Procurement Professional is the official publication of CIPS Australasia

#89 - The great hidden cost in all supply chains

02 Nov 2009

Several people have asked The Buyer since the CIPSA annual conference in mid-October, if he’d fathomed what the former Global Talent Director at Nike was saying as the final key note speaker on the first day?

Well, maybe.

Between the stonking Nike videos, Dan Hanyzewski seemed to be saying that all supply chains contain one large category of spend that often remains untouched – people costs. Not just for the staff in your own organisation, but of all the people input costs in the supply chain including the staff within your suppliers, and their suppliers. He added that often this cost was exaggerated, and costed in to prices at inflated rates.

Even worse, not only was the cost substantial, it was an area of real risk. He cited examples where suppliers’ contractors were actually legally deemed to be ‘employees’ of the buying firm. And therefore [in the USA] the purchasing firm became liable for the additional employment costs such as tax, superannuation and healthcare insurance of contractors that were working for them on supply contracts. Substantial sums. He added that they also became responsible for their OH&S liabilities.

Dan described his project at Nike to minimize these exposures and costs to Nike. His message was caveat emptor.

At least, that’s what The Buyer gleaned from Dan’s glitzy presentation. But if The Buyer is wrong and has inadvertently invented a whole new idea, then he hereby claims all rights, copyright, royalties and rewards for this startling new theory. Send cheques payable to The Buyer c/- PP magazine please.

The Buyer – posted 2 November 2009    

The views of THE BUYER are personal and are not necessarily those of Procurement Professional magazine, BTTB Marketing nor CIPS.