Does your procurement team have the time to threaten the status quo?
Most would say yes but it typically only happens when performance starts to slide or the budget pressure is significantly ramped up.
There are so many factors involved in evaluating a supplier’s performance.
Cost, quality and on time performance are all important. In most cases you should be able to benchmark these within the relevant range of normal operations.
If a supplier is performing well then most organizations will continue along the same path primarily because vetting new suppliers can be time consuming.
Plus, there is clearly a value in relationships. If the current supplier has responded quickly to problems this is valuable. It is also difficult to measure.
So when should you challenge the status quo?
I don’t believe you need to wait for something big to go wrong.
Here are some questions to help you evaluate your suppliers and service providers:
- How long have they been in place?
- What specific actions have they initiated to lower costs?
- What steps have they implemented to improve service?
- Has there been an increase in service related issues or an upward trend?
- Has there been a change in key personnel servicing your organization?
- Have there been any unexpected cost increases?
- Have any billing issues surfaced?
- Are they adhering to changes in service that were agreed to?
- Have other suppliers “suddenly” appeared aggressively seeking your business?
- Do you think of your company as an “A” customer but feel like you are getting “B” service?
A yes answer to any of these questions should a be sign that evaluating an alternative provider makes sense.
Here are a couple of other questions that will help you determine if you have leverage:
- How important is your business to them in the scheme of things?
- How important would your business be to an alternative provider?
If your business is important to your current provider or an alternative provider you should periodically evaluate your agreement. I believe strongly in this approach even if things appear to be going well.
Service can get stale as companies take on new business and dedicate resources to getting these new customers up and running profitably.
I am not suggesting that you make doing business with your organization unprofitable for the provider. This is simply letting your provider know that you are paying attention.
How can you do that if you don’t think you have time?
You don’t really have a choice. You have to find the time.
There are price concessions and service improvements waiting to happen if you just ask.
Using the questions above should provide you with a roadmap of opportunities. If there are warning signs that the service or product is slipping you probably already know about that.
Competition is healthy. Sometimes you have to drive the supplier or service provider to improve because they may not believe they have the time to do it but they don’t have a choice either.
Action Step: Evaluating your suppliers and service providers should be part of the procurement process. Having the courage to challenge the status quo will help you uncover price concessions and service improvements. If you are uncertain where to start a procurement professional like myself can provide guidance and expertise to help your organization achieve the results you need. If you want to go explore this topic in greater detail, please contact me.
EC Sourcing Group is one of the companies I represent because their tools have been created by dedicated and experienced sourcing professionals. They know the day-to-day challenges your team faces and have built their tools to solve them. If you want to know how, I invite you to request a demo or 30-minute discovery conversation so you can experience the platform, process, people, and tools. You can reach me at (973) 718-7071 x875. The call will be forwarded to my mobile phone if I am not in my office which is pretty likely.
Next week I will continue on this same theme so your organization can improve your bottom line.
If you would like to know more ways to reduce costs without changing the way you do business, simply give me a call or send me an email with your contact information and the best time to reach you.
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Until Next Time, I Wish You Great Success in Your Business and in Your Life