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November 28, 2006

ORGANISERS vs SUPPLIERS: How can they work together?

In the first of two reports examining event organiser and supplier relationships, we look at what organisers can do to get the most from their suppliers.

Managing a supply chain, as organisers must do when planning and executing an event, may seem simple on the surface, but the key to a truly successful event is to carry out this process as effectively as possible.
“You are only as good as your supply chain and your supply chain is only as good as your ability to manage it well,” says Elling Hamso, meeting management consultant and managing partner of the European Event ROI Institute. “There is a huge difference between traditional supply chain business models and those that really exploit the potential of supply chain optimisation. The difference is that you need to deliver more for less – a better meeting for less money, without squeezing supplier margins.”
Therein lies the conundrum. Driving down costs is one thing – and something that’s particularly necessary, today, with the increasing involvement of procurement professionals in the marketing mix – but slashing supplier margins in the process can prove counterproductive.

Hamso: "You are only as good as your supply chain"

“This has become a very last-minute business now,” says Duncan Beale, managing director of Line Up. “If you get a reputation for screwing suppliers down on price, they won’t always go that extra mile for you, which is becoming more and more important. Saving an extra few pounds can come back to haunt you on the day of the event. You only get one shot at a live event – you can’t go back and do it again. We deal with high-profile individuals and senior management who can’t afford to be embarrassed by an event – we’re playing with other people’s reputations. You simply can’t play fast and loose with suppliers in the events industry as you might be able to in other sectors.”
Andrew Ely, head of solutions at SBS, agrees, saying: “We look for honest pricing, not necessarily the cheapest as we demand quality. At the end of the day, we need to justify costs to clients, so essentially we’re looking for calm assurance that suppliers will deliver in line with our expectations.”

Squeezing out value
The key is to get great value out of your suppliers, according to Hamso. “You need suppliers to give you their best resources, highest priority and all of their experience and ingenuity to develop your supply chain,” he says. “You need to buy value, not price – what the procurement profession calls ‘value-based procurement’.”

To achieve value and quality, everyone in the supply chain must be working towards the same goals. “Without alignment of objectives, the project is a non-starter,” continues Hamso. “What is good for your supplier must be good for you, and vice-versa. Good supply chain management invariably means that you reward good performance, not just with a pat on the back or a promise of future business (at competitive prices), but in a currency which is really valued, like money.”

The problem is, as Hamso points out, the structure of the events industry works against this. “Our industry is riddled with win-loose relationships based on commissions and fixed price contracts,” he says. “When your venue finder makes the extra effort and gets you an extraordinary low price, you don’t reward them, on the contrary, you penalise them for the extra effort because their 10% commission is now calculated from a lower price. Fixed price agency contracts, whether lump sum or per meeting attendee, are only a little better in the sense that you don’t penalise exceptional performance, you just don’t reward it.

 “The relationship between hotels and meeting planners or their agents is also a classical win-lose relationship on the subject of attrition,” Hamso explains. “Why do we offer lower conference fees for early registrations, but not cheaper hotel rooms, or why do hotels not reward planners who are able to make good room block estimates? Where are the industry statistics that could help both planners and hotels better forecast registration patterns? Why do we have cancellation clauses for meeting participants which discourage early registrations?”

 However, as soon as the value-based incentive contract is in place, the magic starts to unfold. “Because it makes good commercial sense for the supplier to provide better value at lower cost, he will incessantly search for opportunities to do just that,” says Hamso. “You need fewer resources to police supplier performance, making sure they deliver their promise according to contract and don’t exceed the budget items you have entrusted with them. Cutting corners to make more money for themselves, is no longer a supplier option. Instead, you join their quest for smarter solutions, cutting costs where it does not really matter and spending more where a disproportionate increase in value may be achieved.”

Pin down and spread your objectives
Of course, the key to suppliers delivering on their promises and therefore turning a good event into a great one, is to make sure what their promising is in line with the aims of the event – or the key objectives as mentioned previously.

“To align objectives, you have to know what the objectives are, and how to measure success,” says Hamso. “What you measure improves, what you cannot measure you cannot manage, and probably should not be doing in the first place. You simply have to figure out what your objectives really are, in detail, communicate them to your suppliers and develop the measurement tools.”

So next time you’re organising an event, rather than being obsessed with negotiating on price, negotiate on goals and incentives instead. Nothing should make you happier than good supplier profits earned as a result of outstanding performance.

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