Profitable Buying Strategies : How to Cut

Organizations that wish to improve their profits have only three options. They can increase sales prices, increase sales volumes or reduce costs. For many organizations, competitive pressures are making the first two options increasingly difficult, which leaves cost reduction as the key option to improve profits. Strategic Procurement offers organizations a long term, structured approach to cost reduction, through smart procurement practices. This straight-forward guide to profitable buying strategies provides readers with a thorough understanding of the philosophy and psychology of buying; buying concepts, tools and techniques; changes that deliver cost reduction; market testing; outsourcing and insourcing; negotiation and the legal aspects; and e- procurement. Containing multiple case studies and appendices outlining the successful cost reduction drives of a number of major organizations, Strategic Procurement gives readers a real world explanation of cost reduction and procurement options to help them make their organizations more profitable.

Mike Buchanan has 25 years of senior-level experience in procurement, almost all within major private sector organizations, in many market sectors. He is now a procurement consultant and the Chief Executive of the UK-based consulting firm Link Procurement Services.

List of figures	p. xi
List of tables	p. xii
List of case studies	p. xiv
Preface and acknowledgements	p. xvi
Introduction	p. 1
The philosophy and psychology of buying	p. 7
The philosophy of buying	p. 7
The psychology of buying	p. 9
Vendor conditioning of buyers	p. 15
Personality types and aptitudes	p. 16
Risk management	p. 17
Important buying-related concepts	p. 21
Terminology - cost reduction, cost containment, cost avoidance	p. 22
The buying portfolio	p. 23
The Pareto Principle (the '80/20 rule')	p. 25
Single sourcing and multi-sourcing	p. 26
Buying power and intrinsic cost reduction	p. 27
Market segregation	p. 30
Quality	p. 31
Total cost of ownership ('TCO')	p. 31
Effective tools and techniques	p. 34
Spend mapping	p. 35
Estimating and targeting cost savings opportunities	p. 37
The buying cycle	p. 41
Price benchmarking	p. 45
Specifications - goods	p. 47
Specifications - capital equipment	p. 49
Specifications - services	p. 52
The changes that deliver cost reduction	p. 54
Engage the current vendor(s), and potential new vendors	p. 55
Change what is bought	p. 55
Change how it is bought	p. 57
Change when it is bought	p. 66
Change who buys it	p. 67
Change where you buy it from	p. 67
Rent rather than buy?	p. 68
Involve procurement at an earlier stage in the buying cycle	p. 70
Market testing	p. 72
Why market testing is so important	p. 72
Different types of market testing	p. 74
Locating potential new vendors	p. 76
Buying internationally	p. 78
Market testing in difficult markets	p. 82
Case studies	p. 83
Outsourcing and insourcing	p. 87
Background	p. 87
Deciding what to outsource	p. 88
Levels of outsourcing	p. 89
The top three legal issues	p. 91
Insourcing	p. 96
Negotiation	p. 97
The distinction between buying and negotiating	p. 98
Aligning style and tactics with the nature of the buyer-vendor relationship	p. 98
Why most people are poor negotiators	p. 99
How to develop your negotiating abilities	p. 99
The five golden rules of effective negotiation	p. 100
Minimum and maximum settling points (MSPs), and the 'killer question'	p. 103
The buyer's power over the course of the buying cycle	p. 106
How to leverage your buying power	p. 107
Vendor pre-conditioning	p. 108
Contracts and contract law	p. 110
Why formal contracts are important	p. 111
Contract fairness	p. 112
Contract duration	p. 112
Which contract terms to use	p. 115
Vendor terms to be challenged	p. 116
Developing your own contract terms	p. 117
Contract termination	p. 117
Contract terms and the buying cycle	p. 121
Contract register	p. 121
E-procurement	p. 123
Background	p. 123
Terminology	p. 124
The development of e-procurement	p. 125
A brief introduction to auctions - Dutch, Chinese, reverse, electronic, English...	p. 126
E-auction 'do's and don'ts'	p. 127
eWorld	p. 127
An overview of e-procurement - The Aberdeen Group	p. 127
E-procurement enabler 1 - Procuri	p. 133
E-procurement enabler 2 - BravoSolution	p. 139
E-procurement enabler 3 - Vendigital	p. 143
Organizational issues	p. 147
Politics	p. 148
Buying development stages	p. 149
Approaches to buying	p. 149
Building buying capacity and capability: employees, interim managers, consultants	p. 153
Maximizing the value derived from external experts	p. 162
Matching buyer personalities/aptitudes to tasks	p. 162
Buyer motivation and incentivization	p. 162
Individual roles, responsibilities and authorities	p. 163
Buyers' product knowledge	p. 164
Buyers' contract law knowledge	p. 164
Buyers' competence development	p. 164
Performance measurement and reporting	p. 165
Ethics	p. 167
Service level agreement (SLA)	p. 168
Request for proposal (RFP)	p. 179
The Chartered Institute of Purchasing and Supply	p. 191
Soft issues impacting on cost reduction drives	p. 205
Buying at Sainsbury's supermarkets	p. 209
Buying at SmithKline Beecham	p. 217
Buyer remuneration in the UK	p. 228
References	p. 233
Index	p. 234
Table of Contents provided by Ingram. All Rights Reserved.

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Profitable Buying Strategies : How to Cut Procurement Costs and Buy Your Way to Higher Profits

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