Procurement Factors Other than Price that Impact Competitive Advantage
Procurement professionals want to achieve measurable savings but there are many factors other than price that impact competitive advantage.
As a buyer I love to get a very competitive bid for a product or service. Then I put my procurement hat on and list out the factors that can determine if this is such a good deal.
Here are some competitive advantage factors that I consider before making a change:
- After evaluating the cost to change is this really a better price?
- Does this supplier also provide the same product or service to key competitors?
- Is this an opportunity to partner with our current supplier on a more competitive agreement?
- What is their record for responsiveness to service or product issues after the sale?
- What is their record for on time delivery?
- How have the handled product interruptions on this and similar items?
- Are there lead time or warranty period differences that also impact price?
- Do they have alternative suppliers for critical items or services in the case of shortages?
- What procedures do they have in place to screen and test employees that will service the account?
- Would they consider taking a smaller role as a secondary supplier at the beginning?
Many of these points could or should be part of the sourcing process. Some suppliers might be reluctant to provide answers to all of these questions just to qualify to bid, but they should still be asked. A middle road that covers the most common supplier issues will help move the onboarding process forward.
The RFI can then contain more detailed questions as part of the sourcing event.
Regardless of how much due diligence you do in your sourcing events there will always be other factors that are not quantifiable or easily quantifiable. A prime example is the issue of the supplier providing the same product or service to key competitors. This is not going to help your organization get a leg up on the competition.
If your organization is unhappy with the performance of a supplier, then making the change will appear to be easier but the decision should always be made after careful consideration of all factors.
I still like the idea of entertaining alternative suppliers since you never know when some event outside of your control will impact performance. The events in the UK are a sober reminder of that.
These issues are important regardless of the size of your organization. Mid-size companies that have smaller staffs need to organize their sourcing process so many of these issues are dealt with before you need to pull the trigger.
Action Step: This type of analysis is vital especially for smaller organizations. This is where a procurement professional like myself can provide guidance and expertise to help achieve measurable results. If you want to go explore this topic in greater detail, please reach out.
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 at973-936-9672.
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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