What’s the most important variable in selecting a supplier? Quality, service or cost?
The selection process often has some tension.
The ultimate internal users of the product insist, as they should, on quality and service. They may have no pressing need to save money. They assert their accountability for delivering results.
On the other hand, procurement goals typically do have savings targets. Often, large ones. This is also important because it leads to bottomline gains to the company.
Users often view procurement as slowing the process and “forcing” consumers to sacrifice quality for lower cost.
Make Everyone Happy in Three Simple Steps
1. Define the universe of suppliers
- Pull a historical transactions report. Identify all suppliers that you purchased a similar product from. People change roles, come from other backgrounds or may have preferred suppliers that have always delivered. Corporate systems can reveal previously used suppliers not considered by the incumbent stakeholders.
- Do a Google search using the name of a known supplier as the search term. Check out the paid results (the ones highlighted on the first few lines) and the organic results. Also check out the ads on the right sidebar. You’ll likely find suppliers that you didn’t know of.
2. Develop your quality and service filters
“Do not consider cost at this step. Don’t talk about it. Don’t think about it.”
Have the users list out in detail their non-negotiable quality and service requirements. These are the deal breakers. If you don’t meet these requirements, you don’t even sit on the table.
This is very important. Have your internal clients (the users of the product) ask themselves the question below:
What are the quality and service requirements, such that if a supplier meets them I will confidently do business with them?
Have them make the requirements as rigid as they need to. Do not consider cost at this step. Don’t talk about it. Don’t think about it.
3. Request for price quotes
Let’s assume that you identified 10 suppliers in your universe. And after taking these 10 suppliers through the quality and service filters, only three make it through.
You’re now ready to request for price quotations. Only these three suppliers get to participate.
Once you get to this point, the only thing you now talk about is cost.
Why It Works
Here’s the beauty of the system.
At this point, internal clients like to argue that quality and service is sacrificed to save money. Not an issue here. They set the uber rigid requirements. And only the suppliers that met them were asked for quotes.
This is also the point when suppliers like to sell their world-class market leading quality and customer service. Yep, we agree with you. Congratulations! This is the very reason you are part of the select group of suppliers that we are asking quotations from.
No confusion. No non-factual arguments.
Once you get to this stage, you can focus solely on price negotiation. You’re assured that the ultimate choice will meet quality, service and cost goals.
Have you had similar experiences? We’d love to hear them.
Image: © iStockphoto.com/pederk