It can’t have escaped your notice that Tesco has recently had a problem with beefburgers in its Value range
. Some were found to contain pork and horse meat (more than 20 per cent in some samples), as well as beef. A number of other retailers have also had problems.
The cost of the result, in terms of lost sales and reputational damage, will probably exceed the money made selling cheap burgers many times over.
Years ago, when training people who did purchasing only as part of their job,
I made it clear there is much more to procurement than achieving the lowest price. At the most basic level, I explained the ‘five rights’ – the right goods of the right quality to the right place at the right time for the right price.
These alone, however, are not enough. If you are using products sourced from the Far East, you may want to check your supplier has a policy against using child labour; in construction services, you need a supplier with the right health and safety policy; if your organisation is concerned with the environment, you want to find suppliers who share your values.
There are dozens of ‘rights’ that buyers apply every day, be they right level of innovation, right size to be stable, right track record to be credible, and so on.
The myth that price is the be all
and end all of procurement must be shattered. The cheapest car in the UK
is currently the Dacia Sandero. How
many of us drive those? Are our homes filled with the cheapest possible furniture? Do we buy all our clothing
in charity shops?
If it is not appropriate for us as individuals to buy things merely because they are cheap, why can we not explain to our bosses that this is not a good philosophy for the business that we work for?
My theory, although I don’t know for sure, is that purchasers have done deals to acquire cheap burgers and suppliers bought cheap meat. As a result, some may never buy burgers from affected retailers again. For some religious groups, the effect may last
Procurement is also about managing suppliers in a way that balances cost against risk. This means investing time and money working with suppliers to help them understand the culture of our organisations and behave in a way that benefits us, our customers and our suppliers; the managed supply chain.
So thank you Tesco – and others that have had the same problem – for giving us such a marvellous case study we can use whenever someone in our organisation tells us they have identified a cheaper way.