Training - Contract Management
Let’s be frank – contract management isn’t the most exciting aspect of procurement. After all, who likes paperwork and minutia? Most people don’t. For those in the earlier stage of their career understanding legal jargon can be daunting and negotiating the contract with the supplier, harder still. More experienced professionals might not have even been taught this core skill properly and, with a desire to focus on more exciting activities, try to steer clear of contracts whenever possible.
Robust contracts are a key tool to manage your suppliers and minimise risk. So, like them or loathe them, you need to be good at them. Following some simple steps and with a bit of practice, I’ll show you that contract management isn’t nearly as arduous as you might think.
If you’re a Head of Procurement or Procurement Director you might have different needs. Perhaps you’re unhappy with the low level of spend under contract, the poor accessibility of contracts or that the full contract value isn’t derived. As a Procurement Director I’ve had this challenge myself and have some god ideas of how to help you.
Training - Contract Management
Let’s be frank – contract management isn’t the most exciting aspect of procurement. After all, who likes paperwork and minutia? Most people don’t. For those in the earlier stage of their career understanding legal jargon can be daunting and negotiating the contract with the supplier, harder still. More experienced professionals might not have even been taught this core skill properly and, with a desire to focus on more exciting activities, try to steer clear of contracts whenever possible.
Robust contracts are a key tool to manage your suppliers and minimise risk. So, like them or loathe them, you need to be good at them. Following some simple steps and with a bit of practice, I’ll show you that contract management isn’t nearly as arduous as you might think.
If you’re a Head of Procurement or Procurement Director you might have different needs. Perhaps you’re unhappy with the low level of spend under contract, the poor accessibility of contracts or that the full contract value isn’t derived. As a Procurement Director I’ve had this challenge myself and have some god ideas of how to help you.
Course Prospectus
Matt McDonald
Procurement Adventurer®
Intro
There are adventurers and there are adventurers…and then there’s Matt McDonald – between 2011 and 2014 he cycled 30,000 miles around the world. Add in that he’s a highly skilled coffee buyer for Cafédirect and that he’s a super interesting, lovely guy and you have the definition of a double-platinum Procurement Adventurer.
Our meeting needed a venue with excellent coffee. Matt selected ‘The Cabin Cafe’ by Haslemere station. Not only was the coffee spot on but the owner Max was the perfect host.
With coffees in hand, Max helped us kick off the interview with a great question to Matt…
How did you cross the sea?
I’ll come to the sea in a minute. First up my route: starting from Trafalgar Square I crossed Europe into Turkey and Iran. Next were the Ex-Soviet ‘Stans’ leading into China – bit of a slog there - then down through South-East Asia to Singapore. Next was the south coast of Australia and a quick foray into New Zealand. The second big leg was from Tierra del Fuego, up (and over) the Andes to Cartagena in Colombia. Finally back home from Spain, finishing in Trafalgar Square almost exactly three years to the day after setting off. As for the sea, I had hoped to take ships, but it proved very hard to find any passenger or commercial vessels for these stretches, so sadly I had no option but to fly these sections.
"Only 5 punctures all the way to Australia"
How many punctures and falls did you have?
Only 5 punctures all the way to Australia – my bike had excellent tires (lined with Kevlar) which were a godsend. As for falls, excluding the icy roads in Kyrgyzstan, about the same number. None too bad, the worst was when I sprained my wrist in Montenegro. I was going too fast down a mountain towards the stunning Bay of Kotor and focusing too much on the beautiful blue sea and curving coastline rather than the more mundane yet critical features like the road in front of me. The bruised ego was worse than the grazed legs!
What was your favourite country on the trip and why?
There were many but I’d have to say Iran. Whilst the Iranian State is challenging, the people are amazingly hospitable. In the Muslim World, guests are considered a gift from God. The local people helped us every day, feeding us and often inviting us into their homes to stay. In Tehran I got in contact with someone on Warm Showers (a cycling version of Couch Surfing) and ended up staying with a group of friends for three weeks. The kindness they showed me was immense and I will never forget this experience.
Most scary moment?
