Watch Out For Spend Management Pirates

In the swashbuckling days of old, pirates wore many hats and played multiple roles. Many were unofficially sanctioned by governments to pillage the trading goods and strike fear into the heart of enemy nations, playing the metaphorical role of Venezuela and Iran today as Russian puppets. Others were truly rogue states afloat in the great blue abyss, an olden time North Korea if you will (albeit without the spiffy fascist uniforms and enriched uranium to extend their influence past starboard cannon range). Today's real-life pirates, however, don't represent either category -- at least not yet. Over on Supply Excellence Bob Zeiger recently called them inconsequential when it comes to playing a role in driving prices. But I believe, metaphorically, that today's pirates matter quite a bit in the context of Spend Management. Outsiders might look at them as organized seafaring criminals. I look at them as opportunists that are breaking the law with an understanding of just how far they can push the limit.

Much like the big steel (or should I say "steal") companies who recently repealed steel surcharges last week -- which they should have done months earlier -- and the air carriers (passenger and freight) and transportation providers who have not yet rolled-back surcharges at the speed with which they should, they're taking a calculated risk. Granted, they're risking their lives and our suppliers are just risking their reputation (and potential court action), but it's a similar risk nonetheless. In Spend Management, some of our suppliers serve the role of pirates, and while we don't think of them as such, we should. The key is figuring out which ones are robbing us -- or holding us at gunpoint with a smile -- and to take action.

Transportation providers, base material suppliers and office supply companies are often the ones who get away with murder -- and these are a good place to start. But don't worry about calling in the navy to come to your rescue. Usually a good spend visibility and analytics package, market competition and the willingness to evaluate alternatives -- not just alternative suppliers, but substitute products -- is often enough to sheath the swords . Sometimes you might need to call out the big guns and wage war against the more smarmy and smart pirates (e.g., MeadWestVaco and Leggett and Platt who have tied up various commodity markets such as activated carbon and bedding springs by attempting to monopolize the supply markets and/or filing anti-dumping complaints). This can take years, but ultimately the market forces should prevail, just as it can take a lifetime to sink the Edward Teaches (i.e., Blackbeards) of the supply world.

And one final thought. It's also worth thinking about the sources of content you read -- they're often propaganda for the pirates' game. Many of the business trade rags that focus on different commodity and supply markets are in large part funded via advertising by the suppliers themselves. So don't look for any truly good tips to combat piracy from them. Turn to blogs, objective analysts, vendors and consultants who are on your cost side for tips to sink these guys to the bottom of the ocean -- where they belong. Avast ya scarvy cost scum!

- Jason Busch

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