A characteristic of business in the UK in recent years, and I suspect in other countries, is the removal of people from the interface between buyer and seller. In the place of the traditional face-to-face meeting is the RFI, the RFP and the E-auction. Indeed, some companies bar any direct communication between the department which has the need and the potential suppliers. As a senior buyer once told me “You are interested in relationship selling; we don’t want relationships. We are only interested in getting the best deal.”
The techniques that are appropriate when sourcing an engineering component often fail when buying a unique or highly differentiated service. We find that procurement rarely define the need; they define what they see as the solution and ask supplier to quote against that. Many years ago, when the British coal industry was nationalized, a buyer from the National Coal Board was visiting a supplier’s factory. He saw some state-of-the-art hydraulic pit props which he had never seen before. He was told that they were for a South African client. He asked why the NCB didn’t buy them and was told “because you never specified them in your order.”
So, my message to procurement is, let those with the need talk to those who might address the need. Yes, you might lose some of your power, but the business will gain overall. And if it is delegated to you, make sure you understand the critical elements of the purchase as opposed to the “nice to haves”.
Share the purpose of the goods or services you wish to buy with your suppliers and don’t just specify your solution. This will allow your suppliers to suggest more innovative and possibly cheaper options.
I wanted to buy a train ticket from Dundee to Glasgow. Instead of just buying the ticket I asked what was the cheapest and was told that if I bought two tickets, one to Perth and another from Perth to Glasgow, I would save 25% of the normal fare without having to leave the train.
Sales people find it increasingly difficult to get to talk to potential customers. The Web has led to the attitude “If we need you we’ll find you; don’t call us, we’ll call you.” Procurement are increasingly distanced from those who have the need, often these days being an outsourced function. This means that their understanding of the need is limited and even if they spot an innovative solution they are not empowered to include it because it is “outside the process.”
If we are to believe the forecasters then computers will replace many of today’s jobs, presumably including sales people and procurement staff. If processes take over from people then we will all lose out. In my selling days I used to say to my clients, “I know of 5 different ways to save you money; you only know of one, which it to cut my price.”
And my message for sales people is to follow the procurement process but also to present your original innovative solution alongside it.