Rule #1 of Tactical Procurement
PurchTips edition #193
What Should Be The Focus In Tactical Procurement?
Unlike strategic procurement which has a long-term focus, tactical procurement deals with the administration of procurement transactions, including the occasional "one-time buys." Now, just because a procurement is a one-time buy doesn't mean that it can be handled by anyone. A buyer still needs to know some fundamentals of procurement for this tactical purchase, which brings me to "Rule #1 of Tactical Procurement."
My Rule #1 of Tactical Procurement is this: "The buyer must first identify the product, service, and/or supplier with an acceptable probability of being satisfactory in all aspects of the transaction and then achieve the lowest cost for that product or service or with that supplier."
What does this mean?
It means that the buyer is to first assess:
- Whether the product or service is the right one for the purpose intended
- The likelihood of the product being delivered, or the service being performed, in the desired time-frame
- The likelihood of the product or service meeting or exceeding quality expectations
- The likelihood of the supplier being able to provide the type of support anticipated when things go well or if things go wrong
Only after this assessment is done should the buyer consider cost in the decision. If multiple suppliers have an equally high probability of providing a satisfactory experience, then cost can be a differentiator or even THE differentiator.
"Cost" can simply mean price or can mean a carefully calculated total cost of ownership. Which type of cost you use depends on the value and the complexity of the purchase. But both are factored into the decision only after the probability of satisfaction is determined.
This rule means forces you to focus on a satisfactory experience first, cost second. You never want to select a supplier that provides an unsatisfactory experience just because they offered the lower price.
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