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Actual for You - The Principle(s) of Negative Value - A Procurement Article
An important object to keep in mind about ZIP code finder is that they change over time. In some cases these change can be quite amazing, but more frequently they are small and subtle. When a ZIP code changes its definition it does not change its name like a census zone. The ZIP code that was called '63301' in St. Charles County, Mo in 1985 has since been broken into first two and now three ZIP codes. These new codes were not called 63301.01, 63301.02 and 63301.03; they were called 63301, 63303 and 63304. So what is referred to as 63301 today represent about a third of the area that it referred to in 1985.The new code 63303 did not exist 12 years ago and it has already changed its definition so that it now represents about partially of the area it included when it was to begin with created. What this means, of course, is that ZIP codes are really terrible units for doing any kind of time-series analysis unless you have some way of keeping track of all the changes over time. Otherwise, you may wind up concluding that there has been a dramatic downward trend in the population of 63301 since 1980, when in fact just the opposite is true.What the world real
The cost per Purchase order as calculated by the industry or the company is we’ll say $200.00 per order.
The administrative cost alone to re-contact the supplier, source and identify the problem and then rectify the issue, be it returning the goods, accepting the material with a deviation, revising the price, quarantining the material, or expediting the order, whatever the case may be, has just driven up the actual transaction cost by at least $100.00 possibly to $300.00.
The Buyer has actually brought added value into the transaction by his/her due diligence by resolving the issue. The supplier has contributed an equal amount of “negative value.”
So my question is, “who is tracking this “negative value” and who is tracking this “positive value’” By the Buyer identifying, confirming and then resolving the problem, the actual composite price has just skyrocketed, yet the only me
Indian textile tradition is the world's oldest textile tradition. The origin of indian textile can be traced back to the days of indus valley civilisation. Rigveda, the earliest of the Veda contains the literary information about textiles and it refers to weaving. Ramayana and Mahabharata, the eminent Indian epics depict the existence of wide variety of fabrics in ancient India. These epics refer both to rich and stylized garment worn by the aristocrats and ordinary simple clothes worn by the common people. The fragments of cotton material originating from gujarat found in the egyptian tombs support that discovery. There are occasional comments about the textile craft in most of the ancient indian writings as well. Indian textile was also exported to various countries since time immemorial. The history of vijayanagar empire (ad 1504), one of india's celebrated dynasties emphasize that textile was an important trade. Indian geography, climate, social customs, availability of the raw material etc defines the art of indian textile.India had numerous trade links with the outside world and Indian textiles were popular in the ancient world. Indian silk was popular
Alright, I admit it was and could still be, construed as something of a Procurement diatribe but the purpose both then and now is to assist venders recognize and comprehend how Buyers perceive and respond, to the levels of service we receive from distributors and manufacturers when there are problems. (Notice I didn’t say, “reps”)
After 20 years of battling repetitive and inane situations and shortfalls, I thought it was time for someone to get it out into the open and talk about it plainly. Forget the graphs and the charts and Power Points, statistics and pep talks, just plain talk seemed like a reasonable solution.
After all, how many Buyers and PA’s aren’t exhausted to the point of pending insanity, by suppliers not delivering on promises or being late, or shipping incomplete orders or failing to include documentation or … on and on and on?
When I say “It’s a Tough World Out There…” (That’s the book title) I’m not just whistling “Dixie”. It’s a tough row to hoe on any given day in the land of industrial procurement no matter the industry, or the branch. Suppliers just don’t seem to get it sometimes.
There comes a time when people just have to get nose to nose and hash things out.
Was I justified in my disparagement? Are countless hours and countless dollars not spent needlessly across America re-doing what suppliers should automatically perform according to their quotations and PO deliverables?
Daily … even hourly across this land industrial clients must repeatedly request and re-request Certificates of Compliance, MTR’s, Calibration Certificates, Proof of Shelf Life, Shipping Bills and on and on. It’s a fact. It’s no secret. It’s reality. It’s expensive. It’s aggravating.
Anyway, in my old notes I think I labeled the problem as providing “negative value”. While suppliers regularly provide very good, in fact exceptional value in a myriad of ways on many other levels, (technical support, trouble shooting, rush deliveries and other hoop jumping exercises) the “negative values” tend to overshadow many of the positive values, simply due to their repetitiveness nature and needlessness. Enter human nature. Can it be overcome? Darned sure it can.
So what is value and how is it measured?
Hold on to that thought because first of all you have to understand what “price” is before you can appreciate what “value” is.
