Procuring Value…

My first three days of last week were spent in the mid-west and then I decamped to Cambridge Massachusetts. I flew to Boston airport via Detroit late Wednesday evening. My travel overlapped with the Baseball World Series. As as well as watching 4 innings in an airport bar with 50 other Boston bound travellers, I watched the next 4½ innings on the plane. Our flight was WiFi enabled and there were more than enough passengers watching on their laptops or smart phones to ensure I saw everything. We also had a running commentary up and down the plane – with communal cheering no less – and at one stage I am sure I even heard a chant of ‘let’s go Red Sox’ from beyond the first class partition.

Internal US plane rides are normally quiet – no-one talks to anyone – and dull – the only interest being the choice of pretzels. My flight Wednesday was exciting, loud and memorable. I would have rather watched the game live, or with friends or family, but failing that, a plane ride from Detroit was a surprisingly enjoyable place to be.

I was in Cambridge for a series of meetings – from breakfast through to late afternoon. And I even met (by co-incidence rather than by design) an old colleague in the lounge at Boston airport that evening. A colleague who is now working for a small virtual pharmaceutical company and who was interested in working with us. It was a long day but great fun, and high value…

As I look back I realise that value was a theme for the day…or more particularly value for money. My flight from Detroit provided real value for money – unexpected value I agree…but definitely real. I started at breakfast with a consultant I know who works exclusively with Cambridge based biotech companies. I learned so much from him in 60 minutes (over coffee and pancakes) about the dynamics of the Pharma industry in Greater Boston…my perception changed as rapidly as my knowledge increased.

I met individuals and teams from big Pharma through mid-size biotechs through to virtual companies. I had little idea ahead of any session what we were going to talk about and no idea what I was going to learn. This was more than value…I was learning, meeting, enjoying and working. Even the time walking between meetings involved me talking with colleagues from our own company…more learning and more value.

One of the most stimulating sessions I had was over coffee with a scientist I know who has moved into an emerging procurement role. It wasn’t her intent or her plan, but the need and opportunity arose…I was surprised to hear of the move but intrigued. I work a lot with procurement either in our own company or as our point of entry/contact with a partner company. Some of my best friends work in procurement…and some don’t.

My sense with procurement has always been that their purpose is to deliver savings – this always seems to be number 1 performance metric. Over coffee I learned that this is true, but out-dated (at least in one company). ‘Budgets are not spent to achieve a saving’ was the first quote that resonated. ‘Savings are important…but they are not the reason for being’…was the second.

Apparently the new main purpose for Procurement is to deliver ‘value for money’. For example, an initial decrease in cost base combined with continuing efforts to prevent this new cost base from deteriorating back to where it was.

Altruistic? Unrealistic? I don’t know. But thought provoking for sure. And definitely high value for me for the (price of a coffee) money.

Cheers

Steve

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About Steve Street

I have worked in R&D within the Pharmaceutical industry for over 29 years. Up until April 2012 all of my career had been with one company, but that has now changed. I left that company and took up a new role on May 1, 2012 - still very much within the Pharmaceutical industry and again based in the UK. I have been blogging every week now for over 9 years but only on an external site since January 2012. Email updates of the blogs can be requested using the ‘follow’ option within Wordpress. The blogs are only ever my personal view of what I see, think and feel. I am delighted if you agree and find value; happy if you disagree with my views and overjoyed if you feel motivated to comment. Most of all I am simply grateful that you read. Cheers Steve
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4 Responses to Procuring Value…

  1. ‘Budgets are not spent to achieve a saving’ certainly resonates with me Steve.

    I am sorry to say that almost (thankfully, not quite) all the people I have dealt with in Procurement would have been better suited to buying water than buying something where there are two sides to the value equation. Makes me wonder what I could have done better to help them see the other side, but I’ve found that Procurement likes to set a very specific set of questions that leaves you with very little opportunity to demonstrate value. We recently reached the shortlist for another CRO and the final presentations were allocated 15 minutes each.

  2. Graham Baker says:

    Steve, I agree that there should be more to Procurement than savings but this is usually the primary metric that Procurement is measured by and in these tough times savings is what is expected. You can’t get away from it but there should be more to Procurement than that.
    Personally I look to the words of Reck and Long 1988 where Procurement and Operations strategy is truly aligned and “integrative” which to my mind needs to extend to the external partners. A meeting of minds needs to occur at a senior level through governance to set the tone (culture) in the operational groups that deliver projects. Its only when this happens that the commitment, trust and buy-in develops to enable the sorts of initiatives that develop value beyond immediate savings and more particularly prevent value leakage (see also http://www.sourcingfocus.com/site/featurescomments/6036/ and KPMG Report – Mark Voytek & Ron Walker (2012) ‘Stop the value leakage’). I have always liked the Vested Sourcing Approach which looks for and quantifies the win-win which you would hope will keep both sides of a partnership happy but alas have seen very little of this in practise within our industry.

    • Steve Street says:

      Graham

      Great to hear from you and tihs is great input. I am not surprised tis is a topic close to your heart and i really like your description of what you are after with and in procurement.

      I tust you are well and continue to enjoy yourself as well as doing great work.

      Cheers

      Steve

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