Was in Bolivia after cycling across the Salar de Uyuni, salt flats. On my last morning on the salt flats, I’d neglected to put on my sunglasses. By the evening, I had a headache and took refuge in a tiny village. The villagers only spoke the indigenous Quechua language which made communication difficult. In the middle of the night, I woke up in agonising pain unable to see. I later realised I had given myself snow blindness from riding over the high-altitude salt flat for two hours without sunglasses – the strong UV had burnt my retinas. After overcoming the initial panic that I was blind, I had to lay in a dark room with my eyes closed for 3 days praying for my eyes heal.
There were others: a gun toting pimp in Turkey; being interrogated by the secret police in Uzbekistan and then being deported - but not before having a vodka party with our police escort. The extremes of -30C in Kyrgyzstan and +50C in Southern China; not to mention almost dying in a landslide while trekking in Patagonia.
Add in almost being eaten by marauding packs of dogs across large swathes of Asia and it’s fair to say it was eventful.
"I almost died in a landslide..."
Biggest learnings from the trip?
When I got home, I wrote them down. Here they are:
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Opportunities not obstacles - Embrace challenges and failure as part of learning & succeeding
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Live adventurously & be curious - Break your routines, try new things & push yourself out of your comfort zone
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Appreciate everything you have - Don’t take anything for granted
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Time, experiences and relationships are what’s important - Use your time and energy wisely
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Live simply - Don’t waste time or money on things that aren't important
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Everything is up for negotiation - Don't accept the status quo as inevitable
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Always help others the way strangers have helped you
"I slept next to a dead camel!"
Strangest places you slept?
In a chicken factory in the Western Iranian desert
In a train station in Turkmenistan which looked like it was from the 1940’s
Next to a dead camel under a bridge in China
In a gold mine in China with a pack of semi-wild dogs
In an aboriginal burial ground in Western Australia
In a 2x1m wooden wind shelter in Southern Patagonia during a ferocious storm
Sometimes it was hard to find somewhere sheltered and safe. I always had to allow an hour or so before sunset each day to look for a good spot to pitch the tent. The key is to find somewhere out of site and sheltered. A bonus was a clean water source for drinking, cooking and washing.
How did your cycle adventure lead on to your current job in procurement?
It was hard settling down after 3 years on the road, a huge mental adjustment. However, I was aware of the law of diminishing returns. After so long away I was becoming desensitised to the amazing experiences I was privileged to enjoy and starting to normalise them.
On my return I knew I wanted to work for a company with strong ethics, balancing people, planet and profit. But I also wanted a job that allowed me to travel, especially to non-western countries that I find much more interesting. I was extremely lucky to find this in my role at Cafédirect.
Graph courtesy of Mintec Analytics
How do you go about sourcing coffee?
If you are souring coffee directly you must first be clear on the flavour profile and quality of coffee, you are looking for. Then within the relevant harvest window for each origin you can request or make offers to exporters (coops or growers). You can then agree all the specific details with the exporter like price, quality, volume, shipping period etc. The price risk must also be managed as contracts are typically agreed on differential meaning the stock exchange component of the pricing is left ‘open’ or unfixed.
Coffee is traded on the Intercontinental Exchange (Arabica in New York and Robusta in London). The Arabica market is famously volatile in part due to fundamental factors like weather and currency but to a greater degree because speculators (non-coffee actors) tend to trade this market quite heavily which greatly exacerbates the ups and downs in price or sometimes can detached the price from the fundamentals. Due to this volatility, it is important to have a price risk management strategy.
What makes a perfect coffee?
It takes a great deal of effort and expertise to produce specialty coffee (high quality coffee). Without great care and attention, the quality can be damaged or even destroyed at each stage. A few processes that stand out: coffee cherries need to be picked at peak and uniform ripeness; not as easy as it sounds with climate change giving less uniformity to crops and the additional time and cost this adds to be selective. Then the beans need to be dried to the right moisture level to make them stable and remove the risk of mould; do this too quickly in temperatures above 40C and you will damage the quality but too slowly and you run the risk of mould growing. Coffee is very susceptible to moisture which can cause mould but also the absorption of unpleasant smells or flavours (which is why you never store roasted coffee in the fridge). We therefore must be careful to manage the conditions during transit and storage.
Who was the most impressive person you met?
Marko Baloh, one of the world’s best ultra endurance cyclists. Amongst many other races he is a serial competitor in RAAM. Race Across America is a gruelling 3,000 mile race which you have to qualify to enter. The race has no stages, it is therefore a nonstop event from start to finish. This means competitors must choose if and when to sleep. The winners typically take between 8 to 10 days and often sleep no more than an hour each night while cycling more than 300 miles each day. In Ljubljana, Slovenia I fortuitously bumped into someone who knew Marko and was lucky enough to receive an invite to his house the following day. The man himself was humble, kind and warm. He was very inspiring to spend time with.
