It never ceases to amaze me how the bigger companies lack the creative insight to look beyond the old standby of vendor compression or rationalization as a means of driving procurement savings.
With Procter & Gamble’s latest move to save money “plan,” the industry heavyweight is looking to reduce the number of production companies with whom it’s brand agencies can deal from a current 125 to 30 through what they are referring to as a “preferred vendor” status.
I cannot help but think of the Federal Government of Canada’s attempts to implement a shared services strategy by offering their “preferred vendors” an eight year contract to undertake a task that has little chance for success. The Government’s “plan” has been greeted (although not quite as verbosely) by the vendor community with similar disdain, demonstrating that these silver or lead proposals only serve to damage supplier relations, while at the same time attracting the least desirable vendors.
In an excerpt from the Creativity Online post, this very sentiment was expressed by one executive producer who stated “When you’re in a world blasted with so much imagery and you need to stand out to make a difference, you want to get the most talented, most creative people to make your stuff stand out. The way to do that is not to bully their creative choices or create a shallower talent pool.”
With the emergence of SaaS vendors, whose sophisticated, algorithm-driven solutions enable companies to intelligently and effectively engage suppliers in all areas of spend (including services), purchasers should actually be looking for ways to expand rather than compress their supply base.
I guess the P&G brain trust were off that day? Now I know why the dinosaurs are extinct.
To coin a phrase from the old Johnny Rivers song (and yes I am giving away my age) “When will they ever learn?”
Advocates for the P&G move will likely point to P&G’s Brand Agency Leader model* which was launched in early 2009. In doing so they will champion the “enormous faith and trust” they are placing in their agencies” that is similar to the relationship between clients and management consultants or lawyers, who are seen as trusted advisers rather than suppliers.” Even using this logic as a means of justification for the reduction, I am not sure that it will produce the desired outcome.