A UK company, Network Solutions, are doing a remarkable job and recently expanded their workforce; supplying competitively priced products that help UK companies directly and provide sales income to the United Kingdom as they export over half the products they sell around the world; network routers and switches which form the communication backbone of just about every organisation and service. It’s not easy and it’s not a level playing field.
You assume your council, your locally elected body, will be effective at reducing costs of goods purchased. Would you believe that the rules they use might actually be adding greatly to the amount of money they actually spend? If you are a cynic then you probably won’t be that surprised. It’s not just your local council; it’s the government too. In fact everything that is designed to be ‘open and transparent’ has probably already succumbed. So why are we all losing out?
Let’s start by looking at where it should not seem obvious, where you would expect that it was ‘open’ and there’s no better example than the European Common Market; definitely no reference to any current topics.
Across the world there are global manufacturers and, in the market that Network Solutions operate in, there is a global price list. Partners and distributors will make charges, as will their customers, so they generate the income that enables them to pay their shareholders, to pay their wage bills, pay their taxes and provide sufficient capital to reinvest in their future through R&D and training and innovation. They have a, perceived, strategy in place that encourages that only those companies that are manufacturer trained are officially accredited. Put rules in place by which actions that can ultimately damage the global manufacturer are deemed liable to the loss of the accreditation and you can imagine that you can keep everyone in the fold, or in channel. It all seems on the surface to be the most effective way to affect positive outcomes for all their goals. Next to realise real success with this approach is to ensure that only those that are officially certified (partners) by the global manufacturer can purchase and sell. Add to this that every bit of the partners’ business must be laid bare to the manufacturer; they can effectively oversee the whole process. Finally add one last piece to the process by making it a requirement that this ‘partner’ approach should form part of official purchasing policy of every official, EU approved, tendering process and everyone wins; well not really.
These partner companies will have targets to meet every month and the manufacturing process requires an acceptance that when an order is placed, it will take its place in the production process; it cannot therefore be cancelled and will take as long as it takes till the process completes. In a global market with global players, a global retailer for example may purchase network products that they, themselves, will introduce into their organisations wherever they are located; in France, Germany, Dubai, UK, Canada, in fact just about anywhere else in the world, all supplied from one source and all deemed in channel.
In any of these countries, perhaps France, a company that has over purchased a network switch, could sell it on to another company in France who then see an opportunity to sell it, because the part was manufactured to be 100% compatible for the UK market, to yet another company, in the UK; New Sealed, 100% genuine – After all we are in a Free and Open market. European Law encourages this. This product is however seen by the global manufacturer as grey market goods. It is perfectly legal. It will be 100% supported by the global manufacturer – The company that supplied it will in every likelihood employ qualified engineers, maintain a working environment that implements best business practice and facilities that meet ISO 9001; it pays its taxes and pensions, holiday pay, overall a good inclusive employer and yet will never, ever be recognised by the manufacturer. On the other hand the goods that came from the global retailer that happens to have an office in the UK, it can install the parts supplied to it by the parent company in the USA and have them fully recognised by the global manufacturer in the UK. In a free market the world sometimes moves its own way. A contract cancels, even by government instruction, specifications change and errors occur. So how do companies meet their target, pick up shortfalls in production, recoup investments on cancelled products and generally stay in business regardless of global changes? They do so by operating in a free market. They will work outside of channel when needs dictate. They will stay in channel when situations dictate.
How does this ‘not’ open market benefit government tenders? How does this ‘not’ open market benefit local authority tenders? How does the ‘in channel’ supply benefit the manufacturer? How does the ‘in channel’ supply benefit the local authority?
An analogy to this is to see a car made by a USA car manufacturer supplied to an American company that has an office in the UK and will be driven in the UK with the American Manufacturer’s approval – Alternatively another car made by the same USA manufacturer and again made to a UK specification is this time sold to a French supplier who in turn sells it to a UK company; the UK company that buys and sells the car will never be recognised by the American Company, even though the American Manufacturer will still happily service and repair the car for the new owner. The real crazy part in this story, that is, apart from the grey market providing in all likelihood lower prices always, all the cars made in the making of this point, were made, like most of the network hardware, in China.
So our question in earnest, why do local authorities and government procurement rules follow the guidance of the global manufacturers so that the rules of procurement include a requirement that products are only purchased from suppliers that have global manufacturer approval – Gold partners and their like. It is the tax payers that are paying the bill. We can understand that the manufacturers need to invest. We understand too that they need their shareholder to stay behind them; after all that’s their job. In a free market, however, and in the belief of free enterprise, you would expect that a supplier of merit, Network Solutions, with genuine new sealed market appropriate network hardware products, who can do the same job at a lower price, should also be included, and encouraged, and against the rhetoric from the global manufacturers that only in channel suppliers should be allowed.
What do you think? Let us know at support@network-sol.com