In their book, The Portable MBA in Marketing , Alexander Hiam and Charles D. Schew provide us with an equation which builds upon Professor Dick Berry’s study on the marketers role in the marketplace. Quite simply it is this: …”the price paid by the Buyer must be equal to or less than the total satisfaction obtainable from the bundle of benefits received.
In other words Buyers don’t want to pay more for any item than the satisfaction value they are going to achieve from purchasing it.
And very simply put, “value” in marketing should consist of product, place, promotion, customer sensitivity, satisfaction and service which is all included in the price. You can then say that “value” is incorporated as a component of the price.
Even from a procurement standard, if we are talking about measurable value(s) we cannot look at a sale as simply a “sale” or a purchase. We also have to look at the transaction as a “bundle”. Real value is rarely measured and less frequently examined and recorded.
Most Buyers and P/A’s don’t have the time for examining ”bundles”. They need a product, they request a quote and they purchase whatever the requisition calls for at the lowest price. As Purchasers we crunch (and report on) the obvious which is the sticker price. Few of us have time for anything else.
Remember Oscar Wilde? In his short life span he learned a lot or at least observed what many do not. He was the one who opined, “What is a cynic? A man who knows the price of everything and the value of nothing.” Are we all cynics then?
I can think of at least two quick reasons why Buyers may have become cynical in today’s purchasing environment.
(1) Buyers are overworked and undervalued
(2) Buyers are becoming increasingly bound to software programs and routines where the single benefactor in the company is the Accounting Department. They rarely have time either to examine nor calculate the real costs of acquisition. Neither can they take steps to counteract the problem.
How can Buyers talk about value when procedurally, professionally and psychologically they have been conditioned to and driven to focus almost entirely on price? Even though they have heard and even learned that the bundle, or the total transaction cost is the real story, both lateral and pressures from outside and managerial sources foster and encourage the “sticker price” mentality because “price” is what is most often measured. I’ll say it again. In most organizations, the PO price is what is measured. Should Buyers be cynical? How can they not be?
Here is a common example.
Customer A purchases one million dollars of product from Supplier B annually.
Supplier B has performance problems which the Buyer at Customer A calculates at 30% “negative value”. In other words, of the one thousand business transactions conducted between Customer A and Supplier B in one year, over three hundred problems occur within that “bundle” of deliverables per year. That’s about one per day. Either the Certs are missing or the order is short shipped or the order is late or the order arrives damaged or the material is in non conformance or the material has an expired shelf life or the material doesn’t meet spec or the product isn’t according to the drawing …. On and on but you get the point.
The cost per Purchase order as calculated by the industry or the company is we’ll say $200.00 per order.
The administrative cost alone to re-contact the supplier, source and identify the problem and then rectify the issue, be it returning the goods, accepting the material with a deviation, revising the price, quarantining the material, or expediting the order, whatever the case may be, has just driven up the actual transaction cost by at least $100.00 possibly to $300.00.
The Buyer has actually brought added value into the transaction by his/her due diligence by resolving the issue. The supplier has contributed an equal amount of “negative value.”
So my question is, “who is tracking this “negative value” and who is tracking this “positive value’” By the Buyer identifying, confirming and then resolving the problem, the actual composite price has just skyrocketed, yet the only mea
Where do you see yourself and your organization 1,5,10 years from now? What do you want to accomplish? What do you and your organization want to be known for? What do you do for a living? These are all very important questions that need to be answered both on a professional and personal level.People think differently about vision statements. Some people develop them and put them away. Never to be seen again. Some people display them prominently and base every decision on the vision statement. As Stephen Covey says” Always start with the end in mind.” People and organizations need to know where they want to be before they can figure out how to get there. Without a vision statement, people and the organizations they are a part of drift aimlessly through life.The ability to see the future starts at its earliest time in childhood. Kids are great dreamers. They can visualize themselves in a variety of scenarios. Children also have great imaginations. The one thing that children never do is edit their dreams. Only when we become adults, do we start editing our imagination and dreams. Why does that happen? Various life experiences, good and bad, cause adults
There comes a time when people just have to get nose to nose and hash things out.
Was I justified in my disparagement? Are countless hours and countless dollars not spent needlessly across America re-doing what suppliers should automatically perform according to their quotations and PO deliverables?
Daily … even hourly across this land industrial clients must repeatedly request and re-request Certificates of Compliance, MTR’s, Calibration Certificates, Proof of Shelf Life, Shipping Bills and on and on. It’s a fact. It’s no secret. It’s reality. It’s expensive. It’s aggravating.
