Last Friday I was in a meeting with several senior managers at IBX when the question of IM&S pooling came up. As pros and cons were discussed from both strategic and pragmatic angles one of the participants finally blurted out:
The only (IM&S) commodities for which pooling works are those which are so standardized that specifications have become obsolete (such as gasoline), for all other commodities, specifications quickly become so essential (and diverse) that trying to pool even within your own company quickly becomes overwhelming. Pooling across company borders is simply not doable.
As usual I was taking notes of the discussion and as I let my eyes wander across the table I started to realize that maybe he was right, because in front of me were four purchasing professionals who preach the gospel of standardization and consolidation on a daily basis; yet all were taking notes in different notebooks. And if there ever was a commodity that should be seen as a poster child of standardization it is office supplies – after all; we’re mostly talking about pens and paper here; it’s so non-core that even the most liberally minded purchaser could think of it as potentially “five-year-plan:able”.
As the discussion continued I used the notebook example to illustrate the complexity of the issue; when asked all of us had different reasons for choosing our notebook of choice ranging from “it was in the office storage” (which I suppose was the most correct answer from a purchasers point of view) to “I got it for free at a conference” (a good answer from a cost perspective) to my defence of my Moleskine; “I honestly believe that I take better notes in this notebook than in any other” and then I added “and it makes a statement”.
I suppose the quality of the notes taken in the notebooks are only vital to those that assume their notes are core-business; a group of people that are (and should be) quite small to be honest.
Walking away from the meeting one question was lingering in my mind: why is it so hard to standardize IM&S?
Could it be that the same libertarian philosophy that has enabled global trade at the same time work against procurement by emphasising people’s right to choose?
October 28, 2008 at 6:16 am
I also have experienced the hard work needed to pool volumes. But one can ask a couple of relevent questions.
Process cost v/s price saving based on volume on scale? The smaller companies involved the higher likely price saving but also the higher process cost? Or the larger companies involved the lower price saving based on volume and the lower process cost to complete?
Process cost is based on starting position. Is the company used to standardized solutions and have little or no saying on with standardized product range is used or should a product range be narrowed down with company’s own selection criteria?
I think it is about thinking outside the box and pooling solutions tho the buying community that allow cherry picking from buying side. Contradiction in terms – I do not think so.
February 23, 2009 at 11:40 am
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