b'8American Journal ofTransportation ajot.com(RE-THINKcontinued frommaincostdrivers(materials,andpricinglogicmeaningtheThe second concerns incon- valueincludingreliability,ser-page 4) energy,labor,yield,logistics)commercialoutcomereflectssistent decisions, as a result of dif- vice levels, and long-term part-($18.23 billion). and use relevant indices to sep- measurable performance. ferent negotiators interpreting thenership considerations rather than It operates from 39 manu- araterealmarketmovementManyorganizationshavesamesituationdifferently,whichon any single external variable. facturing plants, employs morefrom noise. This creates credi- parts of thisa cost model here,reduces credibility with suppliersFromaprocurementperspec-than 57,000 staff and is repre- ble negotiation ranges and helpsa scorecard there. Far fewer con- and creates internal friction. tive, the emphasis is on structural sented in around 50 countries. both sides stay grounded whennect negotiation preparation, KPIA structured approach forcesresilience and predictability, not The group combines productvolatility is high. governance, and contract mecha- continuousrecalibrationbasedshort-term fluctuations.development and industrial man- The second building blocknisms into a closed-loop systemonobservabledrivers,scenarioHealsoplayeddownthe ufacturingwithaninternationalisBATNA(BestAlternativethatisscalableacrossregionsranges,anddocumentedtrade- impact of a scenario where BSHs salesfootprint.ProcurementtoaNegotiatedAgreement).and categories. That end-to-endoffsimprovingspeed,consis- products became too expensive playsacentralroleinkeepingBATNA simply means: WhatoperationalizationiswhatIvetency, and credibility. due to currency and tariff factors supply,cost,andperformanceis my credible alternative if wefocused on implementing. leading to its US customers turn-stable across very different mar- dont agree?Koverznev also emphasisedO verAllv Aluer AtHert HAn ing to cheaper goods from Asia, kets and product requirements. I embedded this into prepa- the failings of intuition-basede xternAlv AriAbleSnotably China.Europe is a core market, andration so negotiators enter dis- negotiationsundersustainedOnemightassumethatPricesensitivityispres-Asia,particularlyChina.Othercussions knowing their options,volatility. whenBSHsitsdownwithitsent in every market, and global regions, including North Amer- thresholds, and escalation pathsIntuitionworkswhenthecustomers in the US the declinesourcing alternatives are always ica, also contribute significantly. ratherthanmakingreactiveenvironmentisstableandpastin the dollar, notably against theconsidered. That said, purchas-Home appliances combinedecisions at the table. experience reliably predicts theeuroandUSimporttariffsofing decisions for complex con-heavyindustrialinputswithThethirdbuildingblockfuture. Under sustained volatil- 15%ongoodsfromtheEuro- sumer goods in the US are rarely precisioncomponents.Typicalfocuses on KPI-linked commer- ity,costdriversswingrapidlypeanUnion,wouldbeatthedrivenbypricealone.Product suppliesincluderawmateri- cialmechanismstomakeper- and risks shift faster than inter- forefront of the negotiations. performance, compliance, after-als(steel,plastics,non-ferrousformancetangible.Koverznevnal habits. However, Koverznev arguessalessupport,andsupplyreli-metals), mechanical componentsexplained that while companiesTwopredictableprob- that macroeconomic factors suchabilityremaindecisivefactors. (hinges, frames, fasteners), elec- track supplier KPIs, they alonelems appear, he noted. There isas currency movements and tariffCompetitiveness,therefore,is tromechanicalparts(motors,often dont change behavior. an anchoring to outdated refer- regimes form part of the broaderbest understood in terms of total pumps),electronics(controlIhelpedintegrateoper- ence points where people keepoperating environment for inter- value, not simply unit cost.units, sensors), as well as com- ationalKPIs(qualitystability,negotiatingaroundlastyearsnational companies. As for the role AI is likely to pletemodulesandsubassem- deliveryreliability,responsive- logic,evenwhendrivershaveIncustomerdiscussions,(RE-THINKcontinued on blies, Koverznev explained. ness,flexibility)intocontractmoved materially.the focus is typically on overallpage 28)BSHs sourcing is global by nature: some items are sourced locally to support regional plants and responsiveness, while many strategic components come from internationalsuppliernetworks (often across Europe and Asia) based on technology capability, qualitymaturity,capacity,andRanked #1 Mosttotal cost.Thisglobalstructureis exactly why volatilityin rela-tiontoenergy,commodities,Productive Port logisticsandcurrencydisrup-tionshitsprocurementso directly, he underlined.M OreS tructured , prac- in North AmericaM eASurAbleA pprOAcHUnlikegenericbest tices,KoverznevsapproachtoTwo Years in a procurementnegotiationshas been developed and implemented throughconcreteSixSigma projects with measurable finan- Rowcial and performance outcomes.Six Sigma is a set of man-agement techniques intended to improvebusinessprocessesby greatly reducing the probabilityThis recognition reects the dedication of that an error or defect will occur.Itooksomethingthatiseveryone who keeps the port movingoftendrivenbypersonalstylefrom the men and women on the front lines and intuition and helped imple-mentamorestructured,mea- at PhilaPorts Packer Avenue Marine surableapproachsoresultsTerminal to our carriers, logistics teams,become more consistent and less person-dependent,especiallyand partners across the region.under volatility, he said.SixSigmaisbestknown frommanufacturingandqual- Thank you to our entire port communityity. You reduce variation, definefor helping Philadelphia lead the waywhat good looks like, find root causes,andkeeptheprocessonce again.undercontrol.Iappliedthat same logic to negotiations and supplierperformancegover-nance by rolling out a repeatable frameworkthatteamscanuse across categories and suppliers. A simple way to describe it is theSixSigmacycle,DMAIC: Define, Measure, Analyze, Improve, Control, translated into procure- Ship Philly First.ment language.b uildingb lOckS www.philaport.comTomakethisoperational rather than theoretical, Kovernzev implemented three practical build-ingblocks.Firstly,acost-driver1and index logic to replace opin- According to the 2024 Container Port Performance Index (CPPI) released by the World Bank Group and S&P ion-based price debates. Global Market Intelligence.Insteadofnegotiating around feelings (this seems too expensive), we prepare a trans-parentviewofthesuppliers'