Archive for October, 2009

Were onion sourcing the root to McDonalds closure in Iceland

October 27, 2009

Now anyone with even the smallest grasp of procurement knows that in most cases standardization is good, but one has to wonder how far this decree should be taken.

This coming Monday, McDonalds will close their three Icelandic restaurants turning Iceland into one of few McDonalds free zones in Europe (the others being Albania and Bosnia and Herzegovina). In a Reuters interview, Jon Ogmundsson, managing director of Lyst, holder of the McDonald’s franchise in Iceland, blame rising cost of supplies as the main reason for the closure. With McDonalds famed for their comparability across the globe – taste wise, if not cost wise – changing the ingredients seemed out of the question.

“For a kilo of onion, imported from Germany, I’m paying the equivalent of a bottle of good whiskey.” Now, the

Icelandic economy is still in a freefall so there are of course other aspects that play into this equation as well, but one might wonder what could have happened if the purchasing professionals at McDonalds in Iceland had stayed a little more on their toes when it came to sourcing their ingredients for 2009.

Posted in Best Cost Country Sourcing, Business, Low Cost Country Sourcing, Marketing | Leave a Comment »

The problems of marketing spend – quality fulfillment

October 26, 2009

I recently came face to face with one of the major hurdles (and misunderstandings) of purchasing marketing spend; namely the definition of quality fulfillment.

Now, in most cases, marketers want superior quality – it is one of the real drivers of marketing effect – but when purchasing professionals attempt to support marketing in procuring say photography services the definition of quality fulfillment quickly becomes somewhat blurred.

  • The professional purchaser wants to buy images.
  • The marketer wants to buy superior images.

The problem is that who is to judge when an image goes from useful (it clearly displays whatever object was photographed) to superior (it displays not only the object, but also projects emotions or feelings).

The images that I purchased definitely passed any criteria set by the purchasing department (great focus, clearly displaying the object) yet I was devastated since the images were unusable due to the lack of correctly projected emotions. So what did I do?

Did I blame purchasing for supplying an inferior photographer? Well, no, on paper he was perfectly capable of doing the job (and he did, only I wasn’t satisfied with the superiority of his work) so I bit the sour apple. But next time, I’m going provide a longer list of suitable suppliers – suppliers that I as stakeholder know can bring me the superior quality I demand – and then purchasing will get to support me in the negotiations.

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Overcoming the differences between private and public sector procurement

October 22, 2009

Over the past few years many of my colleagues and I have been on a mission bolster the notion that mindset is the key issue that separates the laggards from the top performers in the purchasing field. And this is particularly evident when it comes to understanding why public procurement so often lags behind its private counterparts.

In a recent McKinsey Quarterly article; McKinsey on Government; the gaps in performance is significantly larger in the softer dimensions – mindset, talent management and aspirations – than in the areas most often promoted by purchasing solution vendors – tools, processes and strategy. While many research organizations often stop when they’ve realized their findings, McKinsey in this instance offers a rather pragmatic explanation of why public and private procurement professionals differ in these key areas:

Two important reasons [for these differences] are that, first, the members of the [public sector] purchasing staff are typically not on a career track as attractive as that of civil servants, which makes it difficult to attract and retain the best people. Second, a culture that rewards zero errors—for instance, one dedicated to “protecting the minister”—tends to favor preserving existing processes and mandates and offers limited incentives to aim for anything more ambitious.

Unfortunately, McKinsey leaves the subject of mindset and aspirations and returns to the more familiar hunting grounds of tools implementation and purchasing process streamlining; a track that is already being centrally driven in the EU through the PEPPOL initiative. And although better processes and widespread tools adoption surely will close some of the gaps between public and private sector procurement, these gaps will always remain if the softer dimensions mentioned above are not properly dealt with.

Posted in Change Management, Procurement, Public procurement, Strategy, eprocurement | 1 Comment »