Sunday, June 5, 2011

Commodity Items

The last lecture of my PM class (it went fast, and there are items I am still absorbing, so I am sure I will post more, but I do wish the class was more thorough – but I suppose there is much more to project management that you can gain from 10 weeks) discussed a variety of contracts / contract management. Of course while discussing this and the procurement process, awarding work based on the lowest bid came up. In the lecture – it was stated that this really only works best if it is a commodity. But I think that is a little too basic.
This would work if you were requesting bids, for example, on Dutchboy paint, Duraclean, Satin, Color “X”, 1 gallon. It is a specific product, with specific qualifications – and at that point the lowest price would be fine. But you can’t just say buy the cheapest paint you can find in “X” color. Obviously there are many cost differences – sheen, quality, binder, warranty. Sheen price differences occur even within the same brand. And the $9 a gallon paint just isn’t as nice as the more expensive stuff. It doesn’t cover as well, it doesn’t “flow” the same, its more chalky, it doesn’t clean as easy…. And if paint isn’t a commodity…..
There are thousands of examples – Dove Chocolate verses a Hershey bar. White Castle burgers versus epic burger or Max and Ermas. Papa John’s pizza versus my favorite pizza from Waldos in Kansas City, Mo, in which every time I make the 8 hour drive back to KC is the first place I visit. Freud may have said sometimes a cigar is just a cigar, but he obviously wasn’t purchasing one.
Plus, none of my above comments really deal with anything except for the product. Service for example is hard to quantify. It’s hard for a company to sell, it’s hard to “see”, and its something that you don’t want to pay for except for when you need it. For instance, the last time I bought tires for my car I went to a cheap place. Ever since then I have gotten crappy service – and when I replace my tires this time around I will probably go someplace that has better service.
Where I work now as a project manager, this discussion is relevant to me because my price for a “product” (a set, exhibit, etc) can’t really be compared based on price alone. The specifications are never thorough enough to look at my companies price, and another shops price and assume that both are not only apples, but granny smith apples from Michigan, picked at the best time of the year, shipped carefully, and free of pesticides.
From the theatre side, there are two different viewpoints. Some TD’s are purchasing their scenery (opera, ballet, broadway etc), and thus need to understand what goes into the bid & the qualifications to be able to evaluate the bids. The more specific the request is the better. But even for the average shop guy, its worth remembering that sometimes things are cheap for a reason – and sometimes that is okay, and sometimes it’s not.

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