CPSM Blog

Back to Contracting and Negotiation Task 1-A-1

This is the start of the second round of the topics of the CPSM exam. See the first post on this section from February 2008. While negotiation is huge in supply management remember that the Internet has become big in the last fifteen years. So although my version of the study guide does not talk a whole lot of the role of the Internet in contracting and negotiation, I would encourage you to think about the role of the Internet in contracting and negotiation. Do you seriously believe that you or your negotiating suppliers will not check out each other and competitors before contracting? So you need to think about the Internet when dealing with this section. But please check the language of the question, if the Internet is not mentioned at all- do not assume the role of Internet in contract and negotiation. Perhaps the question is written several years ago.

So what are the bridge topics of this section?

• Electronic solicitations (RFx) : these include the ones (perhaps all in the US) sent out by e-mail  that the supplier  needs to access via the e-sourcing platform of the client. 
• Pricing models  and market structure: refers to types of markets that you need to recognize because in some markets there may be many suppliers and this would allow you to send out RFx to all the players. Obviously when say a hundred suppliers learn that they are all bidding then you can expect to come down to the perfect competition state.  In the real world things are not perfect and you need to think about imperfect competition that is a mixed state.

Defining and measuring supply management department performance

In this section, the methodology of measuring supply management performance is discussed. The section starts with a discussion of expectations from supply management from top management. Ideally, the top management should have a measurement of supply management expectation consistent with the company's mission. For example. historically Southwest airlines had the mission of "THE low cost airline" and you'd expect that supply management would have a similar aim.However, the website has the following mission :"The mission of Southwest Airlines is dedication to the highest quality of Customer Service delivered with a sense of warmth, friendliness, individual pride, and Company Spirit". So if you lead the Southwest airline supply management you need to have a sense of the history and what is expected going forward. So along with "low cost" you are supposed to deliver "warmth, friendliness, individual pride, and Company Spirit. " You need to therefore make sure that you are able to measure the department's performance from the point of view of passengers, suppliers, individual department members- against the explicit website mission statement and the implied,historical low cost idea.

Once you articulate specific metrics of goals for the department,individuals users you need to measure how well you did. For example, if you want a 90% reliability of supply delivery date according to the delivery date in your  purchase order terms, you must have data that are able to show what the actual reliability number is. It's fine if you are at 85% in the first year and its great if you have 87% in the next year. In other words, the idea is to keep track of how well you are doing as per standard. So long as you are working towards the goal (85% moves to 87% in the second year against the target of 90%). it's fine. If you are short then you need to have a remedial action in place like giving suppliers more lead time that in turn must be supported by early requisition by the users. You don't need to beat every target , but you need to have an explicit plan and progress data as you keep trying to improve the metrics.

CAPM's CPSM Blog launched

At the CAPM Board meeting on December 12, 2007 the Board of Directors resolved to approve the start of a CPSM blog. The blog is sponsored and maintained by Stratoserve LLC and is intended to build a community within the CAPM membership of those who are interested in taking the CPSM Pilot exam and then the CPM Bridge Exam.

The Blog is initially positioned to function as a support group for CPSM exam takers and potential exam takers.However, all folks interested in supply management should find the blog of interest. The blog needs your support by way of your thoughts,experiences and questions that you can comment directly on the blog. Feel free to email Subroto at [email protected] with your thoughts,comments and inputs.

Bruce Caldwell CPM Treasurer, CAPM and a prominent instructor of the CPM modules has promised to provide thoughts,ideas and posts.

Our tag line is "A Blog for CPSM wannabes"