Supply & Demand Chain Executive’s 9/16 edition has a special report: “Set Your Sights on Strategic Sourcing”. This report contains a number of useful thoughts that could have very positive benefits to the purchasing organization. While this report deals mainly with large entities, seeking strategic suppliers is worthy of the consideration of all.
Proficient Sourcing finds new supplier candidates for procurement professionals. In most cases, these are both one-off situations and involve larger companies considering smaller company supplier candidates. Even though the buying organization is larger, it is often also a small company by many definitions. In our experience there are many cases where we believe the procurement organization is missing opportunity to connect with a superior supplier that might qualify as a truly strategic supplier. Please comment on all this in our blog. We welcome the potential to learn from your experiences!
We have advocated that buyers consider expanding their inquiry information, even for first-time, one-off RFQ’s. By doing so we do not believe there are any new risks, and the buyer can only win as a consequence. This is especially true if the buyer is considering a future where an expanded relationship might be useful. Why not take steps to improve the chances of finding that supplier?
Our experience is that buyers tend to ignore this future possibility and simply search for the new supplier with price as the sole, or primary, criterion for selection. This could be valid for any number of circumstances, but also might be a case of opportunity lost.
Potential excellent matches never happen for any of many possible reasons. The really good supplier candidate thus loses this initial event and is never considered in the future. Neither party will be aware of this loss, and from this time forward it is truly an opportunity lost that just might be avoidable.
There are some simple tactics a procurement professional might consider to lessen the possibility of losing a valuable supplier. Among these are:
- Include some hint about future opportunities. For example, in addition to asking for price and delivery, add a question something like “are there circumstances that might lead to a better quote for this item in the future”? While the possible answers are numerous, you might learn that the company had some short-term problem that made price and delivery worse than “normal”. If and when the future circumstance occurs, you will have a candidate available otherwise lost, and without any risk on your part. A smart supplier truly interested in your future business can be expected to address this question in a way to capture your attention.
Small companies may be enjoying a boom from an important existing customer. These are usually not permanent, but during such a “boom”, the company is not as available for new prospective customers as it might be otherwise. Or, perhaps key equipment is down for a time and unavailable for your RFQ.
The new project may also involve risk issues; precision, exotic materials, and perhaps other things may give the prospective supplier pause. We have witnessed lost medical device business because prospective and qualified suppliers were nervous about undertaking risky projects for a new customer. Both sides agreed that if the companies involved had an existing relationship, the risky issues would likely be easily solved. In these few cases, a relationship never happened.
- Ask for price with and without material included, especially if you are already a significant user of the material needed in your RFQ. You may discover the candidate can’t get the same material price you can, but the other costs are very good if you supply the material. There are many reasons why a small business may not be willing to make the initial material investment for a new customer. As a consequence, no relationship was created.
- You can access free engineering and design consulting by simply asking a potential (or existing, for that matter) supplier what would make this item cheaper to make or with improved functionality. The supplier will probably have great expertise in the manufacture of your parts, or at least similar ones, and may have ideas on how to make it better and/or cheaper. Why not ask?
These are but a small number of things a curious procurement professional can do to improve the likelihood of finding a really good supplier—maybe even a strategic one. We encourage you to give this consideration—you might find the supplier you need!