Procurement & Supply Chain Lessons Learned in 2022

Every news story contains a combination of information, entertainment, shock value, and lessons to be learned. Although the top headlines receive lots of coverage, it often isn’t until the news cycle settles down that the core issues become apparent.?

That is the lens through which I am looking back at the top procurement and supply chain news stories of 2022. I covered all of these stories on Dial P, and you can listen here for a summary of each… plus a couple of ‘honorable mentions.’

Make sure your supplier diversity actions match your supplier diversity mission

Allen Media Group (AMG, parent of The Weather Channel) is a minority-owned business. McDonald’s has a carve out for diverse-owned media firms – one that may or may not be as lucrative as their general market contracts. AMG wanted a piece of McDonald’s general market digital ad budget, but McDonald’s insisted upon funneling them into the minority segment. Now AMG is suing McDonald’s.

McDonald’s may have created a situation where their supplier diversity program could scale quickly, but not succeed. Byron Allen, owner of AMG, has a history of placing pressure on large companies that don’t align with his diversity expectations. Will he settle out of court like he has in the past or let the case go to trial and change the supplier diversity landscape forever?

The trial date is set for May 2023. I’m personally hoping for a high visibility trial… stay tuned.

If your company wants to get rid of you and you give them an opportunity, they will take it

Tony Blevins worked at Apple for 20 years, most recently as VP of Procurement. When TikToker Daniel Mac asked him what he did for a living, Blevins replied colorfully – and offended the sensibilities of other Apple employees.

Blevins was unceremoniously fired without severance. Now the only question is WHY? There are many plausible reasons that Apple may have fired him. Was it really the off-color joke in that TikTok video or something else? His reputation for being a hard-nosed negotiator? His approach to procurement? The cost of his keep?

He’s not going quietly, with an exclusive feature interview running in the WSJ last weekend… will he continue to speak out? Time will tell.

You can make people work, but you can’t make them like it

Back in September, the U.S. waited with bated breath to find out if Labor Secretary Marty Walsh could avert a pending railway strike. When the news broke that – hooray! – an agreement had been reached, there was a sigh of relief… a sigh that came too soon.

The agreement was between the rail companies and the union representatives, but not the workers themselves. As votes took place union by union, it became clear that the agreement was not going to be ratified. Once again, a rail strike was looming.

This time, it took an act of Congress and the President’s pen to reach an ‘agreement.’ Now it is illegal for the workers to strike. A strike would have been a shock to the economy, but you can only keep a lid on a simmering pot for so long… and the more pressure builds, the less predictable its contents become. Is this story over? I'm not so sure.

If you drive market concentration, you will get market concentration

The federal Women, Infants, and Children (WIC) program buys 60% of the baby formula purchased in the U.S. They award one contract per state for all of the formula vouchers in that state… in order to save money, they used the oldest procurement trick in the book: straight volume leverage.

That led to a situation where 4 producers make up 89% of the market. The top two represent 80% and the top supplier is 42%. It was a wildly over concentrated market. Guess what happened when that top supplier - a single point of failure - stopped producing. We got widespread, catastrophic outages.

What is the answer? A procurement professional would advise you to diversify… distribute the volume in each state between multiple suppliers. Incentivize smaller providers to grow. That is not what the federal government chose. They changed regulations to allow foreign-made baby formula to be shipped into the U.S. I’m no expert, but any savings you negotiate by over concentrating your domestic market is probably wiped out by the costs of having to ship pallets of formula in from Europe and New Zealand.?

Note: Dial P will be publishing new content and updated classics over the holidays, so be on the lookout each Thursday for the latest episode!

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Other content released this week?

The Sourcing Hero podcast Episode 94: Fostering Sustainability in the Real World with Jonathan O’Brien

Procurement 6 for December 16, 2022 on Art of Procurement

2022 Supply Market Information and Research Trends That Will Continue Into 2023 on Cottrill Research