by Cheryl-Anne Sturken | April 01, 2006

The growing influence of procurement departments within corporations, and their extended reach into meetings territory, has created a deep chasm of mistrust and apprehension in the meetings industry. Parties on both sides of the divide say this largely can be attributed to a lack of education on the part of planners when it comes to the overall role of procurement.
    Indeed, insiders say it has become vital for meetings professionals to learn the basic principles that procurement officials apply to the supplier selection process, whether the supply in question is paper clips, office furniture or hotel rooms. Knowing the process could well make the difference between a slashed budget and a cooperative effort to do right by meetings.
    To help shine light on an often obscure area of finance, M&C spoke directly with procurement heads from several organizations. What we learned might come as a surprise to many meeting planners. As it turns out, procurement officials have much the same job responsibilities, goals and philosophies as planners do; even the language they use is very similar. The folks in procurement are looking for value at a good price, with consistency, accountability and limited risk to the organization as a whole. Sound familiar? Read on.

Balancing cost and value
The common perception among meeting planners is that procurement pays homage to one language and one language only the dollar sign. Furthermore, the supplier with the lowest bid always wins the contract and preferred status.
    Not so at all, says Paul Davis, vice president of strategic sourcing for White Plains, N.Y.-based Starwood Hotels & Resorts Worldwide. “Yes, we want to save our hotels and owners monies through  lower cost of goods, but we are the same as any meeting planner trying to balance quality and price.”
    At Starwood, Davis oversees 200-plus vendor accounts for goods and services ranging from TVs and bedding to security and food and beverage delivery. His perspective from a service industry standpoint, however, is no different from that of a procurement official concerned solely with product purchasing.
    “Companies are in business to make money, and there is a lot of fat in most companies that deserves to be looked at,” says Jack Frain, account manager for Beverly, Mass.-based Three Core Co., which provides procurement assistance to manufacturing firms.  “If you are not looking for ways to reduce cost while keeping your product competitive, you are immediately at a disadvantage.” 
    Launched in 1999, Three Core has built a reputation in the procurement industry for helping manufacturing  companies harness their buying power by creating and implementing internal customized procurement systems. The average initial savings per client is 10 to 15 percent, with another 3 to 5 percent year-over-year, the company claims. 
    But precisely because it is procurement’s job to drive costs down, says Frain, outsiders miss the big picture. “Cost is extremely important, but it’s always about quality,” he notes. “A lot of things can be made in China and other countries much cheaper. That’s a fact. What is unknown, though, is quality of the product, and quality is what it always boils down to in the end.”

Focused on objective
One company’s procurement objective might be to consolidate and reduce its vendor base. Another’s might be to find distribution channels in new markets. Whatever the case, the individual company’s overall objective is what drives the procurement buying process. 
    “You have to have a consistent procurement philosophy, a road map from which to work,” says Tim McKenna, CMP, senior manager of strategic procurement for Minneapolis-based Carlson Marketing Group. 
    McKenna is responsible for procurement i.e., site selection for corporations placing corporate as well as incentive business. And precisely because his objectives change, depending on the meeting client’s needs, McKenna never allows his prior knowledge of a hotel to cloud his buying judgment.
“Just because I’ve been to a property  four times in one year, know it inside and out and what rate I can get, doesn’t mean I’ll go with it,” says McKenna. “I always have to buy through the eyes of, ‘What is my client’s objective?’ That’s the basis for my negotiation.”