and butter, and Conceptum Sports Logistics performed at least as well as the winning athletes. Maybe CEO Magyar could have spared a bit of praise for them?
Then again, the perfect logistics professional is a bit like the perfect butler – out of sight and out of mind, managing events behind the scenes and only visible when they are needed. Perhaps the fact that Conceptum didn’t feature is another testament to their skill. If so, I have no doubts that their performance at Zürich this year will keep them in clients for some time to come.
So what about your logistics needs? Perhaps you won’t be spending £23 million putting on a sports festival this year. Perhaps you only need to find a better LTL carrier for the extra orders you expect this Christmas. Perhaps you need a better place to store inventory. Britain boasts thousands of 3PLs and logistics companies that would be thrilled to help.
Sarah Robey represents www.whichwarehouse.com. Whichwarehouse offers a logistics finding service that carries listings of many logistics providers from all over the UK.