Hot on the heels of March Madness, we polled expert procurement professionals from around the globe as to the best slam dunk purchasing advice they can offer.  Over the next several weeks, we will feature 64 procurement tips including the “Sweet 16” and “Final 4” where we declare our National Champion of purchasing advice!  Let’s tip off:

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Pay attention to the “human side” of your career.

Look for opportunities to continually refresh your skill set and your knowledge base. The more effort you put into career development, the more rewarding you’ll find procurement to be. Every new job represents a chance to master new technologies, immerse yourself in new industries, and connect with mentors who can help you get to the next level.

Be of service to others, too! By being a mentor, you can advocate for our profession. To remain strong, our industry needs more Millennials to replace the Baby Boomers who are retiring. Seek them out, offer encouragement and support, and share your enthusiasm for procurement. You’ll be strengthening your industry by keeping these young professionals interested and engaged.
Kristin Carty | Outreach Director | ThomasNet.com | @ThomasNet | @kristincarty

Every year you must re-tool yourself by completing at least 1 course each year – education is key & invaluable.
Ann-Marie Woodham, SPSM | Purchasing Manager | Jamaica Public Service Co. Ltd.

Single or Sole Source Suppliers

single-supplierOnce vendors know they are getting a deal in a sole source scenario, they are less likely to negotiate on pure price. But they often will add small things to the deal, which can be of real, tangible value to you. Your requests might include complimentary training hours, extended warranty periods, and extra services. You’ll be surprised how often vendors will add these to the deal at no cost.

Just because you know you don’t have an alternative to switching suppliers doesn’t mean that your single source supplier has to know that. Sharpen your negotiation skills, prepare well, and negotiate with your supplier with vigor! Pricing and terms decisions are made by humans and that means that good persuasion techniques can get your supplier to concede even when it isn’t logical for them to do so.

If pricing is based on cost plus a percentage for the single source supplier’s profit (“cost plus pricing”) instead of a fixed price, it can prevent the supplier from inflating its profits at your expense year after year and “hiding” that fact in a fixed price with no visibility into unreasonably high profit margins.
Next Level Purchasing Association – Powerful Negotiation For Successful Buying

Have patience; the more pragmatic I became about what value meant made the outcome all the better. Don’t be afraid to challenge those stakeholders who demand you to squeeze price. I deal a lot with long – term relationships, so p!ssing suppliers off for the last few % can affect your own bottom line.
David Little | @daveylittle

Report savings that are real, verifiable, solid and congruent. Don’t go making up wild assumptions and create fictional cost avoidance or unbelievable bottom line benefits that you can’t prove.
Bruno Alvarez | Procurement Stories | @procstories

 

Request for Proposal (RFP)request-for-proposal

It’s embarrassing to get no responses to an RFP. If no suppliers want to bid on your business, you want to know this as soon as possible so that you can revise your RFP to be more attractive. Require suppliers to complete and return a Notice of Intent to Participate provided in your RFP so you can predict participation.

Knowing how direct costs, overhead, and profits comprise suppliers’ prices gives you a negotiating advantage. Your existing suppliers know this and will often withhold cost breakdowns while they have certainty of getting your business. Therefore, require cost breakdowns when they’re still competing for your business. The RFP process is the perfect time to ask for them.

Analyzing suppliers’ “financials” is a critical activity in supplier qualification. Privately-held suppliers often reject requests for theirs. However, just like with cost breakdowns, suppliers are often willing to share more information when they are still competing for your business. Again, the RFP process is the perfect time to ask for or require supplier financials.
Next Level Purchasing Association – Savings Strategy Development

Find out as much as you can about your potential customer to prepare a responsive proposal. Vendors should always follow the directions of the RFP/RFQ thoroughly, and ensure they exhibit a clear understanding of the technical requirements (i.e. what the customer needs) in their submission. Failure to do so can result in disqualification from many procurement opportunities that they otherwise could have been successful in winning.
Stephen J. Yuter, SPSM  |  Director of Acquisition  |  U.S. Department of Health and Human Services / Indian Health Service

Do call the given references and make site visits with internal stakeholders within your Procurement project/RFP.
Paul Hubert | @TPHubert

Know your markets.  For those who tackle a large number of categories, it can be very difficult to be an expert on every product and service they look at. However, in order to deliver what internal clients need, build mutually beneficial relationships with suppliers, and secure the best pricing and contract terms, buyers need to understand the specific market dynamics of the products and services they purchase. Our clients tell us that having this knowledge pays off every time in the form of buyer confidence, time saving and big cost reductions.
Robert Kempken |Senior VP of Business Development | IBISWorld, Inc. | @IBISWorld

Do your homework on markets/categories, internal stakeholders, suppliers-and listen!
My Purchasing Center | @mypurchasing

Focus on the issues, not positions.
Richard H. Niven, SPSM | Director, Global Indirect Sourcing & Procurement – Global Supply Chain | St. Jude Medical

 

supplier-performanceSupplier Performance

If the time frame for payment and/or delivery is specified in days, ensure that it is clear when the counting of days begins as there are many options.

Make sure that the warranty clause specifies the applicable remedy or remedies for failure and includes the time frame in which each remedy is required.

