FROM THE FIELD
September 2005
Getting Spec & Purchase To Hear The Same Music

Spec and purchasing functions might never actually dance together at championship level, but it'd sure be nice to know whether they're hearing the same music.

Last spring, I thought they were. Certainly some of them were, and are. Purchasers attending an equipment session at the Institute for Supply Management's Hospitality Supply Management meeting were intent on discussing lifecycle costing. Some of them appeared surprised and concerned to see data showing two seemingly similar pieces of equipment had vastly different costs after factoring five years of energy consumption. Maybe it was just a matter of skewed sampling--by definition the people who chose the equipment breakout were different from the ones who chose other sessions--but the lifecycle costing concept clearly was important to them. In fact, when I alluded to oft-conflicting goals between spec and purchase--the battle between capital and operating budget concerns--several of them expressed offense.

You can spend more and get a payback that improves ROI.

Meanwhile, the NAFEM Technical Liaison Committee last spring kept hammering away on developing lifecycle costing models. Subgroups studied energy, maintenance, ancillary supplyexpenses and so on. In the final phases, all the pieces will be combined into formulas or indices, depending on what works best. The whole project has taken shape at the request--almost a demand--of some big chains realizing that initial cost was just the tip of their iceberg, and not a useful way to make comparisons.

So against this backdrop, you'd get the impression that specifiers and purchasers are making big progress on coordinating their priorities and speaking the same language. My own visits to several chain headquarters last spring led me to the same conclusion. Several equipment heads indicated their spec and purchase departments are communicating much better now than in the past, and that longer-term priorities like lifecycle costing were on everyone's shared radar screen. Again, maybe it was a matter of sampling, but things were looking good.

Buoyed by my findings, later on I told some dealer friends who do a lot of chain business that I thought the Big Dichotomy was finally maturing into a single, coordinated effort.

They were dumbstruck for a brief but distinct half-second. WHO told you that?" they shrieked. They proceeded to tell me they had many chain purchasing clients who are still "incentivized" to hold purchase price down, by which they meant bonuses for driving down capital costs regardless of longer-term payback advantages. They suggested spec and purchasing had not achieved the "Vulcan mindmeld" that I'd hoped for, and that extended cost still didn’t matter to many nearly as much as capital budget.

People have their reasons, of course, whether they have to do with cash flow issues or short-term ROI or whatever. If you go broke today, tomorrow's payoff is small consolation. Likewise, saving money today and giving it back tomorrow is not much of a solution, either.

The answers lie in the balancing points. You can gain efficiencies will little or no additional up-front expense. You can spend a few dollars more and see a payback that actually improves ROI.

But you have to do the math, piece by piece. And both spec and purchase sides have to do the work side by side.

One final note: In your projections, allow for utility costs to rise.

A lot.

Brian Ward
Chief Editor