For a long time, procurement managers were focused on one thing—reducing costs.
The efficacy of procurement teams is tethered to knowing and understanding what they are purchasing and why. Think this seems straightforward? Think again. Large enterprises might have vendor rosters numbering in the thousands that cut across numerous categories. And most of the ongoing vendor engagement is in the hands of stakeholders, who all too often, sit in virtual silos. So what can procurement teams do to address this? Actually, there are lots of things. But for the purpose of this post, let’s focus on maximizing the chances that the best-aligned vendors are engaged. A key tactic to engage involves leveraging procurement’s favorite three-letter acronym — the RFP (request for proposal). An RFP allows an organization to assess whether the supplier’s goods and/or services are actually going to meet the its needs.
Advancements in technology have allowed procurement teams to introduce new sourcing strategies and practices. A reverse auction, for example, can automate and streamline the sourcing process to increase cost efficiency without requiring months of negotiation. Before going further, we want to acknowledge that cost should not, in the vast majority of situations, be the sole driving factor in choosing a supplier. Indeed, sometimes cost and quality can be inversely correlated. Taking a holistic approach where cost is a key consideration will deliver better outcomes. But that’s for another blog post….
Topics: Reverse Auctions
When it comes to procurement, technology can make a significant impact.
Most businesses understand the challenges of finding a reliable supplier. Sure, there are “throwaway engagements” where your focus is purely transactional, the sole focus might be quickly identifying who can get the job time. But for larger, more strategic endeavors, the scope of your evaluation likely transcends the supplier’s current capabilities. Indeed, your looking to find a partner with whom you can build a long-term, mutually beneficial working relationship.
As a business, streamlining your sourcing, allows you to save time and money, build better working relationships with suppliers, and ultimately ensures the success of your procurement cycle.
The role of traditional procurement teams is changing.
What’s the difference between an acceptable RFP versus a stellar one that engages suppliers to put forward their best possible response?
We’ve dedicated quite a bit of time speaking to the virtues of the RFP process. Indeed, if you’re sourcing any complex good or service, running a Request for Proposal, is a great way to gather and evaluate the data the will ultimately support the decision you make. While running a comprehensive sourcing event makes sense in many scenarios, there are other situations where price is the overriding criterion. If that is the case, and the product/service being sourced is steeped in commodity rather than complexity, you might have a good candidate for a reverse auction.
Topics: Reverse Auctions