Make sure that the Force Majeure clause does not contain any unreasonable excuses for the supplier’s failure to perform.
Next Level Purchasing Association – Managing Supplier Performance

Never hesitate to ask a supplier for better pricing or terms on a purchase because the worst thing that could happen is they might say no.
Gary Alden, SPSM | Mechanical Materials Specialist | Genesis Systems Group LLC 

Engage your stakeholders early and often!
Meri M. Stockwell | @MeriMStockwell | Procurement Expertise

The best procurement advice I’ve received is simply ; “You won’t GET if you don’t ASK.” Most vendors are willing to accommodate special requests within reason, but if you don’t ask for a better deal, expedited order processing, etc., you’re not going to get it.
Greta Matje, SPSM | W.L. Gore and Associates

 

Creating a Negotiation Win-Win

win-win-2

When suppliers propose unreasonably high prices and later lower those prices dramatically, they worry about customers perceiving them as greedy and opportunistic. This fear can work against you in a negotiation. So, be careful how you describe an unacceptable price to the supplier who proposed it. Describing it too negatively like “a rip-off,” “price gouging,” etc. can make a supplier reluctant to prove you right.

When many of us think of negotiation, we think of using words to overpower our counterpart and convincing them to agree to our terms. However, as you’ve seen from the two preceding tips, concessions are often achieved when you let the supplier do the talking. Sometimes, it is best to just shut your mouth and listen.

Imagine a supplier resisting your demands. You can describe to the supplier a situation where you are trying to decide between multiple suppliers and one supplier (meaning the supplier you are speaking with) won’t improve its proposed terms. Then, ask the supplier “What would you do if you were me?” The supplier will not likely say “I would just do business with the other supplier” (meaning their competitor). Instead, they may volunteer an alternate approach to making the deal more palatable, such as suggesting to ask the supplier for improvements in warranty or a rebate or free value-added services – ideas that have value to your organization.

Develop and share internally a communications plan stating who must be updated on negotiation progress and what information they must keep confidential.

At the end of the negotiation, help the supplier feel positive about the new relationship rather than feeling like it lost the negotiation.
Next Level Purchasing Association – Powerful Negotiation For Successful Buying

Suppliers are the best experts in their field so… learn from them! A good partnership with the supplier is strategic but never forget that YOU are the customer. To get the most from a supplier you will need to team up with your internal customer.
Sergio Giordano | @GiordanoProcOut

Market conditions change, and one day the shoe will always be on the other foot.   People may forget the result of your negotiation, but they will always remember the way you treated them during the discussions.  And that can be an asset, or it can be a detriment.
Carrie Uhl, SPSM | Vice President of Procurement, Americas | Magna International Inc. | @MagnaInt

Everything is negotiable.  In negotiating, document what tactics worked and what tactics didn’t work and create a ‘lessons learned’ notebook for future reference.  Be prepared before you negotiate. Know your target price and your acceptable price in advance.
Catherine Shaw, SPSM3 | Purchasing Manager | Vectronix  

The best procurement advice I can give you is to be vigilant in your supplier relationship management.  Take care to ensure the relationship between organizations is MUTUALLY beneficial.  All too often I see our supply chain performance take a hit due to rebate program growth targets not aligning with our actual YOY growth, resulting in a gradual decrease in working capital efficiency.
Jason Farr | Senior Purchasing Analyst | Univar

A bit of advice I once had and have used successfully many times is; “competition between suppliers tends to result in a lower price”
Phil Harrison, SPSM3 | Sourcing Project Leader | Pacific Insight Electronics

Negotiate Wisely

wise-owlRenegotiating a contract:  Address specifications and expectations. Be careful about specifying that you want the same product/service that you are getting today for a lower rate. Often, when suppliers agree to renegotiate a price, they look to cut corners in quality, delivery, or service or to substitute a cheaper product or service.

Predict the likelihood of scaring the supplier away. Some suppliers can be so insulted by how a procurement professional negotiates, they may decide to end the negotiation and decline the opportunity to do business. So, before making an offer, evaluate the likelihood of insulting the supplier to the point that the supplier would walk away. Assess the degree of sacrifice involved in going with the next best alternative. Then, make an offer appropriate for the risk involved.

Don’t make your offer seem like a predictable negotiation tactic. Suppliers aren’t dummies. They know that it is your job to ask for price reductions. So, they try to determine whether you truly need one or if you’re just following protocol.
Next Level Purchasing Association – Powerful Negotiation For Successful Buying

It’s not always the best strategy to find the cheapest cost – you need to look at procurement as an end-to-end process. Quality, logistic capabilities, partnership, customer service, as well as cost are important factors. There is never ONE objective to the sourcing/procurement process.”
Elizabeth Skipor | Senior Project Analyst | Source One

Quote Twice, Purchase Once.
Jesse Hazelet, SPSM | Purchasing Manager | Atlas Spine™ Inc.

Seek to be significant!  Anyone can be trained to comply & mimic an existing process…but the people that think outside of the box and perform well consistently are noticed…sought after…and promoted!
Linda L. Ransom, SPSM | Senior Purchasing Agent | Watson

Before processing payments, organizations should use three way matching to avoid fraud or errors between purchase orders and invoices.
Procurify | @procurify

Be specific, use common sense and do not assume anything.  Always ask questions.
Martha Dallas, SPSM2 | Director of Strategic Sourcing | Apollo Group, Inc.

To quote Steve McQueen: “When I believe in something, I fight like hell for it.”
Lance Younger | CEO | Statess | @lanceyounger

Ask questions!  You may have all the book and education, practical experience and knowledge is gain through interaction and inquiry with others.
Daniel Martin, SPSM

Always look to improve, procurement & business are never static, business & stakeholder needs change. The biggest killer to procurement, complacency.
Gary Bond | @GAABond

Next week, we will continue with our Sweet 16 Procurement Tips before Finishing up with our Final 4 Procurement Tips where we crown our 2015 National Champion of purchasing advice.  Stay tuned!

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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