Archive for September, 2022

In Negotiations, Price Matching Barely Scratches the Surface

Friday, September 2nd, 2022

 

Today’s re-post is by Dave Wenig, Senior Vice President of Sales and Services at  SafeSourcing

Every day, I talk with buyers of all sorts about their procurement processes. While I do get to hear some really interesting perspectives, I also get to hear some really old perspectives over and over again. One of the worst and oldest offenders is price matching.

It goes like this:

A buyer feels that the price she pays for her product or service is higher than it should be. So, she asks a competitor to provide her with a quote. She then takes that quote to her incumbent vendor and asks them to beat or match the price. It’s simple, and it is technically successful, because it delivered savings. I hear that this often generates 5-15% discounts. I’m not impressed by this.

What to do instead?

Testing the pricing in the market by asking for a quote is alright. So is asking your incumbent vendor to sharpen their pencil. But, it’s at this point that there is room for improvement. Any time your vendor signals that they are willing to offer a better rate like in the example above, they are tipping their hand. We now know that they are willing to reduce their margin to keep your business and that they do, in fact, have margin to reduce. It’s at this point, that we recommend applying a lever in the negotiation. An RFQ is a great lever because it creates an environment where the vendors are forced to compete live against each other for the lowest cost. Why have a vendor match a price and manually facilitate this slow type of back and forth? Let the vendors duke it out until they are done. Go grab some popcorn watch it happen. This will probably increase your savings by at least double.

Whatever you do, don’t settle for negotiating tactics that should have died with the dinosaurs. Modernize and use the tools at your disposal to win better.

If  you would like more information on how SafeSourcing can help you, please contact a SafeSourcing Customer Service representative.  We have an entire team ready to assist you today.

 

 

 

 

 

 

Life Cycle Costing

Thursday, September 1st, 2022

 

Today’s post is by Ronald D. Southard, CEO at SafeSourcing Inc

Life-Cycle Costing is a procurement technique which considers operating costs , maintenance costs, acquisition price, and other costs of ownership in the award of contracts to ensure that the item acquired will result in the lowest total ownership cost during the time the item’s function is required. Also considered in life-cycle costing is the sum of all recurring and one-time (non-recurring) costs over the full lifecycle or a specified period of a goodservice, structure, or system. This includes purchase price, installation cost, operating costs, maintenance costs, upgrade costs, and remaining (residual or salvage) value at the end of ownership or its useful life.

If you’d like to learn more about our service offerings that make it easier to understand your total product and or services costs, it’s time to learn more about SafeSourcing.

To that end, SafeSourcing is a Procure to Pay SaaS based provider with E-Procurement solutions and services that are part of our SaaS offered eSourcing suite like SafeContract™, SafePO™, SafeContract™ and our SafeSourceIt™ Global Supplier Database with over 500,000 vendor/suppliers. To learn more, please contact a SafeSourcing customer services associate.