April 2024

To fail to plan

“You can’t steer a ship by looking at its wake!”

“A good plan today is worth more than an excellent plan tomorrow!”
“To fail to plan is to plan to fail!”
“You can’t steer a ship by looking at its wake!”

I thought that a few aphorisms would be a good introduction to a presentation about procurement planning. I was wrong. After the presentation, a man approached me.
“Actually,” he announced, “if all your instruments fail when you’re on a ship, the only way you can successfully steer the vessel is by looking at its wake.” it is possible that he had a point. If the future is so dynamic and so difficult to predict as to make any forecasts pointless, maybe relying on what has worked before is the only option?

Here’s one I prepared earlier
Look back at the procurement plans that you have been involved with. How many of them took the previously-used document and updated the timetable? Isn’t that 'steering the ship by looking at its wake?'

Four types of planning
I think there are four types of planning that are relevant to procurement;
• Forward planning
• Contingent planning
• Preventative planning
• Scenario planning

The truth is that the contemporary workplace squeezes out opportunities for thinking in general and envisioning in particular. How can we claim to be strategic if our time horizon is focused on getting the RFP out by Friday rather than “what will the market be like in 18 months time?”
Forward planning
Forward procurement planning is typically focused on the following four topics;
• The RFP process and timetable
• The evaluation process and timetable
• The contract timetable
• Known and potential market dynamics

Whether your forward plan for a significant spend is called a “procurement plan“ or a “category plan“, it Is likely to contain a timetable for market engagement. When will the bids go out and when are the bids due back? Having insisted on ten days for bid submission, it is a truth universally acknowledged that sometime during the scheduled evaluation process, the procurement team will announce to the bidders that “evaluation is taking longer than we expected!” . It is my experience procurement people like you and me routinely underestimate how long it takes to evaluate offers. Could this be a symptom of poor planning?

The contract timetable includes the interval between contract award and contract commencement, the primary period and the number and duration of any optional contract extensions. I once asked a senior procurement manager why the office supplies contract had a duration of one year plus two optional contract extensions each of two years. “That’s easy, if the contractor is rubbish, we can kick them out after a year!” I hope the rationale for the duration of the initial contract period is based on better logic than that! Consider the payback period on any customer specific investments that the contractor has to make, or the cost of change, or even the dynamism of the market.

Market dynamics is the final topic for forward planning. This might include synchronising the expiry of different agreements within the organisation in order to consolidate like requirements. Or perhaps a provider of a legacy solution is withdrawing support at a known future milestone. Or there are future regulations coming which impose new obligations.
My rule-of-thumb when reviewing procurement plans is to sum the number of words in the topics in the first three bullet points listed above, and divide that by the number of words in the fourth topic. If the answer is greater than procurement’s magic number- three- then this may point to an operational plan, rather than a more “strategic” plan.
At the very least procurement plans should include content dealing with known drivers of change that will make tomorrow different to today. The reality for all of us is that the time horizon over which we can confidently anticipate the future is getting shorter. But that doesn't mean we shouldn't try.

Contingent planning
Contingent planning is the “if this happens, then we will do that” thinking that informs disaster recovery and business continuity plans. The lessons learned from recent supply chain disruptions is that it is good practice to monitor leading indicators of change so we can execute a pre-prepared plan immediately that a trigger event is detected. If “Supply chain resilience” is an important priority for you, then having the contact details of alternate suppliers, or having access to safety stock may be examples of a contingency plan.
The key steps are
• identify potential sources of supply chain disruption;
• consider what may be the direct and indirect consequences;
• develop a contingency plan to a level of detail so it can be executed immediately;
• identify leading indicators of potential disruption;
• assign responsibility for monitoring the leading indicators;
• define the authorising chain to enact the plans at short notice.

Preventative planning
A packaging executive once told me about how starch was a vital ingredient in making cardboard boxes. Apparently, manufacturers of cardboard boxes played off the three starch suppliers in the Australian market against each other. Eventually, one of the starch suppliers left the market as margins were unsustainable and demand unpredictable. The big buyers of starch continued to play tactical price games, and the two remaining suppliers continued to complain about sustainability. Eventually, one of the two remaining suppliers exited the market. You don't need me to tell you what happened next, do you?
Preventative planning might have involved the buyers of starch ensuring that there was sufficient capacity in the market to meet their needs, without falling foul of the market regulator. Perhaps dual sourcing might have been appropriate? Or underwriting some of the supplier's fixed costs? Preventative planning requires risk focused prescience of what might happen, and taking steps beforehand to reduce the likelihood of the risk happening. You wouldn't entrust a strategic negotiation to someone with no negotiation capability, would you?

Scenario planning
It is sometimes said that scenario planning is undertaken in order to give horoscopes a good name. "Tomorrow will be like yesterday, only with hoverboards!" For procurement practitioners this translates into modelling "what might happen in the evolution of the supply market?" Nominate a facilitator and a sage.
• The sage identifies a specific macroeconomic or market change;
• the facilitator asks "what happens next?";
• the sage identifies a number of likely consequences;
• for each of the consequences, the facilitator asks "why does that happen?", and "what happens next?";
• the sage continues exploring follow-on direct and indirect consequences;
• do this for five or six cycles and add a label for the scenario;
• then the team review the unfolding events, the linkages and the outcome.

After two or three iterations with different trigger events, the team will have explored some possible futures and built understanding of market processes and inter-relationships. When developing category plans, if the intended strategy would fail under any of the possible futures, then it may need to be revised to make it more robust. 

Conclusion
I hope your instruments haven't failed! Challenge yourself and your team to make time to plan, and make sure you are not navigating by looking at the ship's wake.