Counter Picos

Suppliers Must Take Defensive Countermeasures When Attacked with Aggressive Supply Chain Price Management Tactics

by  Mitch Little

"The result of long-term relationships is better and better quality, and lower and lower costs."

—W. Edwards Deming

Generally, I agree with Deming. Except when that relationship involves a supply chain (purchasing) team that is schooled in PICOS. When that is the case, all bets are absolutely off and you had better hold on to your wallet. It is going to get personal, ugly, and emotional, and that's just the start.

So, what is PICOS and why should I care? PICOS (Program for Improvement and Cost Optimization of Suppliers) is the most detrimental program ever conceived in the arena of sellers versus buyers. And sadly now, it has become more pervasive than ever. Watch out! It will grab you by the throat and it won't let go.

What is it, where did it come from, why is it bad, and what can I do about it? These are the questions whose answers must be heard and internalized if we are to deliver real value to our clients.

In essence, PICOS is the mix of ruthless probing, consultation, orders and ultimatums that J. Ignacio Lopez de Arriortua used in the late 1980s and early 1990s to slash the cost of parts for General Motors Europe. GM Europe became it hugely profitable while its Detroit-based parent piled up losses. Len Givens at describes PICOS as follows:

"Simply put, the first objective of such programs is to turn every supplier product--including $20+ million/unit high-technology equipment--into a commodity so that the only thing negotiable is price. The second objective is to ensure that the customer, not the supplier, determines what that price will be. Intuitively and performance-wise, neither objective is sustainable long term.

The procurement strategies employed vary from customer to customer. Some examples of the elements of such programs in action are:

  • gathering and using extensive personal data about members of supplier account teams
  • attempted access (demands) to supplier costs early in the sales cycle
  • customer-driven continuous supplier cost-reduction "programs" beginning with customer/supplier committees where all of
    • supplier data is supposed to be "on the table," including proprietary supplier information
    • and many other equally insidious practices

In combination, these customer strategies and related tactics often demoralize the supplier account team, put them on the defensive, and open them up for major exploitation . . . if they're not prepared!"

I know Len quite well and his class on how to counter AGGRESSIVE Supply Chain tactics has been taught to hundreds of the MCHP team around the world. Len is a gentleman and the above, while accurate, does not tell the entire ugly story. As Lopez defined the process and created the methods in the late 80s he spawned an industrial revolution in the purchasing practice that is still in use today in every industry around the world.

Now to give you a glimpse of my view of his practices it might be sufficient to say that Mr. Lopez stands indicted by the US government for industrial espionage charges and is still fighting extradition from Spain.

The human manipulation and emotional flogging that masquerades as professional practice in PICOS is dehumanizing, unprofessional, transparent as hell, and sadly very effective. Here is a link to all of the written rules (yes they are written down) of engagement for PICOS:

PICOS Written Rules

Take a few moments to read these rules. As a sales professional you will recognize many of the "tricks" that have been used to belittle you personally and professionally. The most telling of all of these "rules" is Rule 6 f).... Be prepared indirectly and under pressure to bluff and lie. These are the established methods of doing business that were poured into concrete by Mr. Lopez and that remain as revered and honored practices in many companies, large and small, around the world today. Ugly, huh? And that's just the way it will remain.

So, what are we to do? Well, rather than make this blog any longer than it already is, I am going to redirect you to the man with the answers, Len Givens at Quest Team Inc. and his site at Len and his team have a very specific 5-tool answer and decades of experience battling this evil. It takes guts, will, and stamina to win this battle... and you can if you work at it.

Tell Len that Mitch Little sent you!

At the heart of this matter is the value that we have created as sales professionals for the clients we serve. If we have done the right thing and done it the right way, it will be valued by the client and the art of dollarization of the impact of that effort will be acknowledged by them.

You always need to know the rules of the game that you are playing... and now you are playing Counter PICOS!

Keep focused.

‹‹ Mitch Little
[About the Author]