What Makes Procurement So Interesting? A Skiing Story …

Why is procurement so interesting? I know, you might not always feel that way, but one reason that might resonate with many of us is that commercial decisions about buying, contracts and so on come into every aspect of our lives.

Here’s a good example. We don’t do summer holidays at all these days, but love skiing. So recently I had a key decision to make. Do I buy a lift pass and ski hire ahead of time, via Crystal, the travel firm we’re going with, or wait till we’re in the resort and buy those products ourselves?

This is not as easy a decision as you might think. The first consideration that comes into it is currency. Crystal, one assumes, fix their currency risk well in advance and presumably buy Euro “futures” in some way to cover their forward exposure. So when I looked at the rate for the lift pass for instance quoted by Crystal, compared to the list price in the resort, Crystal looks quite a bit cheaper. Maybe they also negotiated a volume discount from the lift company – procurement again – or perhaps they simply bought Euros ahead when the rate was 1.20 rather than the 1.13 it is now.

So buy through Crystal – surely that is the obvious solution?

Well … maybe. Two other supply chain related issues come into play. Firstly, can Crystal meet my requirements? They only sell clients a full 6-day lift pass. What if we only want to ski for five days? Or four? And that raises the other key risk-related issue. This is a pretty high, exposed resort, with a fair chance that the weather might intervene, making it impossible to ski for some of the week. What is the probability of that occurring, and might that also make the six-day lift pass a less good option?

Remember how natural disasters, weather events and the like can have a huge influence on supply chains. Even in the Austrian Alps, a major snow dump can bring everything, even hardened men of the mountain like me, to a halt. (Actually, I’m a pretty soft and fluffy man of the mountain, truth be told.)

Now we come onto the ski hire. Here, the Internet has changed everything, as it has for so much in the procurement and supply chain space. I can order my skis (we have our own boots) in advance on line, and choose between different suppliers, although there appear to be pretty strong resort-level cartels at work here, with remarkably similar pricing from different shops - another interesting procurement topic maybe.

But this route to market cuts out the middle man, as Crystal presumably make some margin on the hire deal if it goes through them, and should enable the shop to offer me a good deal directly. But again, comparing like for like is not always easy. Crystal offers three levels of ski if I book through them  – the shop offers five directly. Am I really comparing equivalent specifications when I look at the prices?

OK, so maybe I’m just sad, but this is the fascination of procurement for me. There are so many different aspects – just going through this exercise has raised questions of risk management, forward buying, currency movements, comparing specifications, understanding your requirements, and supply chain optimisation (eliminate the middle man).

And the real message of this is that - I suggest that pretty much everything you buy can be just as interesting as my ski trip, if you think hard and creatively about what you might be able to do to bring value and benefits to the organisation. Any category manager who says “there’s nothing more we can do in this area” just isn’t trying hard enough.

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