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Friday
Nov222013

Top ten tips for effective buying

Joe Critchley, VP Sales and Busiess Development, Trade Extensions


The air of optimism surrounding 2014 and hopes that the long awaited economic recovery finally arrives is growing and there are even a number of commentators reporting early signs it has already started. The latest Markit/CIPS Purchasing Managers' Index (PMI) reports the UK manufacturing sector is showing increased demand in the domestic market and overseas and CIPS, CEO David Noble states “suppliers can hope to end the year on a high and set up a strong start to 2014.”1 

Hopefully this means procurement professionals will be busier in 2014 than they have been for a number of years so in preparation it’s a good time to refresh buying best practice. With that in mind, Trade Extensions, VP Sales and Business Development, Joe Critchley has pulled together his Top Ten Tips for managing a large tender. Because while tendering provides a opportunity to optimize the mix of suppliers in terms of quality and cost, to maximise this opportunity it is vital that the tender is planned and executed correctly.  

  1. Use professional buyers 
    It may be tempting to extend an existing role within an organisation to include the buying function but this is generally a false economy since effective buying is a full time job in its own right. Only dedicated professional buyers will have the time, motivation and skills to complete a tender effectively.
  2. Identify the best suppliers available and consider ones not used before
    The success of a tender depends largely on the quality of the suppliers involved. There are hundreds of thousands of suppliers in the world but not all are capable of providing the prices and the quality of service you demand.

    One approach is to invite potential suppliers to complete a pre-qualification stage and then to evaluate them against some simple agreed criteria.

    Experience shows that the best suppliers are not always those that produce the glossiest company brochures and also that a supplier who cannot complete a simple RFI accurately and on time is unlikely to be worth pursuing. Suppliers who can make no contribution to your business should be politely but quickly discarded. 
  3. Involve operational ‘stakeholders’ at all stages
    It is essential that everyone affected by the tender is involved early on and given an opportunity to have input to all stages of the process – from suggesting potential new suppliers and creating accurate specifications to discussions about possible winners and losers. When new suppliers are introduced there can be a learning curve, and the support of all stake holders can mean the difference between success and failure. In general, the greater the involvement, the greater the chance of success and the smoother the implementation.
  4. Publicise the process at all stages
    A number of people not directly involved in the tender still have an interest in the outcome. These include the factories and warehouses and employees who may have some involvement with suppliers in other business areas, for example bill payment or health and safety officers. Different people have different information needs but, in general, more communication is better than less.
  5. Leave enough time
    Traditionally tendering has been a resource-consuming process. E-sourcing reduces the burden by streamlining the administrative processes, but a successful tender is still reliant on keeping to a strict timetable. It is essential that sufficient time is allowed to complete each part of the process in an effective way. This means allowing enough time to specify the tender, collect offers, analyse these offers and implement the results.
  6. Specify the tender properly
    Accurate specifications enable suppliers to make accurate bids. It also provides buyers with a record of what has been agreed. The most successful tenders are ones where buyers and suppliers are in total agreement over what is expected from each other and nothing is left ‘open to interpretation’. To stand any chance of achieving this it is essential to specify the tender accurately.
  7. Select winners carefully
    One way of looking at the tender process is as an effective way of connecting suppliers with business. All suppliers have areas of strengths but no supplier is good at everything. Often the supplier with the lowest offer for a particular item can also provide the best quality and service because the item fits in well with the rest of their business. However, if an offer looks ‘too good to be true’ it often is. Contact the supplier directly and examine their quote and their logic in detail. It may be that they have misunderstood something (although this should not happen if the tender has been specified accurately) but hopefully the offer is so good it complements their existing business.
  8. Consider supplier protection
    Inevitably, incumbent suppliers stand to lose business during a tender and it may be agreed for various reasons to provide some limited protection to the supplier, at least for a time. When this happens it is essential that the amount, method and timescale covered by the protection is openly discussed and agreed by the interested parties. It should not be handled in an ad-hoc, opportunistic or secretive way which can undermine credibility of the tender process.
  9. Use optimisation
    Optimisation allows you to match the goods and services being bought with the most appropriate suppliers that meet your needs in terms of price, quality or any other consideration you have. If you are considering supplier protection optimisation is essential because for example you could identify the optimum mix of goods and suppliers based on a condition such as existing suppliers not losing more than half of their business.
  10. Handling losing suppliers – don’t burn bridges
    When awarding business it is possible that unsuccessful suppliers may lose significant business and this is a situation that needs to be dealt with professionally. Suppliers need to know that the tender was a fair process and carried out in line with the published rules. Losing a fair fight is easier to accept then losing a fixed one.

    An important point is to make it clear to the suppliers that they still have a chance of winning business in the future. Suppliers are often much more successful in the next tender, having learned from their experience, and often win the business back.

101 November 2013 - Manufacturing makes a solid start to final quarter

 

An edited version of this article appeared on the Supply Management Blog on 21 November 2013:
http://www.supplymanagement.com/blog/2013/11/the-10-fundamentals-of-buying