Pain Point # 1 – ROGUE INTERNAL

CUSTOMERS

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“THE Godfather of Negotiation Planning” ~ Intel Corp

Omid GhamamiPURCHASING AND NEGOTIATIONS EXPERT

1) Customer doesn’t involve purchasing

because purchasing is viewed as a roadblock

2) Customer pre-cooks deal with

supplier

3) Purchasing receives order and has to stop

everything to try and add value, which delays

purchase

4) Customer gets upset because purchasing has

become a roadblock; perceptions are reinforced

5) Purchasing is unable to add full value, deal is delayed, customer and

purchasing are both frustrated

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Company Policies on Rogue Purchasing Behavior

• How many Fortune 500 companies have a corporate POLICY (not guideline) that states that– Customers MUST involve

purchasing up front for all transactions over $_____?

– Failure to do so may result in personal legal liability?

– Failure to do so will result in performance review consequences?

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Answer:

How Other Service Organizations Roll Out Policies:

• HR: “Starting Monday, the new tool employees must use for interviewing external candidates is __________”

• Finance: “Starting Monday, the new expense report policy is _______”

• Accounts Payable: “Starting Monday, we will no longer accept supplier invoices that ___________”

• Corporate Travel: “Starting Monday, this is how you must book flights and hotels __________”

• Security: “Starting Monday, all employees wanting to access facilities after hours must __________”

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How Purchasing Rolls Out Policies

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2) Get approval from purchasing

management chain

4) Make presentations to finance to get

support

1) Create justification

models, root cause analysis, benchmarking,

and set of alternatives

3) Get approval from other purchasing

organizations & commodity

teams

5) Make presentations to all

major customer groups; dissent

needs to be handled on case by case

basis; changes made to accommodate

concerns

6) Policy verbiage is finalized, but

corporate refuses to call it a policy, so it has to get rolled

out as a purchasing “guideline”

7) Guidelines are sent out by

email and presented in

customer staff meetings instead of

blasted on front page of intranet

8) Purchasing goes through

frustration cycle to try and enforce

9) Customer views purchasing as roadblock;

customer is frustrated, purchasing is frustrated

Trickle Down From “After the Fact PO’s”

More time spent on customer

negotiations, less time spent

on contract negotiations

Less spends aggregation,

lower supplier discounts,

increased TCO

Increased Supply Base Size, more suppliers to

manage, more efforts to

reduce supply base

6Career and Income MEDIOCRITY!!

AMERA Execution

Model

1) Analysis

2) Motivation

3) Execution4) Reward

5) Aversion

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AMERA Execution Model

1. Analysis: Pareto top non-complying customer groups by spends & savings opportunities

2. Motivation: Develop & present “Key wins” presentation

3. Execution: Ensure better, faster, & lower TCO4. Reward: Visibly reward customer in front of

peers5. Aversion: Develop “Walk of Shame” for non-

compliers8

Step 1: Analysis• Perform data analysis on customer groups that DO work with

purchasing– Expenditures, $ savings, % savings

• Do Pareto analysis of top customer group opportunities– By spends or by known savings opportunities

• Calculate expenditure volume for next 12 months with top customer groups

• Extrapolate same savings % across these customer groups and forecast opportunity

• Present these findings to finance representative for that group– They are your ally in this process– Do not “report” this group to finance; focus on collaboration opportunities

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Step 2: Motivate• Gather key success stories from best customers

– “Big Win” negotiation results, benefits to the customer, along with enthusiastic customer quotes

• Couple this with information from Step 1– Sell to both heart (compelling testimonials) and minds

(compelling data) of customers• Set up 30 minute meeting with customer group

manager, invite finance as well• Walk manager through presentation, and ask for their

support based on benefits to customer• Request staff time to present, invite finance, and

secure minimum commitment to ONE big deal10

Step 3: Execution• Review success indicators with customer, so

that there is a common definition of success• Double-up efforts to ensure a GRAND SLAM• Keep customer representative actively involved

in process– Give customer specific and defined roles– Make them feel like their inputs are critical to the

process• Make them excited about the results and

review post-mortem success indicators11

Step 4: Reward• Take post-mortem success indicators to customer staff• SURPRISE your customer representative with a

reward in front of their peers & manager• Reward can be small, but the story needs to be big

– Make a BIG deal about their efforts and results, and make sure their manager is there to hear it

• Can be a $25 - $50 certificate, or can even be a color certificate in a cardboard frame – No budget for awards is no issue!

• The goal is to develop customer ambassadors of the purchasing department

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Certificate of Customer Achievement

The Purchasing Department would like to recognizeSteve Johnson

(Date)For his OUTSTANDING work in

helping reduce total cost

Sample Recognition Template

Step 5: Aversion• Assumption: Corporate will not support

implementation of purchasing policies• Get purchasing and finance support to develop a

“Walk of Shame”• Walk of shame entails putting ATFPO* on hold and

having offending customer take their ATFPO to a designated senior purchasing manager (Director or above) and explain why they skirted the purchasing process and what they will do to ensure it never happens again. (hint: it never does)

• This measure should be used less than 1% of the time14

*After The Fact PO

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Sample “Walk of Shame” memo

Call to Action1. Analysis: Pareto top non-complying customer

groups by spends & savings opportunities2. Motivation: Develop & present “Key wins”

presentation3. Execution: Ensure better, faster, & lower TCO4. Reward: Visibly reward customer in front of

peers5. Aversion: Develop “Walk of Shame” for non-

compliers

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Thank you for watching!

www.PurchasingAdvantage.com1-888-TCO-4889 1-888-826-4889

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“THE Godfather of Negotiation Planning” ~ Intel Corp

Omid GhamamiPURCHASING AND NEGOTIATIONS EXPERT