Procurement savings, mummified Japanese and ITV resignations

OK, so if that heading didn't attract your interest, then there is no hope.

I've been writing a series of pieces on procurement savings; one more to go actually on 'capturing' those savings.  And that issue, of how to turn a theoretical saving into something real that contributes to profit or is genuinely re-used in a productive manner, is just one of the reasons why I am very cynical about most of the savings claims made by procurement people and increasingly by organisations in their annual reports, acquisition documents and so on. You know the sort of thing.

"Merger benefits will include $500 million from combining purchasing and greater buying power".. “Procurement savings of £100M this year contributed to record profits”.

The truth is that, unless we know what methodology has been used for measuring and capturing savings (or for predicting future savings), we can have no clue as to how accurate or even vaguely credible the figures might be.

I wrote back in March about this issue.

"Another ‘procurement is making huge savings’ piece in Supply Management, this time from ITV.

And again, as in my last rant about this trend, no criticism of ITV or Angela Porter and her team intended, I’m sure they’re doing a wonderful job.  But unless she shares the savings measurement methodology, and the detailed results with us, it is just another unsubstantiated claim.

Now, less than six months later, that CPO is leaving.   Again, this is genuinely not a criticism of  ITV or the lady in question, and clearly I don’t know the full story.  But one can’t help wonder whether there was a mismatch at ITV between how procurement was reporting its achievements, how it was perceived by top management, or indeed whether 'savings' were strategically what the organisation really wanted from procurement.  Supply Management had a very interesting quote from another ITV procurement executive on this issue which suggested some strategic misalignment.

"Andrew Newnham, head of technology sourcing at ITV, told SM that the broadcaster was moving towards a smaller number of commercial relationships with key partners.

“We have to consider whether [we] should be focusing on deriving commercial value from these partners and working with the business to innovate and bring new ideas to market much quicker than we have previously, rather than a more traditional approach that has focused on savings as a proxy for procurement success,” Newnham said.

"Savings as a proxy for procurement success" - Andrew Newnham, you have just come up with a phrase I will be using for many years to come!  But my main point is this; quoted "procurement savings", or pretty much any data or numbers made public, rarely tell the whole story and often don't tell much of it at all.

And that takes us into the mummified Japanese.  We’ve been told for years now about the amazing longevity of the Japanese race; more centenarians than any other country in the world for example.  Now the Times (from behind their firewall) reports an amazing story, that this appears to have been an illusion based on appalling report keeping, nonexistent social services, and greedy ‘children’ (themselves of pensionable age) concealing their parent’s death to carry on claiming their pensions and benefits.  Often the actual body was also concealed – hence the mummification!  Here’s a sample from the Times:

“The plan was simple: knock on Sogen Kato’s front door, congratulate him on his longevity, offer a cash reward and inquire whether Tokyo’s oldest resident would, at the age of 111, mind taking part in Japan’s “Respect the Elderly” festivities on September 20.

After a bit of doorstep argy-bargy with his 81-year old daughter, the authorities were led upstairs to Kato’s bedroom. He was there all right. Or, at least, his bones were: swaddled in bandages and surrounded by newspapers from October 1978, the last time he had drawn breath or followed world affairs”.

And this has not been an isolated incident.... and the world's belief in Japanese longevity may have been based on a lie and rubbish data.

So if the underlying truth is important to you, don’t take quoted ‘numbers’ and ‘facts’ on trust.  Ask to see the raw data.  Ask where it comes from.  How is it verified?  Could it be distorted?  Does the person communicating to you have a vested interest in the data?  These are great questions to bear in mind, whether it is in dealings with suppliers, in reading the newspapers, in listening to politicians – or even when reading articles about procurement!

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