{"id":3282,"date":"2013-08-30T17:29:00","date_gmt":"2013-08-30T17:29:00","guid":{"rendered":"https:\/\/www.certitrek.com\/nlpa\/2013\/08\/30\/procurement-parable-is-the-most-cooperative-supplier-always-the-best-choice\/"},"modified":"2021-07-08T06:58:45","modified_gmt":"2021-07-08T10:58:45","slug":"procurement-parable-is-the-most-cooperative","status":"publish","type":"post","link":"https:\/\/www.certitrek.com\/nlpa\/blog\/procurement-parable-is-the-most-cooperative\/","title":{"rendered":"Procurement Parable – Is The Most Cooperative Supplier Always The Best Choice?"},"content":{"rendered":"
<\/div>\n

Because my previous procurement parables \u2013 like \u201cHiring Buyers With Potential,\u201d \u201cA Procurement Certification or MBA?\u201d and \u201cExecute, Da**it, Execute!\u201d\u00a0were among the most widely read blog posts I\u2019ve created, I\u2019ll share another procurement parable with you today.<\/p>\n

Don\u2019t miss updates on Procurement & Supply Chain, Subscribe here!<\/p>\n

The setting for today\u2019s procurement parable is the offices of Hill Office Technology & Computer Optimization Company, or HOTCOCO for short.<\/p>\n

HOTCOCO has been a rapidly growing company since it was founded four years ago.\u00a0 Occasionally, management felt that it was growing faster than it should be.<\/p>\n

HOTCOCO\u2019s internal processes would always work well up to a certain point.\u00a0 But as the company\u2019s sales grew month after month, soon those processes that worked so well at previous workloads would break down at higher volumes.<\/p>\n

In order for HOTCOCO to delight customers and keep them coming back, management had to do something to install processes that could scale in harmony with its anticipated growth rate.\u00a0 Therefore, the company\u2019s executive team decided to bring in consultants to lead the reengineering of most of its internal processes:\u00a0 from procurement to shipping to accounting and everything else.\u00a0 HOTCOCO\u2019s CEO asked her procurement manager, Paul Coffey, to source for a consulting firm that could end the months of internal struggle that was plaguing the company and threatening their ability to keep up with growth.<\/p>\n

Paul, who was promoted from sales and had no prior procurement experience, knew that this was a critical project.\u00a0 So, he assigned his newly hired senior buyer, Buck Starr, to lead the effort.\u00a0 Though he was a new college graduate, Buck did hold an internship in the procurement department at one of the major manufacturers in town and was lauded for effectively employing his \u201cgut feel\u201d in making smart decisions.<\/p>\n

From his internship, Buck knew how to run a sourcing project.\u00a0 He assembled a cross-functional team of employees with a vested interest in the outcome of the consulting engagement, put together a request for proposal (RFP), found a few qualified suppliers, and got those suppliers to submit proposals by the deadline.<\/p>\n

Under Buck\u2019s leadership, the team reviewed proposals, visited the top four bidders, and decided that either of two suppliers would be a good fit for the contract.\u00a0 But, speaking of the contract, there was a problem.\u00a0 Buck didn\u2019t follow the purchasing best practice of including the contract\u2019s terms and conditions in the RFP.\u00a0 So, the team decided that it would send terms and conditions to the top two suppliers and see what their reactions were.\u00a0 Paul told Buck to send the consulting firms HOTCOCO\u2019s \u201cTechnical Services Agreement Template\u201d because that was the closest thing that HOTCOCO had for the type of service being procured.\u00a0 That template was 40 pages long and was typically used for subcontracting computer-related work that HOTCOCO didn\u2019t have the resources to perform for its customers itself.<\/p>\n

Well, the first supplier, AET Consulting, came back with a response that troubled Buck and the team.\u00a0 The supplier wrote:<\/p>\n

Dear Mr. Starr,<\/em>
\nWe have reviewed your terms and conditions.\u00a0 It appears that we are going to have to withdraw our bid.\u00a0 Though this engagement is for a mere $10,000, the contract is written in a way that could expose us to tens, perhaps even hundreds, of millions of dollars of liability.<\/em><\/p>\n

While we would love to work with HOTCOCO, it simply would not make business sense for us to expose ourselves to that level of risk, which could put an end to our entire company, for an engagement like the one proposed.<\/em><\/p>\n

Thank you for giving us the opportunity to bid.\u00a0 Best of luck with the project.<\/em><\/p>\n

Regards,<\/em>
\nDominico Charuls<\/em>
\nPresident<\/em>
\nAET Consulting<\/em><\/p>\n

Buck was disappointed.\u00a0 AET was in business a long time (15 years), had a good track record, and was adequately staffed for the engagement.<\/p>\n

Before Buck could ponder AET\u2019s withdrawal too long, he received an email from the other supplier, Grey & Grey Consulting.\u00a0 It said:<\/p>\n

Hey Buck,<\/em>
\nT\u2019s & C\u2019s look good.\u00a0 We\u2019re ready to start.\u00a0 Lemme know.<\/em><\/p>\n

