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17 January 2019
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More on myths and panacea solutions

19 August 2013

Last week I gave my thoughts on the myths around centralised procurement. I picked that activity just because it had been in the media in the preceding days, but it was just one example of panacea solutions.

Social media is full of this sort of thing – “how I made a million dollars in four weeks” – but I have seen more than enough of the same thing in business, too, over the years, as long as there are people gullible enough to be taken in. Part of the problem is that we have fallen in love with the soundbite, which although can be a very good way to illustrate a point, can be little more than a cartoon characterisation of the real issue.

Going back to procurement, one of the classic panacea solutions is reducing the supplier base. Now there is nothing wrong with that, for consolidation of demand will normally reduce price and bring about other efficiency benefits. However, the way that this normally happens goes something like this: new boss (or consultant) looks at the supplier database and finds several thousand companies on it. "Ridiculous!" they shout and set a target of reducing that to about 10 per cent of its number, with the grateful employer swooning with delight at this piece of salvation.

But there are two reasons why there are so many suppliers on that database, one good and one poor. As we are talking history, you can’t do much about the latter. The first reason, the good one, is that the supplier database comes off the accounting system and there is a requirement to keep accurate records for a long time. Every company that you have used will be on there and there will be a lot of one-off transactions or occasional use suppliers that are perfectly legitimately listed. Get rid off suppliers you don’t use less than three times a year? Perfectly laudable, but what about the local council you pay your rates to annually? Or your insurers?

The original soundbite of reducing the number of suppliers has, at its core, much merit, but the reality is that you are probably already doing things right and the only positive thing that needs doing is to to root out any duplications, for example where one supplier is listed under more than one record. You might find Smith and Jones (Builders), Smith & Jones (Builders), Smith and Jones Builders – just three examples of how to set the same firm up with different supplier records. You can’t normally consolidate the historic data on the accounts system, but you can decide which one to use in future.

That’s just one example of the sort of nonsense that gets spouted, and believed, on a regular basis, but you should always look at what is behind such statements. There are always good things to be done and while there are rarely easy solutions, there are often simple ones regardless of how complex the problem is. As long as you, and the people that are working on it for you, truly understand the problem, you have a chance of solving it.

Soundbites, like first impressions, are dangerous. Such superficial judgements should have no part in modern management. What you need are people who put up a good fight regardless of whether or not they can talk one. Beware the BS of management speak and panacea solutions and just get the job done. As the song says, that’s what gets results.

John Bowen is an FM consultant