Illustration of getting multiple supplier bids to detemine best offer“Is getting three bids and choosing the lowest one a good process for purchasing decisions?”

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A common question.

And one whose answer requires an explanation.

So, here’s my explanation…

If supplier qualification was performed; all suppliers were deemed to be substantially equivalent in terms of probability of performing to requirements; and factors such as quality, service, and delivery were deemed to be either not important (likely in very few situations) or the three suppliers given the opportunity to bid had only negligible differences between them in these other factors, then there is nothing wrong with accepting the lowest bid.

However, if price was the only consideration when there are other important factors and supplier qualification was not performed, selecting the lowest of three bids would be a prime example of amateurish purchasing.

Purchasing decisions made solely on price without considering the importance of supplier qualification and non-price factors have a very high likelihood of resulting in poor supplier performance, late deliveries, quality defects (perhaps even safety-related), unresponsive supplier service, disruptions to operations, higher costs of doing business, frustration among employees, poor quality of the end-product or service provided by the individuals who incorporate the purchased product or service into their work, delays that ripple forward through the supply chain, and so on. That’s why purchasing is a profession.

A preschooler can identify the lowest of three numbers. That’s a basic skill.

Making decisions that ensure that huge sums of money are not wasted and the organization’s operations are enhanced rather than inhibited is an advanced business skill!

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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