Buying items and services is a necessary evil of doing business, its operational costs. Smaller sized businesses tend not to pay too much attention to detail and it’s a costly mistake to make when it comes to growth.
The larger your company becomes, the more you need to buy in. That’s not just for raw materials for a production process either. Even hiring staff will eventually take a team of HR personnel to recruit the right talent to the right position. PR staff is needed to target media campaigns to get new customers through your doors and paying for your products and services.
The more your company grows, the more you’re going to need to spend.
For that reason, the best time to optimise your expenditure is before you expand. Having a clearly defined procurement procedure and policy in place is the ultimate way to gaining a huge competitive advantage.
Applying the two out of three process to procurement
When you’re at the beginning of a buying stage for any business supplies, there are only three words you need to remember.
In a perfect world, you’d have all three of the above from a supplier. Thing is though… it’s not an ideal world so you can only have two. Pick.
· Fast and good
· Good and cheap
· Cheap and fast
But never fast, good and cheap.
To strike the right combination, there are a couple of things you need to do. The first is to be exquisitely clear in your objectives.
If you’re renewing a print contract, why do you want to change supplier? Is it due to poor customer service? If that’s the scenario, then perhaps fast and good would be a good option to aim for. If on the other hand you were to be sourcing stationery for the office, cheap and good quality products may be a good combination.
The trick to effective sourcing is prioritising your needs. Basing it on the level of service you need. Do you need it fast? If so, expect it not to be cheap.
Time is money after all and if you’re in a rush to get supplies, suppliers will be in a rush to add a mark-up for the speed of delivery.
Even the Royal Mail won’t give you a next day delivery service without insisting on a premium. They’re in the fast and good category. Cheap, it’s not if you want it fast. If you want cheap, it’s second class postage which will be good and cheap, with the sacrifice of fast.
So ask yourself what you need. A fast service, good quality, or is price the deciding factor?
Once you can honestly answer that, then you move onto the next question of where do you get what you need? This is the investigative stage and it’s where you’re identifying potential suppliers.
What makes a supplier considerable?
You can break this down into a five step process…
1) Set a well-defined criteria that potential suppliers must meet
This could be things like the supplier must be:
b) Have a stringent quality control process
c) Have a reasonable minimum order quantity
d) Reasonable payment terms and conditions of service
e) A clear returns or guarantee policy
f) Have verifiable references
What you’ll find at the early stage of buying any B2B service is there are a lot more suppliers than you initially thought.
2) Define the process you’ll use
When you have your potential suppliers lined up, you need a process and a time scale for assessing suppliers against your criteria. At this stage you should also be thinking about the method of outreach. Will a trade publication be sufficient in letting suppliers know what you need, or will you have someone appointed from within your company to put RFPs (requests for proposals) out to potential suppliers?
3) Ask for the bids to be submitted
The full details of the products you need or the services you need supplied to your business needs to be clearly stated in a written document so that suppliers can get a full understanding of what you require them to do. Clarity at this stage is crucial for getting a correct quotation and the negotiations set off on the right foot.
4) Evaluate each submission received to select a partner and negotiate terms
Evaluation can only be done when all the bids have been submitted. For this reason, in your briefing to suppliers, give them a reasonable deadline to have their proposals submitted for consideration. Once that deadline is reached, evaluate your responses to narrow the selection process and decide which supplier best meets the criteria you set at the beginning stage. Any supplier submitting a bid past the deadline should probably be dropped from the process as they’ll have missed a deadline before you start working together. Start the way you mean to go on.
5) Monitor the supplier continuously
Even the best suppliers will have a hiccup here and there when something goes wrong therefore plan for that to happen by assigning someone as a named contact to oversee the contract. They’ll be responsible for performance reviews ensuring the supply provision is overseen and also for managing the relationship with any key person involved in the service provision.
In our experience, rapport has been essential to long-lasting relationships with suppliers, making it easy to sustain a healthy working relationship that benefits both businesses while making the renegotiating stages flow much smoother and more beneficial.
Ultimately, the better the preparation is in the early stages of the buying process, the better clarity there is, resulting in clear communication with much less misunderstandings.
Image courtesy of krostewitz.com.