There is a Cost to Buying Cheap...

I started work in 1978 and my first job was to process orders. To get value for money, the process was to get three quotes and the lowest won – a very boring introduction to procurement and I would have left if I were not so lazy in my teenage years.

Things did not improve in the 1980s. I was working in the NHS and the Government introduced Compulsory Competitive Tendering to bring “private sector efficiency” into catering, portering and cleaning services. Actually, it was just a way of buying cheap and contractors making a quick profit by exploiting poor specifications, cutting hours, cutting wages, employing staff off the books and reducing holiday entitlement. The “commercial experts” who undertook this hailed the savings but ignored the poor quality, the destruction of the NHS team, the poverty of the workforce and the knock on effect to their families and the local businesses they used. Remember the 80s recession? - this did not help.

By this time, I was bored and would have jumped ship if it were not for the crippling unemployment rate at the time. But then came salvation – a new job, an intelligent boss and the responsibility for managing contracts for surgical dressings across Wales. We had a Quality Control laboratory and suppliers who manufactured in the North of England using the old cotton mills. We worked with suppliers on design and we made decisions based on price, quality and service. At last I felt like a professional and I went on to use my new found skills on incontinence products, clinical waste disposal services, prosthetic services and wheelchairs.

All good things come to an end and by the mid-1990s our suppliers were sourcing cheap product overseas, technology was being used by the administrators and auditors to distance us from our suppliers and of course the dreaded help lines and call centres were introduced. The “value of nothing” people were back in charge – the internet and reverse auctions replaced sourcing and negotiation and the usual suspects were claiming savings regardless of the effect on local communities and the economy and with scant regard to the working conditions of overseas workers.

The new century brought a realisation by some organisations that there is a cost to buying cheap. Perhaps if we pay our suppliers below cost, they will cut corners, reduce wages, make people unemployed and source unethically. Some even realise that paying a living wage (not the new minimum wage) means the tax payer will not have to subsidise poor employers through tax credits. A few even recognize that some supply chains involve modern day slavery and child labour - there is some hope.

However, we continue to let our industries die whilst importing cheap product from dictatorships and we buy ever more cheap consumer goods to fuel an economic boom based on a house of cards. How many telephone upgrades and tee shirts do we really need?

I am glad I stayed in procurement; I hope I have made some contribution to getting real value for money. These days, there are a lot more people trying to get real value. They know buying cheap has a greater cost, whether it is poor quality, badly treated workers or economic and social decline.

Sadly, we still have the “people who know the price of everything and the value of nothing”. They still shout loud, call themselves commercial experts and get senior posts but all of us have a duty to look for real value for money whether we are acting as private consumers or procurement professionals.

Author: Gunther Kostyra

Date: December 2016

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