Beware of "Supply Base Conditioning"

Are You Training Your Suppliers To Not Give You What You Want?

PurchTips Edition #403

When you request proposals from the supply base, you want two things:  participation from all great suppliers and aggressively low bids from them.  But, if you behave in certain ways over time, you may be unwittingly conditioning your supply base to provide inflated proposals or to not respond at all!

Have you conditioned your supply base to:

  • Cut corners or withhold value? If you always select the low bidder even when that means onboarding the worst supplier available, you imply that quality, delivery and service don’t matter.  As a result, some suppliers who compete on performance will decline to bid.  That alone will relieve some of the price pressure you are trying to put on the supply base while taking some good options off of the table.  In addition, suppliers who do bid will look to cut corners or withhold value in order to win your business.  As such, a historical over-emphasis on price isn’t always healthy.
  • Expect you to give your “favorite” suppliers the chance to negotiate? If you historically haven’t disqualified some of the higher bidders, instead giving them the same chance to negotiate as lower bidders, you can expect that some suppliers will inflate their prices knowing that they will be able to reduce them later.  Of course, they hope the negotiation enables them to win your business at a higher price than they would have had to offer if you accepted the low bid without negotiation or only gave the one or two suppliers with the lowest bids the chance to negotiate further.
  • Expect you to award business to the incumbent supplier regardless of how competitive other suppliers and their bids may be? When the supply base sees you awarding business time after time to the same supplier regardless of how much more competitive other suppliers get, they assume that your sourcing process is a mere charade to pressure your incumbent to keep its prices in check.  If the supply base sees no legitimate chance of you changing suppliers, they will stop responding to your RFP’s, which will relieve the price pressure you hoped to apply.
  • Expect no regard for loyalty? On the other hand, if the supply base sees you changing suppliers all of the time regardless of incumbent performance, they will think that you are an unloyal customer and they will not risk offering low initial pricing in the hopes of establishing a long-term relationship that will become mutually profitable in the future.


Want a More Rewarding Procurement Career?

Are you tired of not getting enough opportunities, respect, and money out of your procurement career? Well, guess what? Nothing will change unless you take action towards becoming a world-class procurement professional.

Earning your SPSM® Certification is the action to take if you want to bring the most modern procurement practices into your organization and achieve your career potential.
Download the SPSM® Certification Infopack today to learn how to get started on your journey to a more rewarding procurement career!


Modern Procurement Training For Outstanding Results

Looking for a powerful way to improve your procurement skills or the performance of your team? The NLPA’s online procurement courses can give you the expert guidance you need!

Choose from 16 different full-length online procurement courses. You or your team will learn proven techniques used to deliver measurable results in the real world.  Topics include negotiation, analysis and spreadsheets, sourcing, purchasing management, and much more!

Download a copy of the NLPA’s Course Catalog to learn more.



Want to get more procurement articles by email?

Members of the NLPA get great articles just like this by email every month. As a member, you will also get access to:

  • The Procurement Training & Certification Starter Kit
  • The latest Purchasing & Supply Management Salaries Report
  • Leading-Edge Supply Management™ magazine
  • Live webinars
  • Access of Purchasing Community
  • Access of NLPA BLogs
  • Access of Library (Webinar Replays, Procurement Templates & More)
  • Access to All 20 Express Courses worth $380.00
  • And more!

Sign up today and enjoy access all of the benefits that come with the NLPA Premium membership.

Procurement Courses
Over 196,482 purchasing professionals have joined the Next Level Purchasing Association! So, what are you waiting for?

Copyright 2018. This article is the property of the Next Level Purchasing Association and may not be copied or republished in any form without the express written consent of the Next Level Purchasing Association. Click here to request republishing permission.

By Charles Dominick, SPSM, SPSM2, SPSM3