The job of a procurement team is not just finding the lowest price for a product. Putting together the best possible supply base possible for an organization is a far more complicated process. It requires strong analytical skills, strong communications, and plenty of research. While price is always a consideration when considering prospective suppliers, the right supplier isn’t necessarily the one with the lowest bid. The best trading partners offer value beyond just the price point; instead, they offer the best business outcome.
While the supplier/customer relationship has sometimes been viewed as adversarial, the best suppliers are those with whom your organization has a strong partnership and a strategic relationship. The ideal supplier is a teammate and not an adversary.
The best partnerships often include cultural compatibility, common goals, mutual respect, complementary social values and so much more. Your organization’s suppliers must be a good fit for your organization as well as offering a fair market value on what’s being sold. Undependability, unsustainable practices, and a lack of professionalism are not worth a two percent savings on price.
How to Create Your Supply Base
Once you know what you’re looking for, the real work begins. So how do you create your ideal supplier base? The first step is to assess your current suppliers. Determine who are you buying from. Do they represent your existing customer base? How does your diverse spend compare to non-diverse spend? Are you putting all your eggs in one basket by just going with one big supplier, and will you potentially lose your leveraging and negotiating power in that case by giving all your business to that one market leader? Does that market leader address your current and future needs and wishes, or do you simply have to take what they offer as is? Also assess potential new suppliers in the same way.
Another step to determine the correct suppliers is to determine possible risks of both existing and potential suppliers. While cost and quality are always considerations, it’s important not to discount social value and risk. Are your suppliers likely to put your organization at risk? What about your suppliers’ suppliers and so on down the line? Consider risk not only in terms of quality and reliability but also in terms of reputation, ethical issues, sustainability and potential PR disasters.
Once you’ve found the right suppliers the job isn’t necessarily over. Supplier development could take a promising vendor and turn them into your ideal supplier. By having face-to-face interactions with a supplier after the initial purchases are made, you can often help establish a more collaborative relationship. This type of collaboration can help foster innovation and lead to improved processes and perhaps even better products and lower costs.
Once you have your ideal supply base, Veriscape can help ensure your transactions with those suppliers are smooth and harmonious. For more information on how Veriscape can help your organization, contact us today.