I hope that you enjoyed the article How To Improve Procurement Compliance.
In the article, I provided three tips and alluded to a fourth. That fourth tip is “where appropriate, give internal customers a choice of a few approved suppliers rather than one mandated supplier.”
Sure, certain categories must be single sourced. But for some less critical categories, particularly in the MRO realm, use of dual sourcing – or even using up to four suppliers for huge categories in huge companies – is a decent strategy.
Too often, when single sourcing, procurement professionals assume that there will be 100% compliance. That’s a valiant, if perhaps unrealistic, aspiration. But they often rarely approach that compliance level as disgruntled internal customers engage in maverick buying. So, if your primary supplier is only going to get 75% of the business anyway, wouldn’t you want that other 25% to go to a supplier that has been properly qualified, has agreed to your organization’s standard terms and conditions, and has offered a low, negotiated price?
Internal customers love to feel like they have control over their destiny. When they have to use a single, mandated supplier, they feel like their control has been stolen from them. Giving them limited choice helps them feel they have the control that they seek (and will often break company policy to have). In the end, this limited choice is a key to better procurement compliance in many situations.
Some procurement purists will insist that this approach unnecessarily costs the organization money. But unless you’ve sought bids for varying percentages of your business, this theory cannot be proven for your situation. For tips on how to know the incremental costs of using multiple suppliers instead of one, check out the RFP tips at http://nextlevelpurchasing.com/articles/dual-source.html.
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To Your Career,
Charles Dominick, SPSM, SPSM2
President & Chief Procurement Officer – Next Level Purchasing Association
Author – The Procurement Game Plan
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