Anyway, in my old notes I think I labeled the problem as providing “negative value”. While suppliers regularly provide very good, in fact exceptional value in a myriad of ways on many other levels, (technical support, trouble shooting, rush deliveries and other hoop jumping exercises) the “negative values” tend to overshadow many of the positive values, simply due to their repetitiveness nature and needlessness. Enter human nature. Can it be overcome? Darned sure it can.
So what is value and how is it measured?
Hold on to that thought because first of all you have to understand what “price” is before you can appreciate what “value” is.
In their book, The Portable MBA in Marketing , Alexander Hiam and Charles D. Schew provide us with an equation which builds upon Professor Dick Berry’s study on the marketers role in the marketplace. Quite simply it is this: …”the price paid by the Buyer must be equal to or less than the total satisfaction obtainable from the bundle of benefits received.
In other words Buyers don’t want to pay more for any item than the satisfaction value they are going to achieve from purchasing it.
And very simply put, “value” in marketing should consist of product, place, promotion, customer sensitivity, satisfaction and service which is all included in the price. You can then say that “value” is incorporated as a component of the price.
Even from a procurement standard, if we are talking about measurable value(s) we cannot look at a sale as simply a “sale” or a purchase. We also have to look at the transaction as a “bundle”. Real value is rarely measured and less frequently examined and recorded.
Most Buyers and P/A’s don’t have the time for examining ”bundles”. They need a product, they request a quote and they purchase whatever the requisition calls for at the lowest price. As Purchasers we crunch (and report on) the obvious which is the sticker price. Few of us have time for anything else.
Remember Oscar Wilde? In his short life span he learned a lot or at least observed what many do not. He was the one who opined, “What is a cynic? A man who knows the price of everything and the value of nothing.” Are we all cynics then?
I can think of at least two quick reasons why Buyers may have become cynical in today’s purchasing environment.
(1) Buyers are overworked and undervalued
(2) Buyers are becoming increasingly bound to software programs and routines where the single benefactor in the company is the Accounting Department. They rarely have time either to examine nor calculate the real costs of acquisition. Neither can they take steps to counteract the problem.
How can Buyers talk about value when procedurally, professionally and psychologically they have been conditioned to and driven to focus almost entirely on price? Even though they have heard and even learned that the bundle, or the total transaction cost is the real story, both lateral and pressures from outside and managerial sources foster and encourage the “sticker price” mentality because “price” is what is most often measured. I’ll say it again. In most organizations, the PO price is what is measured. Should Buyers be cynical? How can they not be?
Here is a common example.
Customer A purchases one million dollars of product from Supplier B annually.
Supplier B has performance problems which the Buyer at Customer A calculates at 30% “negative value”. In other words, of the one thousand business transactions conducted between Customer A and Supplier B in one year, over three hundred problems occur within that “bundle” of deliverables per year. That’s about one per day. Either the Certs are missing or the order is short shipped or the order is late or the order arrives damaged or the material is in non conformance or the material has an expired shelf life or the material doesn’t meet spec or the product isn’t according to the drawing …. On and on but you get the point.
The cost per Purchase order as calculated by the industry or the company is we’ll say $200.00 per order.
The administrative cost alone to re-contact the supplier, source and identify the problem and then rectify the issue, be it returning the goods, accepting the material with a deviation, revising the price, quarantining the material, or expediting the order, whatever the case may be, has just driven up the actual transaction cost by at least $100.00 possibly to $300.00.
The Buyer has actually brought added value into the transaction by his/her due diligence by resolving the issue. The supplier has contributed an equal amount of “negative value.”
So my question is, “who is tracking this “negative value” and who is tracking this “positive value’” By the Buyer identifying, confirming and then resolving the problem, the actual composite price has just skyrocketed, yet the only me
Who would have thought a year ago that Don Imus, Mel Gibson, and Michael Richards would find themselves drowning in a negative sea of publicity over something they said. Worse yet, many said their initial apology wasn’t genuine.I hope you never put your foot in your mouth and offend someone or a group. But if you do, here are some tips for damage control. These suggestions are for verbal mistakes. A slightly different series of rules apply for written gaffes.Admit and own up to your mistake. If you said something that you know is wrong, then you should have no problem immediately apologizing. Everyone knows what it’s like to have something come the wrong way and regret it. They’ll likely identify with your situation and cut you some slack. This doesn’t work if you don’t regret your offensive remark. People can pick up on insincerity very easily.Don’t try to tread water and talk your way out of the situation with excuses. Avoid blaming your audience for not having a sense of humor, the person who made you say the remark, or a dark secret in your past. These are stall tactics by someone who does not want to admit they’re wrong
In other words Buyers don’t want to pay more for any item than the satisfaction value they are going to achieve from purchasing it.
