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How To Justify Early Purchasing Involvement
PurchTips - Edition # 225
March 8, 2011
By Charles Dominick, SPSM, SPSM2
Need Ammunition For Early Purchasing Involvement?
In the last edition of PurchTips, I focused on the negotiation value that you can bring to a deal through early purchasing involvement. But negotiation prowess is just one of the many reasons that purchasing departments should be involved in the earliest stages of significant supplier deals. Here are three more qualities that good purchasing departments can bring to the supplier engagement process.
- Strong ethics. Suppliers who sell to internal customers instead of purchasing departments commonly employ tactics of persuasion (e.g., lunches, sports tickets, gifts, etc.) that may cross the ethical line, even if internal customers claim no influence. Purchasing professionals are typically trained to uphold high ethical standards and will ensure that these tactics are not successfully used against unwitting internal customers.
- Supplier qualification expertise. A supplier can talk their way into the heart of an internal customer. But is that internal customer equipped to do things like analyze the supplier's financial health using the Altman Z-Score or other techniques, conduct reference checks in accordance with world-class purchasing practices, or know what to look for when conducting a supplier site visit to avoid a supplier selection mistake? It's unlikely. Of course, if you're going to play this card, you better know (or learn) how to do all of those things!
- A passion for risk management. When internal customers select suppliers, they often ignore some important components of risk management that purchasing professionals are fond of: competition and standardization. This oversight can lead to sole source situations that are characterized by the organization being powerless against the supplier's future price gouging, performance declines, or lack of agility as circumstances change.
If you want your management to mandate early purchasing involvement, you absolutely must not position it as being about you fighting being relegated to a clerical role. No one will care. It must be about what is best for the organization. You must make it clear why involving you early would be beneficial for the organization, preferably in measurable terms.
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