When Will Procurement Do What It's Supposed to Do?

Procurement was celebrated in the bestselling book about the turnaround of the automotive industry quotThe Machine that Changed the Worldquot which documented quotlean productionquot as the wave of the future Automobile producers closed their parts manufacturing factories and focused instead on finding a few global suppliers who could work efficiently as strategic partners in the supply chain Procurement led the way focusing on reducing the 40 percent of costs associated with quotinefficient processesquot using the welldocumented principles outlined in ISO 9001 Western automobile producers emulated The Toyota Way and restored competitiveness to their operations GM Ford and Chrysler cars trucks and SUVs made great leaps forward in quality and customer satisfactionLater after 2001 when procurement was assigned the job of improving quality and cost in media and creative operations they completely blew it Intimidated by the complexity of media and creative agencies they took the easy way out and focused on benchmarking salaries overhead rates and profit margins to cut agency fees The answers to these four questions illustrate whyDid they look at the briefing and ad approval processes Not at all They left in place the extraordinary amounts of rework that resulted from poor briefing and hierarchical ad approval processesDid they focus on scope of work planning and measurement After all scopes of work SOWs define the quotworkloadsquot given to media and creative agencies Not at all Very few major advertisers have the slightest idea how much work they are giving to their agencies What they are falsely confident about is how many agency people it takes to do an unknown quantity of work and rework That39s how fees are set quotWe39re prepared to fund XX number of people at a low average salary level of XXXXXX per year Marketing will tell you how much work to doquotHave they reduced advertiser inhouse operations relying instead on their outside agencies to become strategic partners Not at all Quite the opposite They39ve taken operations away from agencies amp8212 media and creative operations amp8212 even though they are not sure they can recruit the right number and type of peopleHave they reduced complexity and increased quality Hardly Complexity has increased extraordinarily In media complexity has risen due to media fragmentation increased numbers of campaigns and increased agency reporting requirements In creative operations complexity has grown due to the extraordinary increase in SOW deliverables and the frequency with which advertisers review agency operations and change agenciesProcurement has lost sight of its overall mission which is to improve quality and lower costs by eliminating unnecessary complexity and working to strengthen the capabilities of strategic partners Turning agencies into vendors should not be part of their missionThe media industry is generally unfamiliar with the heroic past of procurement in manufacturing and distribution What the media industry has experienced is feebashing amp8212 the type of procurement behavior that makes more sense when purchasing produce for supermarkets than buying media and creative strategic thinking Iceberg lettuce anyoneAt least two generations of procurement executives have cut their teeth bullying media and creative ad agencies and I doubt that they know any betterWhen will procurement do what it is supposed to do Who will require it Can the industry associations pivot to provide a sense of direction It39s an idea whose need has comePhoto credit Jacob Samuel The New Yorker The Cartoon Bank With permissionClick the social buttons above or below to share this story with your friends and colleaguesThe opinions and points of view expressed in this content are exclusively the views of the author andor subjects and do not necessarily represent the views of MediaVillagecomMyersBizNet Inc management or associated writers

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When Will Procurement Do What It's Supposed to Do?

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Michael Farmer

We Are the Outliers - By Jack Myers

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When Will Procurement Do What It's Supposed to Do?

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