Last week, I had the pleasure of presenting a three-hour workshop on purchasing best practices at Corporate United’s SYNERGY conference. One of the best practices that I dissected was the use of commodity teams.
A very common method that commodity teams use for supplier selection is the use of weighted average supplier scoring. This is where you determine the various criteria used to identify the best suppliers, rank the criteria in order of importance, and assign a numeric weight to each criterion that is proportional to its importance in deciding on the right supplier.
Several of the attendees had successfully used this approach. However, an interesting debate broke out.
Some of the attendees said that they regularly disclose to the suppliers the criteria and weightings that are being used. Others said that are more careful with sharing that information.
The proponents of sharing said that doing so helps the suppliers really focus on what is important and try hard to impress the decision-making team on those most important aspects of the potential relationship. The opponents of sharing said that it has the exact opposite effect – suppliers will look for ways to not concede as much in areas that are not as highly weighted.
Personally, I have always shared the criteria but not the weightings because I found that losing suppliers tend to try to pick apart the mathematical computations when you give them a courtesy of a debriefing, as opposed to using the feedback to constructively identify ways that they can improve their business. Plus, I do feel that if price accounts for 30% or less of the total score, suppliers will not be as aggressive in their pricing and, let’s face it, cost savings is often the most important key performance indicator on which a procurement department is measured.
Having said that, I definitely feel that the concept of sharing or not sharing criteria and weightings is a matter of personal preference rather than something that should be standardized for all organizations.
What’s your preference?
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To Your Career,
Charles Dominick, SPSM
President & Chief Procurement Officer
Next Level Purchasing, Inc.
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