And very simply put, “value” in marketing should consist of product, place, promotion, customer sensitivity, satisfaction and service which is all included in the price. You can then say that “value” is incorporated as a component of the price.
Even from a procurement standard, if we are talking about measurable value(s) we cannot look at a sale as simply a “sale” or a purchase. We also have to look at the transaction as a “bundle”. Real value is rarely measured and less frequently examined and recorded.
Most Buyers and P/A’s don’t have the time for examining ”bundles”. They need a product, they request a quote and they purchase whatever the requisition calls for at the lowest price. As Purchasers we crunch (and report on) the obvious which is the sticker price. Few of us have time for anything else.
Remember Oscar Wilde? In his short life span he learned a lot or at least observed what many do not. He was the one who opined, “What is a cynic? A man who knows the price of everything and the value of nothing.” Are we all cynics then?
I can think of at least two quick reasons why Buyers may have become cynical in today’s purchasing environment.
(1) Buyers are overworked and undervalued
(2) Buyers are becoming increasingly bound to software programs and routines where the single benefactor in the company is the Accounting Department. They rarely have time either to examine nor calculate the real costs of acquisition. Neither can they take steps to counteract the problem.
How can Buyers talk about value when procedurally, professionally and psychologically they have been conditioned to and driven to focus almost entirely on price? Even though they have heard and even learned that the bundle, or the total transaction cost is the real story, both lateral and pressures from outside and managerial sources foster and encourage the “sticker price” mentality because “price” is what is most often measured. I’ll say it again. In most organizations, the PO price is what is measured. Should Buyers be cynical? How can they not be?
Here is a common example.
Customer A purchases one million dollars of product from Supplier B annually.
Supplier B has performance problems which the Buyer at Customer A calculates at 30% “negative value”. In other words, of the one thousand business transactions conducted between Customer A and Supplier B in one year, over three hundred problems occur within that “bundle” of deliverables per year. That’s about one per day. Either the Certs are missing or the order is short shipped or the order is late or the order arrives damaged or the material is in non conformance or the material has an expired shelf life or the material doesn’t meet spec or the product isn’t according to the drawing …. On and on but you get the point.
The cost per Purchase order as calculated by the industry or the company is we’ll say $200.00 per order.
The administrative cost alone to re-contact the supplier, source and identify the problem and then rectify the issue, be it returning the goods, accepting the material with a deviation, revising the price, quarantining the material, or expediting the order, whatever the case may be, has just driven up the actual transaction cost by at least $100.00 possibly to $300.00.
The Buyer has actually brought added value into the transaction by his/her due diligence by resolving the issue. The supplier has contributed an equal amount of “negative value.”
So my question is, “who is tracking this “negative value” and who is tracking this “positive value’” By the Buyer identifying, confirming and then resolving the problem, the actual composite price has just skyrocketed, yet the only me
There is a scene in a movie called “Facing the Giants” where the coach of a small high school has to inspire a team that hasn’t performed well and is used to failure. When the quarterback of the team indicates he doesn’t think they can win Friday’s game the coach pulls him aside for one of the most inspiring moments in the film.“Don’t you quit on me, Brock,” he commands the quarterback who is blindfolded and made to crawl on the football field with another player on his back. “Don’t you quit.”Foot by agonizing foot Brock moves across the football field thinking he was only going 20 yards. In the end the player collapses in the end zone. His fellow teammates stand in awe of the punishment it took to reach a goal Brock never would have believed possible.The coach gets down to Brock’s level and says, “I need you. This team needs you, Brock. If you quit then we all give up.” It is in that moment that the mentality of the team changes and success soon follows.Many of us have the tendency to quit when things get tough. There is a lady I am aware of that has started nearly 30 different food service businesses. She is a great cook and has a husba
I can think of at least two quick reasons why Buyers may have become cynical in today’s purchasing environment.
(1) Buyers are overworked and undervalued
(2) Buyers are becoming increasingly bound to software programs and routines where the single benefactor in the company is the Accounting Department. They rarely have time either to examine nor calculate the real costs of acquisition. Neither can they take steps to counteract the problem.
How can Buyers talk about value when procedurally, professionally and psychologically they have been conditioned to and driven to focus almost entirely on price? Even though they have heard and even learned that the bundle, or the total transaction cost is the real story, both lateral and pressures from outside and managerial sources foster and encourage the “sticker price” mentality because “price” is what is most often measured. I’ll say it again. In most organizations, the PO price is what is measured. Should Buyers be cynical? How can they not be?
Here is a common example.
Customer A purchases one million dollars of product from Supplier B annually.
