We have always felt that the goal of any sourcing process MUST be to select the best supplier possible and develop a relationship that will drive mutual value creation – it’s not to find the cheapest supplier. Unfortunately, most sourcing processes and related technologies absolutely reverse the priorities. We were recently invited to respond to an RFP to create a Global Competency Development program for a large global organization and after much deliberation (and pain for our business development person 🙂 ), we decided not to respond.
There were many reasons for us to make that choice but the primary one was that we did not think that the sourcing process had aligned the expected business benefits with the requirements that were listed in the RFP – meaning that we were convinced that if we sold them what they were asking for (requirements), they would not get the business benefits OR results. In addition, the types of questions they were asking about our capabilities were also not aligned with their expected business results. The entire process was also being run on a sourcing technology platform that severely restricted and constrained us from truly presenting our capabilities (more on this topic in a later blog but there needs to be a serious open discussion, that MUST involve the supplier community, on the benefits of the various technology platforms – seems to me they are all geared towards improving the efficiency of the sourcing department and helping to find the cheapest supplier!!).
We made this decision even though we were humbly but absolutely convinced that we were at least one of the best solutions for them. Fortunately, we think we got the attention of the customer by sending this letter by offering them a Next Practice. We told them about our standard transparent pricing philosophy where we will share with them what we charge other customers (blind) so that they can determine if we are giving them a fair price and thus eliminate price risk from their decision. In addition, in lieu of spending the time, effort and cost to respond to a lengthy RFP, we asked for time with their decision making team and committed to live with their decision after we met with them. For saving us the time and effort, we offered to make a donation to their favorite charity in return.
Another recent example is a client (academic institution) who was running the standard type of adversarial sourcing process based on finding the lowest price for a solution that was literally core to their value proposition. They were headed for a total doomsday scenario where the entire academic community was up in arms already. It wasn’t until we changed the entire orientation of their process that they discovered that not only were they behind but their current strategy would have made sure that they fell even further and further behind their competition – in a BIG way!!
The question for you to ponder is how many times is that happening in your organization? How many times are you turning away the best possible supplier because of your process or your technology platform? And is that a “too bad” for the supplier or a disastrous result for your company? Are you really serving the interests of your internal customers if your process and technology are so draconian and adversarial that you are keeping the best solutions from your customers? Is it your job to eliminate price risk for your customers so that they can focus on the capabilities and finding the best solution or is it to make sure that you find the cheapest solution?
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- Category Management of Professional Services – Part Deux Applying Value Drivers to Sourcing/Supply Chain - May 9, 2019
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