Insights
The Revolving Door of Corporate Procurement & Resulting Bottom-Line Vulnerabilities: Part II
In the first installment of this series, The Revolving Door of Corporate Procurement & Resulting Bottom-Line Vulnerabilities: Part I, I introduced a few anecdotes highlighting the perpetual and inevitable nature of turnover in corporate procurement departments. I posited that continuity of category management tends to be undervalued—particularly in tail spend categories, and especially in the most complex among them. When monetary priority is relatively low and complexity is high, a revolving door of category managers tends to yield no results or, more likely, negative results.
For illustrative purposes, let's take a deeper look at an anecdote that highlights how corporate turnover can cost companies significant time and money.
This particular example involves one of the longest sales processes our firm has ever…umm…endured?!?!
Our sales rep first met with the company—we’ll call them "ABC Widgets"—in late summer of 2015. Some highlights from the series of notes in our sales database following this initial meeting are below (names changed to protect anonymity):
September 2015 – 1st meeting (F2F) with “Bob,” MRO Category Manager
Really nice guy. “Bob” will lead this process but will need approval from his Director, “Jane.” Said that he sees opportunity here and will work with me to meet his director. ~$1.2MM in spend in our space.
October 2015 – 2nd meeting (web) with “Bob” and “Jane”
Service issues are a perpetual distraction in their areas and they want help with this. They also have an issue with their sites straying from the national contract and doing their own thing, minimizing the intended benefits of the contract. “Jane” says she’s very interested and sees value in what we do. Wants to review our terms and discuss internally with “Bob.” Next conversation in 1.5 weeks. Sent standard agreement & LOA's.
November 2015 – 3rd meeting (web)
New category manager “Carla” replaced “Bob.” Had to start over pitching her. The bad news is she seems to think there’s some “low hanging fruit” she can grab before handing us the reins to the category. Not sure why she thinks that considering it doesn’t seem she’s done any discovery yet and there’s substantial remaining term in the supplier agreement, but I assured her we could work through this with our terms. Good news is she said the spend is more than double what Bob thought it was—$2.5MM. Scheduled a next meeting for next month.
Prospect missed the meeting in 12/2015 and went dark for over a year. When we finally re-engaged them in early 2017, it came to light that nothing had been accomplished in the targeted category. Other priorities had prevailed throughout 2016.
March 2017 – 4th meeting (F2F) with “Carla” and “Jane”
Both are interested, and “Jane” wants to call two references and needs to review our terms since she had forgotten essentially all engagement details. We are re-connecting in two weeks.
“Two weeks” turned into four months.
July 2017 – 5th meeting (web) 07/2017 with new category manager “Gary”
Ugh. “Gary” now replaced “Carla.” Walked him through introductory presentation and prior discussions. He said it was very helpful and said that he would get with “Jane” in the next two weeks and plans on discussing with her in further detail. I offered to be there in person again and he said that he'd let me know. I told him that we have been at this point multiple times and we have deferred hundreds of thousands of dollars in savings by now. He said that he sees the value in the engagement and will see what he can get done. He said it might be helpful if they had buy-in from their Regional Operations Directors, so he may try to pull them together for a discussion (there are three of them). Waiting on possible dates for that discussion.
September 2017 – 6th meeting (F2F)
Meeting with “Jane” and “Gary” along with the Ops Directors “Steve,” “Allison” and “Julia.” No presentation, just open discussion since they all had been briefed behind the scenes. They asked good questions, and all seemed to like our answers. We stressed the fact that we've been talking about this for 2 years and we still aren't adding any value for them. If they continue to talk about it they'll be in the same situation 2-3 years from now with the same lack of results. The group needed to talk offline. Next (hopefully final) steps to be discussed with “Gary” afterward.
November 2017 – 7th meeting (web) with “Jane”
She said that they have decided to move forward with Fine Tune but we need to work through the negotiations of our agreement and supply them with a 5-6 slide executive summary. She said this is “Phil's” project and to get him the PPT and a copy of the agreement. They would like to roll this out in 2018 and said that we should be able to have a deal signed by Thanksgiving.
Prospect went dark again, resurfacing three months later in early 2018.
February 2018 – 8th meeting (web) with “Gary”
He apologized for the delays and said we should hear back within a week or so. He wants to finalize the deal, he says.
Prospect goes dark—right at the finish line—again, this time for four months.
June 2018 – 9th meeting (web) with “Jane”
“Jane” says category manager has been reassigned again, and hilariously, it is going to be “Bob”, who we met with back in summer of 2015. Since nobody ever called our references, I had to reach back out to them to give them a heads up. “Jan” says “Bob” will be contacting them soon and hopefully we can finally wrap up a deal.
Following the positive reference calls, the process finally moved to an agreement redlining stage. The parties reached agreement in principle on deal parameters in September, but the deal didn’t get fully executed until early December.
December 2018
AGREEMENT SIGNED!
This entire ordeal had taken 39 months and the category ownership had changed hands four times, ultimately landing back with the original contact. In the interim—as we would soon learn—category spend had, not surprisingly, steadily climbed as the supplier feasted on the customer’s lack of focus, management, and category knowledge.
Part III of this "Revolving Door" series highlights what happened when this client finally injected category expertise and continuity into this “hot potato” of a category...
