One of our students recently sent a very interesting question to me. She asked how to handle buying products and services from “sister companies” (i.e., companies who are owned by the same parent company that owns your company).

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This is a great question and one in which there is no definite answer, only opinions.

My opinion is that you should treat your “sister” companies just like any other suppliers if dealing with low-risk categories. Where service, delivery, and quality are substantially equivalent among suppliers, you should not pay a premium to use a sister company. Your business unit’s president or general manager is responsible for the profit and loss of your business unit and doing sister companies a “favor” by purchasing from them at a premium may actually hurt the performance of your business unit’s president/GM.

This topic might be worth a conversation with the president/GM to make sure you’re making the right assumptions.

Now, for high-risk categories, that’s another story. Many of us have been in situations where we need a critical product or service immediately and we can’t get through to any C-level supplier decision-maker to get above-and-beyond treatment. So, for high-risk categories, it may make sense to pay a premium to use a sister company because, theoretically, it would be easier to escalate requests for above-and-beyond treatment to the highest levels of decision-makers.

What do you think?

To Your Career,
Charles Dominick, SPSM
President
Next Level Purchasing, Inc.
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Charles Dominick, SPSM, SPSM2, SPSM3

Charles Dominick, SPSM, SPSM2, SPSM3 is an internationally-recognized business expert, legendary procurement thought leader, award-winning entrepreneur, and provocative blogger. Charles founded the Next Level Purchasing Association in 2000, oversaw its incredible growth, and successfully led the organization to its acquisition by the Certitrek Group in 2016. He continues to blog and provide advisory services for the NLPA on a part-time basis as he incubates his upcoming business innovations. Charles is also the co-author of the wildly popular, groundbreaking book, "The Procurement Game Plan: Winning Strategies & Techniques For Supply Management Professionals."

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