"I'm the coffee buyer for Cafédirect"
Tell us about your current role...
I’m the coffee buyer for Cafédirect responsible for all aspects of the green coffee and quality. My role focuses on the commercial relationships with the cooperatives. This includes planning and managing all green coffee purchases, contracts and pricing including hedging the stock market element of the pricing. I’m also responsible for managing quality; this ranges from checking the green coffee samples before and after shipment as well as the recipes and roast profiles of the packed goods we sell. There are also lots of projects I’m involved in from a sourcing and quality perspective.
Cafédirect was founded in 1991 based on a pioneering new model to trade directly with coffee growers, offering them direct access to western markets and enabling Cafédirect to pay them a better price. Prior to this coffee supply chains were often very opaque. Two of Cafédirect’s eight Board members are coffee growers and Cafédirect has worked with 80% of our coops partners for more than 20 years and some right back to when we were founded. Cafédirect gives at least 33% of our profits to Producers Direct - the independent charity Cafédirect founded – who invest this back into the communities we buy from.
Cafédirect’s business purpose is locked into its governance to ensure it always remains true to it’s mission and values. This is done via the Guardian Share Company which is an independent group of people who hold a ‘golden share’, which means they have shareholder veto power to protect the company mission from outside interests that might seek to dilute its impact.
"Price & sustainability don't need to be mutually exclusive"
How do you balance a good price with sustainability in coffee?
Price and sustainability don’t need to be mutually exclusive provided your approach is not solely based on price. In fact, if you take a slightly longer-term view, we need to pay farmers better prices to ensure we still have a coffee industry and can enjoy the drink in 20- or 30-years’ time. Ultimately prices on shelves across the whole coffee sector are still too low and don’t reflect the true time and cost that have gone into producing the coffee. The industry needs to do a much better job of more equally sharing the risks and rewards with growers who currently absorb most of the risk but generally see very limited benefit.
Cafédirect is 100% Fairtrade and around 70% of that is organic too. This means we are paying additional premiums or differentials to coops/farmers to help ensure they receive a good price and to support environmentally sustainable growing practises. While these certifications add cost they also add value for many consumers.
What impact do you see climate change having on coffee?
Coffee is highly susceptible to weather patterns – especially Arabica - and requires a narrow range of temperatures and predictable patterns of rainfall. It’s widely said that by 2050 rising temperatures will reduce the amount of land that is currently used to grow coffee by up to 50%.
The industry urgently needs to invest more money into research to guarantee the future of coffee. The coffee industry is reliant on just two species: Arabica & Robusta. This is an incredibly narrow genetic pool given the size of the coffee industry and makes it very susceptible not just to climate change but also pests and diseases. There are more than 120 different known species of coffee yet only Arabica and Robusta are currently grown commercially. Therefore, there is much work being done to try to identify other commercially viable species as well as to cultivate stronger and more resistant varieties of Arabica. I’m currently facilitating a trial with Kew Gardens and one of our coop partners to grow a different and more climate resistant species of coffee.
Who is your greatest source of inspiration?
Thor Heyerdahl, for his extraordinary expedition Kon Tiki in 1947. Thor led the expedition which ‘sailed’ across the Pacific on a balsa wood raft. The expedition set out to prove Polynesia was populated from Peru rather than Asia as was believed at the time. The expedition therefore challenged conventional wisdom but is also an example of incredible courage.
What language do you wish you could speak and why?
I began learning Spanish during my cycle through South America. I’m always working hard to continue to improve as it’s so important for my work. If it wasn’t Spanish, I’d love to be able to speak Italian as my wife is fluent and we have designs on retiring in Italy.
What advice would you give your younger self?
There are so many valuable lessons I feel I could pass back to my younger self. However, I can’t help feeling that life is about earning this knowledge for yourself and the value and experiences that come with that. I wouldn’t want to change the path I have taken.
What item can't you do without?
A good coffee grinder and my bike
Rapid fire
Mountain bike or racer?
Mountain bike riders are more friendly!
Cappuccino or flat white?
Filter black for its purity