4 Ways You Can Approach Procurement For Best Value From Suppliers
For any business transaction, you need to scour the market for the best possible outcome. You need to know the pricing options available and then be able to get competitive quotes so you get a great service at an affordable price.
There are different ways to approach any market, but you’ll find that in general, the more time you allow for the procurement process to roll out over, the better you’ll be able to scrutinise the bids put to you and assess them for overall value.
The four ways to procure services within budget
1. Competitive Dialogue
The public sector is always a good place to turn for advice and learn about how large government contracting authorities go about procuring services for maximum benefits.
Within the EU public sector, there are regulations for using the Competitive Dialogue approach for procurement. This guide here gives some solid information on how it’s achieved and why it’s done.
The best way to use this approach is to have a good understanding of what you need from your supplier, but are open to suggestions on how the offering could be improved upon. When you want the input from other experts in a field you’re ready to outsource to, this approach will allow the tendering process to develop a two-way dialogue where suppliers are able to put competitive bids in and include suggestions on how they could be serving you better.
This approach is the only one that will work when you don’t know what’s available in an industry, or you don’t have the time to devote into research. Instead, have the experts in the sector come to you with their input.
The simplest way to describe the best use of this approach is when you really need expert input from suppliers. Print fleet management would be a good example as you could invite experts in the field to pitch you possible solutions at competitive pricing.
The most appropriate responses with suitable pricing would be the ideal candidates to engage directly with in a final stage of negotiations before deciding on a preferred partner.
As you can imagine, this is going to take you the longest time to get your services put in place. The advantage though is that through the dialogue with your supplier, you’ll be able to have worked out all the kinks needed to get a contract for service underway including everything you need taken care of at a price within your budget.
Expect this to take at least a couple of months and plenty of dialogue between your business and potential suppliers. Even those you aren’t considering to include in the final stages, you still need to acknowledge their input, respond to them and keep them updated as any one of the potential bidders could come back with a more appropriate solution for your needs.
If you are going to use this approach, you’re best to appoint a project manager to oversee the tendering process and engage with interested suppliers to find out what each can offer.
2. An Open Approach to Invite Tenders
Taking an open approach to tendering invites is a two-part (minimum) process. The first stage is advertising your need to the market, and the second is assessing the proposals you receive.
To put this method to work, you need to know how to prepare and evaluate tenders. The Chartered Institute of Procurement and Supply has a guide here outlining what’s involved.
This approach works best to get competitive quotations, however, you can expect it to cost you in time and project management as all participants involved in the tendering process will need to be responded to.
However, there won’t be as much dialogue involved as you’re not asking for expert input. For this approach, you need to state your exact requirements, inviting those who feel they can deliver what you need to put their quotations to you. You aren’t asking for input, just the price and terms of engagement.
3. A direct approach to inviting proposals
This method involves you identifying suitable candidates and directly approaching them to invite them to submit their interest in your business and put their proposals to you.
To get this method working in your favour, you are best to have a list of suitable suppliers you’d like to partner with because you are going to lose some competitive advantage as your invitation will not be in the public domain, but instead will only be open to those you identify and approach. Aim for at least a half dozen suppliers.
With an open approach, you can expect to get a lot of responses, each needing replies, whereas the direct approach, only those you invite to submit their interest will be the parties you deal with. The more you have the more quotes you get to pick from but it will take longer to identify candidates to invite directly.
4. The least competitive approach and likely your most expensive
There’s what’s known as a non-competitive approach to procurement and it is likely only best used for emergency use and is not advised for long-term contractual arrangements. The reason being, your supplier is in the driving seat. When you go direct and don’t have others involved in the tendering process, there is no competition for potential suppliers. Never let any company know they are the only firm you’re in discussions with as you will not get competitive pricing.
When you’re in a rut and need supplies fast, this approach can work but never for the long term.
You’re always best to use this approach to get suppliers in place fast, but always take the time to consider longer-term prospects and ensure that any supplier you engage with directly without a competitive advantage, that you do not enter into a long term contract. Let them know it will be for temporary supplies or services and the contract will be going out to tender and invite them to participate in the tendering process.
The more competition there is, the better your options, quotations and value for money you will get. If you don’t even know what your options are then use the Competitive Dialogue approach to engage with suppliers and have them put their proposals to you. Then you can evaluate them and identify the best ones that will fit in with what your business requires.
The more time you have, the better a deal you’ll get. If you’re short on time, your best option is to engage directly with a procurement specialist firm that will have a list of pre-approved suppliers of vetted companies who are already known to be efficient suppliers with value for money built-in. It’s often the fastest way to procure professional services with cost-efficiency built-in.