Finding reliable, long-term suppliers who deliver what they promise at a cost-effective price. Who would be brave enough to take up such a challenge?
It’s the daily reality for procurement managers, tasked with finding quality suppliers to build long-term relationships with while saving their organisation money. While that may be procurement nirvana, here’s seven key considerations to keep in mind when embarking on a sourcing undertaking.
1. Understand your spend category
The ‘be prepared’ motto has held the scout movement in good stead for more than a century, and it’s a good strategy to employ here. Do your homework and make sure you know every detail about the spend category you’re considering. If the category is something as foreign as recycled corrugated packing, for example, research things like the category definition, usage patterns and grade types.
Become an expert in the category. You wouldn’t travel to a foreign country without doing some research, so don’t venture into a foreign category without familiarising yourself first.
2. Evaluate the supplier marketplace
Step 2 is assessing the supplier marketplace, which can give you a strong idea of who the key players are and market dynamics and trends. While not always essential, also consider putting together a ‘should-cost’ report while you’re working through step 2.
3. Develop a supplier poll
Preparing a survey of all suppliers — incumbents and challengers alike — will help you determine vendor capabilities. The idea is to show whether current market capability and capacity meet your requirements.
It’s also an excellent litmus test of the viability of your plans or project before committing any financial outlay.
4. Prepare your sourcing strategy
This is the stage where we bring together the information you have uncovered in the first three steps. While you’re putting together a sourcing strategy, keeping in mind these three questions can help shape an effective, comprehensive strategy:
- How competitive is the supplier market?
- What are the chances of leveraging better pricing?
- Will the proposed sourcing plan have a negative impact on any relationships?
5. Put together an RFP
Make sure your organisation’s requirements are crystal clear to potential suppliers. In putting together your request for proposal, drill down into as much detail as possible and include everything from product stipulations and delivery and service mandates to pricing outlines.
6. Selecting and negotiating with suppliers
By now you’ve thoroughly analysed and reviewed RFP submissions — and asked for supplementary information. If you need clarification, don’t be afraid to ask for it; you’d rather have a complete picture of all applicants now than find out more information down the track that you wished you had at this stage of the procurement process.
Once that’s complete, we can narrow down the candidates — with the support of your senior stakeholders — and move into the negotiation process.
7. ‘Implementation recommendations’ meeting
This is where you meet, preferably face-to-face, suppliers who satisfy your requirements. They outline their execution plans, which are then reviewed and fine-tuned for your circumstances.
Supplier-related issues were rated the ‘biggest headache’ by 30 per cent of procurement professionals in a 2016 survey, with one describing a procurement manager’s challenge as ‘matching capabilities with requirements and finding low cost suppliers that can consistently deliver quality product’.
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