Sincerely,<\/em>
\nEarl Grey, IV<\/em>
\nSales Representative<\/em>
\nGrey & Grey Consulting<\/em><\/p>\n

This troubled Buck.\u00a0 How could one supplier see terms and conditions as such a catastrophic threat to their business that they would turn away a sale and yet another supplier agree to those terms and conditions without batting the proverbial eyelash?<\/p>\n

Furthermore, Buck started reviewing his notes about Grey & Grey.\u00a0 Though they had been in business almost as long as AET, they had done promotional products printing for 12 years before switching to a consulting business in the past 25 months.\u00a0 And, after doing some research on LinkedIn, Buck found that there were a lot of people who used to work for Grey & Grey, even though they were a relatively small company.\u00a0 It appeared that they may have a turnover problem.<\/p>\n

Something about the situation just didn\u2019t sit right with Buck.\u00a0 His gut told him that it would be better to craft a contract template that was more appropriate for a consulting engagement and see if both AET and Grey & Grey would remain in the hunt for HOTCOCO\u2019s business.<\/p>\n

However, when Buck brought this suggestion to Paul, Paul\u2019s face turned red as if the blood was boiling inside his body.\u00a0 \u201cBuck!\u00a0 We don\u2019t have the time to write a new contract template,\u201d Paul yelled.\u00a0 \u201cWe need a consultant in here now and if AET doesn\u2019t want to do business on our terms, than that is a huge indication that they are a dumb supplier and we should want no part of them!\u201d<\/p>\n

\u201cI mean no disrespect, but when a company as respected as AET refuses to do business with us because of an onerous contract, it kind of scares me about what kind of intellectual horsepower Grey & Grey has at the helm,\u201d Buck replied.\u00a0 \u201cI sort of feel like our contract is overly one-sided and if Grey & Grey aren\u2019t smart enough to protect themselves, do we really want them telling us how to run a business?\u201d<\/p>\n

\u201cNonsense, kid,\u201d Paul shouted even louder than before.\u00a0 \u201cWe need a cooperative consulting firm\u00a0and we need one now!\u00a0 Get it signed and let\u2019s get started.\u201d<\/p>\n

Now, in previous procurement parables, I took the story to its end.\u00a0 This time, I\u2019d like to conclude this post with a question for you\u2026Which HOTCOCO\u00a0procurement employee\u00a0do you agree with:\u00a0 Paul or Buck?<\/p>\n","protected":false},"excerpt":{"rendered":"

Because my previous procurement parables \u2013 like \u201cHiring Buyers With […]<\/p>\n","protected":false},"author":12,"featured_media":4057,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-3282","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-procurement"],"yoast_head":"\nProcurement Parable - Is The Most Cooperative Supplier Always The Best Choice? - Next Level Purchasing Association (NLPA)<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.certitrek.com\/nlpa\/blog\/procurement-parable-is-the-most-cooperative\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Procurement Parable - Is The Most Cooperative Supplier Always The Best Choice?\" \/>\n<meta property=\"og:description\" content=\"Because my previous procurement parables \u2013 like \u201cHiring Buyers With […]\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.certitrek.com\/nlpa\/blog\/procurement-parable-is-the-most-cooperative\/\" \/>\n<meta property=\"og:site_name\" content=\"Next Level Purchasing Association (NLPA)\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/NextLevelPurchasing\/\" \/>\n<meta property=\"article:published_time\" content=\"2013-08-30T17:29:00+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2021-07-08T10:58:45+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.certitrek.com\/nlpa\/wp-content\/uploads\/sites\/5\/2020\/11\/nlpa-images-066.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1600\" \/>\n\t<meta property=\"og:image:height\" content=\"1143\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Galo Matagay\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@nextlevelpurch\" \/>\n<meta name=\"twitter:site\" content=\"@nextlevelpurch\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Galo Matagay\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"5 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/blog\/procurement-parable-is-the-most-cooperative\/#article\",\"isPartOf\":{\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/blog\/procurement-parable-is-the-most-cooperative\/\"},\"author\":{\"name\":\"Galo Matagay\",\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/#\/schema\/person\/72d094fab77892483dfa6e061cb27eaa\"},\"headline\":\"Procurement Parable – Is The Most Cooperative Supplier Always The Best Choice?\",\"datePublished\":\"2013-08-30T17:29:00+00:00\",\"dateModified\":\"2021-07-08T10:58:45+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/blog\/procurement-parable-is-the-most-cooperative\/\"},\"wordCount\":1096,\"commentCount\":0,\"publisher\":{\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/#organization\"},\"articleSection\":[\"Procurement\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/www.certitrek.com\/nlpa\/blog\/procurement-parable-is-the-most-cooperative\/#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.certitrek.com\/nlpa\/blog\/procurement-parable-is-the-most-cooperative\/\",\"url\":\"https:\/\/www.certitrek.com\/nlpa\/blog\/procurement-parable-is-the-most-cooperative\/\",\"name\":\"Procurement Parable - Is The Most Cooperative Supplier Always The Best Choice? 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