Procurement Leaders! What type of a buyer are you personally and professionally? What about your team?
The Casual Saver:
Dave is the casual saver. He and his family are living just past “paycheck to paycheck”, with a little bit of savings, but enough to pay all of the bills and still have some money left over. Dave’s income covers all of the expenses of his family’s lifestyle, while being able to improve its quality slowly over time. When Dave shops, he doesn’t turn away savings if a discount is offered, but he doesn’t actively seek savings out. He has enough to get by and is better than average about creating a cushion for his family if things got rough, but is not prepared for something major to happen. He is comfortable.
Quick decisions – Businesses that take Dave’s approach to sourcing frequently put contracts into effect quickly. These companies will never refuse a better deal from their incumbents and are not apt to change suppliers easily. Doing so would require “fixing something that ain’t broke” and may create a situation where the product or service is not as good and money is wasted. Like Dave, these companies may not actively pursue savings, but they don’t like wasting money. When the product or service is not mission critical, companies are likely to try new offerings if they are cheaper and come with a history of similar quality in the industry.
Missed Opportunities – When companies stay with the status quo and do not actively search for something better in the way of service, quality, or pricing, opportunities are missed for a company to get a better product or price. For Example, Dave needs landscaping services and has the current company he has used for years fit into his monthly budget. When he throws away the flyer for a new landscaping company in town, he does not know that this company is already doing better work for his neighbors at 2/3 the cost. Dave has a budget and the incumbent fits in that budget and does good work. How many companies everyday have incumbents that don’t even get considered for change because they fit the budget and do “good enough” work?
False Sense of Security – The Casual Saver company’s approach to sourcing is precariously balanced on one very fallible position; the revenue won’t decrease and the expenses won’t increase. Everything about the Casual Saver works as long as the revenue stays ahead of expenses, even if at a slightly higher rate. This creates a false sense of security because most businesses will eventually run into a decrease in revenue or outgrow a building that requires increased expenses or a capital investment. When a company misses opportunities to save extra cash they are creating a situation where they must become the Discount Shopper and possibly have to cut resources that no company ever wants to.
Casual Savers miss opportunities that are readily available because they are fooled into a false sense of security created by a situation that could change at any time. By investing just a bit more time pressing their incumbents or seeking new product/service alternatives they could get returns of that investment of more than 10X.
Please check back on Monday January 11th for Part IV “The Miser”