Procurement (n) – the action of obtaining or procuring something.

According to one “Head of Procurement” job posting:

Responsible for the delivery of specific Cost Reduction and Cash Flow targets in alignment with overarching goals and objectives, with a focus on Total Cost of Ownership (TCO) and sizable gains in Value Engineering/Reform.

What the hell does that mean?

When business conditions sour, costs need to be cut. And when sizable gains in value engineering / reform are needed, the H.O.P. goes to work. Respect to the author of that listing, poetic mastery of business speak.

Procurement can be dirty work. Necessary work. But what about being on the receiving end?

You’ll know you’re headed for the cutting room floor when an unfamiliar contact from your client’s company in the “Finance department” reaches out. They’ll want to “jump on a call” and “discuss the partnership”.

Here we go.

They’re ready to obtain something, alright. Your contract dollars, back in their pocket. How can one play defense when the stakes get raised and dollars are at risk on both ends? Here are a few ideas:

1.) Positioning: what is the shared reality going into the discussion?

• Lead with fairness. Treating them unfairly will reverberate throughout the company and potentially out into the industry
• Is their business or your business in serious financial straits? One kind of discussion
• Are they trying to save some money to accelerate cost savings during a trying time or is this a timely opportunity to re-negotiate? Another kind of discussion

2.) Partnership: Focus on Value & Service

• Highlight how well & how long the two parties have been working together
• Outline the costs & hard work incurred thus far and the historical value that has been provided in the partnership
• Prepare to speak to the ongoing value of the service and their investment in your upcoming product roadmap

3.) Compromise: Giving to Gain

• Prepare for the likely reality that there is a re-negotiation coming
• Take the opportunity to prepare relief or discounting in the short term for an extension and/or pre-payment for the long term
• Potentially offer volume discounts to meet the cost saving objective with overall partnership growth. Relative savings can be a strong incentive.

4.) Scenario Planning: What are the levers?

• If the goal is increased cash on hand could you offer more lenient payment terms without adjusting the overall contract cost?
• Is there a bundle of service to offer where the per unit cost is lowered but the overall product use is expanded by onboarding additional team members?
• A customer pause of service is better than losing them indefinitely so better to retain vs. recoup 100%, especially if their survival is at risk

Times like these are when the procurement people make their living. We all should be better prepared to share the value of our services, especially during times of uncertainty. Procurement’s day in the sun. May they enjoy it while it (hopefully not long) lasts*.

*If you are reading this and work in procurement, sincerest apologies. You seem like a real nice person and this was not directed at you at all. Have a great day!