Supplier B has performance problems which the Buyer at Customer A calculates at 30% “negative value”. In other words, of the one thousand business transactions conducted between Customer A and Supplier B in one year, over three hundred problems occur within that “bundle” of deliverables per year. That’s about one per day. Either the Certs are missing or the order is short shipped or the order is late or the order arrives damaged or the material is in non conformance or the material has an expired shelf life or the material doesn’t meet spec or the product isn’t according to the drawing …. On and on but you get the point.
The cost per Purchase order as calculated by the industry or the company is we’ll say $200.00 per order.
The administrative cost alone to re-contact the supplier, source and identify the problem and then rectify the issue, be it returning the goods, accepting the material with a deviation, revising the price, quarantining the material, or expediting the order, whatever the case may be, has just driven up the actual transaction cost by at least $100.00 possibly to $300.00.
The Buyer has actually brought added value into the transaction by his/her due diligence by resolving the issue. The supplier has contributed an equal amount of “negative value.”
So my question is, “who is tracking this “negative value” and who is tracking this “positive value’” By the Buyer identifying, confirming and then resolving the problem, the actual composite price has just skyrocketed, yet the only me
One of the biggest reasons why I see network marketers drop like flies is because of the support system. Yes you heard that right, your support system TRULY stinks! But I am not telling you to get you mad, but help you realize that by "plugging into the system" with blind faith is a huge mistake.Sure you may feel a temporary high after listening to your big time upline repeat these lines. But have you actually taken into consideration if it has actually helped you become richer and more successful? Probably not. See if you can relate:Upline: You can do it winner! You: Yeah, yeah I heard that a billion timesUpline: Staying excited and enthusiastic is the secret. Do you know what enthusiastic means? It means the God within YOU man! You: I stayed enthusiastic for the whole year, have no results to show for it. And people, especially my family, think I'm some sort of a happy cult fanatic with no money.Upline: Ain't it great! You: Uhh..yeah I guess.Upline: He who shows the most opportunity plans wins! You: I showed it to COUNTLESS random people I met down the stre
The cost per Purchase order as calculated by the industry or the company is we’ll say $200.00 per order.
The administrative cost alone to re-contact the supplier, source and identify the problem and then rectify the issue, be it returning the goods, accepting the material with a deviation, revising the price, quarantining the material, or expediting the order, whatever the case may be, has just driven up the actual transaction cost by at least $100.00 possibly to $300.00.
The Buyer has actually brought added value into the transaction by his/her due diligence by resolving the issue. The supplier has contributed an equal amount of “negative value.”
So my question is, “who is tracking this “negative value” and who is tracking this “positive value’” By the Buyer identifying, confirming and then resolving the problem, the actual composite price has just skyrocketed, yet the only measurement being taken is again, the purchase sticker price written on the PO.
This is neither fair to the Buyer nor to your vender base.
“Hold on”, you say. “The vender should be sent packing….”
Well, maybe after some discussion they should, but is this the best solution? Are they a single source supplier? Is it single source equipment? Are they providing other “value” unable to be obtained elsewhere?
The bottom line is that it isn’t fair to the Buyer (and his/her employer) and it isn’t fair to our supplier base not to measure these “negative values” being imposed by poor suppliers operating without conscience.
And then there is the other side of the coin.
Today’s suppliers are cynical too. They see the Buyer as a Price Cyclops with his/her only eye, focused entirely upon unit price and little else. Suppliers are angry that the added value they often provide for free in the form of technical advice, free samples, re-routed orders when a customer is in a pinch and rush shipments when the Buyer miscalculates, is unappreciated and largely ignored when the next quotation is offered.
Many outside sales reps and sales managers aren’t even aware of the “negative values” being inflicted on their customers in the form of poor and inadequate services in shipping, documentation, product quality etc.
Suppliers don’t understand that the “negative value” they have been displaying has caused them loss of future orders. The fact is Buyers can rarely … or will rarely … tell the seller why they are being passed over. The supplier must often assume it to be the sticker price.
The bottom line is that we have problems in procurement which must be corrected internally and we have problems externally with suppliers who are screwing up regularly and royally.
We must measure all of the values going on around us within the purchasing bundle. We must learn to measure, to assess and to report the composite values which make up the actual and complete transaction price of a product or service.
In fairness to all of us, including the suppliers who do not inflict this “negative value” upon us so often, we must all begin to measure and to use the data in our workdays effectively.
If neither the Buyer nor the Seller is measuring and reporting these positive and negative values then how can either side expect a positive relationship?
And if we don’t talk about it … how can it ever change?
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