Winning together, or are your suppliers the losers?

The Olympics, whilst being about doing your best, is also about winning. Whether that winning is by being faster, stronger, higher, longer, or by being more precise, creative or strategic. I suspect that won't cover every event, but you get my point.

Winning is something that often crops up in procurement workshops - particularly when discussing negotiations. 

Winning is great if, just like the Olympics, you're opposition is on another team. That is, all participants have the same but mutually exclusive aim - doing their best, and if at all possible coming first, and beating the opposition. No holes barred, and no negative impact as a result of doing so. No relationships to maintain, nor alliances to covert. 

Winning isn't appropriate if it's against those in the same team - the aim then is about working together to achieve a common goal, against a common opposition. Each participant collaborating to achieve the agreed objective. Each bringing their own expertise to bare on achieving that outcome. Sharing the work load, and sharing the benefits.

I'd contend that tactical negotiation is more like the former, and strategic negotiation is like the later. 

Problems arise when we treat suppliers we'd like a relationship with as if they're the opposition in the 100 meters hurdles or the heptathlon, rather than one of our fellow runners in the relay, or part of the same synchronised swimming team. 

What will you choose?

Alison Smith

The Purchasing Coach

Inspiring change inside and out

Blogs with insight from the London 2012 Olympics include:

• Let actions provide the inspiration
• Do your suppliers have passion 
• Success is more than gold
• Are your suppliers like Olympic athletes
• We get what we focus on
• Anything is possible
• Acceptance not comparison  

Reducing your costs isn’t just about negotiating lower prices!

If I ask business owners and managers about their purchasing they normally reply by proudly telling me that they always get 3 quotes and then negotiate down to the lowest price. This process is likely to have involved some banging of fists on desks and exclamations of “HOW MUCH?” & “Lower Lower.”

Perhaps a little stereotypical but that’s certainly what most people think procurement/purchasing/buying is all about. Yet if it’s the only thing you do then I can assure you “your total costs could be lower.”

Why - because negotiating the price only takes place about 90% of the way into the buying process! It’s the 90% before the negotiation takes place where you will have been adding cost into the provision of the goods or services. It’s no use thinking you’ve done a good job in negotiating a 5% reduction when the real costs savings could be 30% if you’d only taken the time to fully and rigorously apply best purchasing practice to the item or service.

The 30% cost reduction might come from:

• Revisiting the specification – is it over specified, can it be standardised or redesigned

• Understanding and consolidating or even reducing your volumes

• Better forecasting
• Reducing your supplier base

• Process reengineering – taking wasted time and material out

• Reducing stock holding

• Moving to more efficient suppliers

• Finding more financially secure suppliers

• Understanding the needs of your suppliers

• Understanding the cost breakdown for the item – materials, overheads, profit etc
• Negotiating with others within the supply chain
• Improved payment terms
• Improving delivery times
• Reducing quality issues
• Improving customer service – theirs and yours

And that’s just a list for illustration purposes.

Next time you ask for 3 quotes I’d suggest you check you’ve done the work before hand to ensure that what you’re asking for, and from whom, has been adequately investigated. Otherwise you might as well be pouring your cash down the drain!

 

Alison Smith

The Purchasing Coach
Sowing the seeds for cost reduction in your business
alison@thepurchasingcoach.co.uk
+44 (0)7770 538159

Money down drain picture source: businesscloud9.com via Alison on Pinterest