PurchTips - Edition # 45

 

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Picture of Charles Dominick, SPSM, SPSM2, SPSM3

Is It All About Price, I

By Charles Dominick, SPSM, SPSM2, SPSM3

What Do You Consider When Making A Decision?

I recently had the enriching opportunity of speaking to a group of sales professionals. I asked them to tell me about the experiences they've had with purchasing groups that have frustrated them the most. I got some interesting responses!

One phrase that was repeated often was, "It's all about price!" These sellers felt that many purchasers do not seek the supplier that will best serve their organization, but instead always seek the cheapest supplier.

I assured them that this was not the case in most progressive purchasing and supply management departments. However, that is not to say that their perspective did not have merit. It does.

I summed up why they had the experiences that they had in this blurb: "It all comes down to what can be quantified in financial terms. When price is the only thing that appears to be quantifiable then, yes, it does all come down to price. However, when paying a higher price can yield a quantifiable return (e.g., minimizations of other costs), a well-trained purchaser will make the decision that has the most favorable net impact on the bottom-line."

There are many other aspects of doing business that affect the bottom line. Are you considering them? If not, consider evaluating how these costs differ between competing suppliers:

  • The cost of acquiring a product or service
  • The cost of using a product or service
  • The cost of supporting a product or service
  • The cost of maintaining a product or service
  • The cost of disposing of a product or service
  • The cost of poor performance


In the next resource, I will teach you how to calculate the cost of poor performance (quality, delivery, service). Until then, all the best...

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