Procurement as a Family Affair — Lessons From Work to Shape the Next Generation of Buyers

There's a running joke amongst our family friends that the Busch/Reisman children will never lead a normal life. No, this is not because we live in a downtown Chicago neighborhood where nearly all the parents in our kids' school attended an Obama fundraiser in which he spoke during the last campaign (except us, that is). Our oldest, when he was five at the time during the last election, defended the importance of not paying people "to sit and watch TV all day when they could be working or learning" to his friends at school and even introduced a bit of Friedrich von Hayek when he implored those around them "to always keep money in their pocket" versus borrowing from parents to buy candy and toys to artificially stimulate spending -- and cavities. But this was to little avail in the Kindergarten classroom election where McCain ended up winning three votes to Obama's twenty. And no, our son only voted once (this was not a Wisconsin recall election after all).

No, the reason our kids are different -- and always will be -- is that their parents come from a procurement, supply chain and trading background and aren't very good at leaving work, or at least work thinking, at the office. All large (and many small) purchases in our household are examined with significant care. The decision to buy a car, for example, is not as much between the color or options as it is to examine the miles it currently has (we only buy used cars, except minivans, but don't get us started on that one) and weigh that against our expected needs, length of ownership utility and forecast depreciation (factoring in both miles and years). For example, we purchased our company car, a completely loaded BMW X5, with 37,000 miles on it, yet it was only one year old.

Some poor guy (actually probably some rich guy, who will be poor someday) took a $30K hit on it in one year, and we got it for a fraction of the original sticker price even if it was high mileage (and we got the extended, certified factory warranty as well, which made it as good as new for us -- at least from a warranty and coverage standpoint). This contrarian buying strategy (high mileage used car only a few quarters off the new car lot) made sense, since we only drive it five to six thousand miles a year. And in case you were wondering, yes, we explained this to our oldest, who was then seven, at the time. Simply put, this was a total cost decision where the actual dealer negotiation – as it so often is the case in procurement negotiations with suppliers – on a unit price basis was only one small component that went into our landed cost and lifecycle calculation.

By now you're probably thinking our children are cursed. You can probably almost see the whiteboard in our living room on which we outline the reason that if our children want cheap China toys, they should buy them ASAP because of the continually appreciating labor costs and currency. But we would argue you're wrong. There are actually a ton of transferable life skills we can teach children from working in the procurement and supply chain profession which we believe can shape and mold not just how they look at youthful spending decisions, but how they plan and budget for their basic requirements (i.e., their needs) and toys (i.e., their wants) in the future. Take total cost decisions to start.

A few weeks back, I gave a keynote at a software company's customer conference on trends we see in procurement today and where we think things might be headed tomorrow. As part of the talk, somehow I went off on a small tangent about how my oldest son (now almost 9) has become obsessed, like just about every other kid his age, with buying "apps" for his iPod Touch or iPhone. The previous weekend I had tried to teach him a lesson in total cost of ownership.

The story begins when he identified a game that passed our violence test (we do have some standards of trying to hold back gore) and he proceeded to run into his room to find three dollars from his stash. Slamming it into my hand, he said "please enter your password, Dad." I told him to hold it a minute and that while the cost of the game was ninety-nine cents, the actual cost must be looked at over the course of the lifecycle of ownership. For example, we went in fifty-fifty on the iPad Touch (which was $200). He contributed $100 from his savings earned from chores and birthday presents and we tossed in $100. That $100 of our share is only part of the total lifecycle costs, though.

You need to add in the cost of electricity for charging the unit, the opportunity cost of Dad having to troubleshoot software upgrades when things go amiss and photos and apps are lost. Not to mention all the costs to feed him to give him the energy to play the game. "It adds up," I lectured. Of course he had enough of my lecture after a few minutes and stomped out of the room to his kinder mother who obliged with permission for the purchase based on the $1 payment. Yet even if this was a victory for my son in the end, at least he was forced to listen to the concept of total cost in a purchase.

Other good kiddie lessons abound in regular buying decisions. Take toys and the importance of understanding provenance. Provenance as a proxy for supplier quality is a great concept because it takes into account a range of factors -- country of origin, brand, designer, etc. Even though our kids are trained to look with circumspection when it comes to the longevity of a China-produced toy versus a domestic or European one, they also have come to trust certain brands where uniformity and quality control matters. For example, the cost of a Lego set is in part justified by the fact that they know the pieces will all snap together perfectly, regardless of where the set is produced, versus a no-name China knock-off brand (Lego has production around the globe, including Asia).

Yet another lesson our children have learned includes the importance of partnering with key suppliers. Even though boxes seem to arrive at our house and office from Amazon every day of the week, we still spend hundreds of dollars every quarter at our local bookstore. They know the amazing staff and managers can quickly help us find the best books for gifts, for our own reading, and, of course, what our kids want to read. It's worth the unit cost premium, in this case, over buying from Amazon not only because of the convenience of walking to the store, but the exceptional service and experience. A great lesson in supplier management and some of the advantages of local vs. non-local sourcing? You bet.

We've also introduced one more great procurement topic to our kids: the concept of weighing purchase cost and inventory amidst and commodity volatility. As our oldest son tried to explain on a video once (unprompted), we are big believers in buying certain types of organic fruit for the kids to enjoy. But we typically buy only what is on sale and ideally, in-season, given commodity price spikes and swings. When the price is low, we buy significant quantities and often freeze what is not consumed to tide us over for when prices increase.

The basic concept that inventory is not inherently a bad thing and that it is possible to hedge through physical purchases when markets are low is one we have no doubt our kids will employ someday whether they opt for a procurement or supply chain career or not. No doubt, there are many other lessons they'll keep with them as well from the obsessive practices their parents bring home. Yet there's a big difference between bringing home work and bringing home work ideas. We can't help but think that those parents who are passionate about procurement and supply chain topics can be among the most influential when it comes to molding their children's young minds by introducing common workplace concepts and applying them to life decisions, from the mundane to the matchless.

- Jason Busch and Lisa Reisman

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