Buying: My challenge - To pick the right suppliers without being taken advantage of

There is a huge amount of excellent guidance, and best practices available to someone faced with this challenge. However, the vast majority assume you have a professional, or at least dedicated procurement team capable of evaluating, and negotiating supplier proposals. But what if you don’t have these resources, and its up to you and/or your operations team to undertake this time-consuming and potentially perilous task. How can you select the suppliers who are right for you without being “taken to the cleaners”; and better still derive some competitive advantage from the exercise?..Sounds too good to be true?...not really.

There are some basic realities when selecting your technical partners (because they are!), most of which is firmly within your control regardless of your size and perceived negotiating strength.

Let’s start by looking at what is important to a supplier, and for the sake of clarity we will focus only on the B2B world, and not high volume consumer markets. Top of the list is probably “Continuity”. If bidding is expensive for you, it is equally as expensive if not more so for a supplier, with the added exposure of not being awarded any work. A relationship that works, and that can be extended by mutual agreement has a value beyond the simple cost of bidding. Talking of value, the recognition of their contribution to your success also has incalculable value, be this in the form of track record, recommendations, or case studies all have intangible value, and cost you nothing to provide.

Third on my list is  alignment, or more specifically the commercial relationship you decide that you want to have with your suppliers. This is where you can leverage competitive advantage is managed correctly. A specialist supplier almost certainly knows more about his or her domain than you or your team. For a supplier it is highly satisfying to work with a customer who listens to this expert advice and incorporates suggestions. There is a greater sense of collaboration and a desire to help you succeed. The all-too-common opposite scenario where the supplier is considered a vendor who can bring nothing constructive to a customer, and is treated accordingly, will fulfill the contractual minimum and no more…why should they?. Ultimately you are the loser, not them.

So bearing in mind that consistency, being listened to, and value recognition are important to most suppliers, how can you use this knowledge to pick those who are right for you?

For a specific workscope, the starting point is to decide what relationship you want with your eventual contract holder. You don’t have endless resources so you need to prioritise. Some workscope have greater potential to impact your success positively or negatively, more than others.

Part of this includes looking at what is important to you beyond the direct workscope. For example; if your own success has considerable uncertainties associated with the timing of your project requiring you to be flexible, you really want your own suppliers to be able to provide flexibility as well. This is quite different from them committing to a fixed delivery date. Similarly if you believe technical innovation can have a positive impact on your success, you may not want to overly prescriptive in your workscope description in order to allow your supplier to share innovative thinking with you.

Finally, the price. If you ask all of the right questions but then make price your dominant or only selection criteria, you have just wasted a lot of your time. Ideally you would want to pre-qualify suppliers who meet your alignment and non-technical needs in order to allow you to focus on the technical workscope. In reality this is not always practical so your evaluation matrix needs to be broad enough to give sensible consideration to your most important criteria along side the headline price. If you leave yourself open to tactical pricing, you risk some frightening realities post-award. This is generally easier for a supplier the more prescriptive your workcope is, especially when there is considerable uncertainty around the final deliverable. If you make it clear that less tangible factors such as flexibility, or innovation are evaluated equally to price, this will make tactical pricing precarious for a supplier to perform.

Much of this comes down to asking the right questions at the appropriate time. To help you take this approach we have created the Mbrace supplier selection tool, a simple to use excel workbook, complemented by commercial training to help you better understand the questions and the way in which you can evaluate the results. Contact us for more information about this tool and the commercial training that supports it.