To Award or Not to Award…..

November 28th, 2011

What characteristics are you using to evaluate who gets your business today?

Today’s post is by Mark Davis; Vice President of Operations and CTO at SafeSourcing.

The process of negotiating deals with vendors has long been seen as one in which the customer “beats up” the vendor over price; sending the message that price/cost is the most important thing involved in making a decision about who you award business to.  Today’s economy would tend to back this mindset, however, in evaluating based on price alone you could be doing your company a great disservice.  Today’s blog is going to focus on a few areas to keep in the forefront as you make your purchasing decisions.

Apples to Apples – Whether by Request for Proposal, Reverse Auction, or just placing phone calls to gather pricing, the end result of your comparative research must ensure that you are looking at the same offering from each vendor (or the nearest comparison possible).  Even in the case when shopping a commodity-type product such as computer hardware there are many chances for the vendor to increase their value with other services they offer.  When comparing vendors make sure the products, services, extra offerings, etc. are being evaluated evenly. 

Reputation  – Although it would seem to go without saying, many companies will take the lowest bid of an apples to apples comparison without finding out much about who they are about to spend their money with.  This is seldom the type of practice people would do with their own personal purchases and yet there are many companies who are so focused on price that they fail to do the research to make sure the vendor they are about to select has a proven track record of performance.

Cost of Change – Assuming that you end up finding a new vendor to do business with, one of the things that must be considered early on in the discovery process is the cost of change.  Before you ever make a phone call, send out an RFI, talk to a vendor; the business needs to determine what the costs of switching vendors will be.  Knowing this in advance will allow you to set the stage with new vendors you are talking with as negotiation points and will possibly allow you  to possibly eliminate those costs should you ever have to change again.  There  are multiple levels of cost for switching vendors and you should know each before starting the process of looking for potential new suppliers.

Policy Changes –The final area that should be examined in the process of evaluating your vendors is the policies surrounding the goods or services being looked at.  Some companies have policies developed long ago and for good reasons that dictate the companies they can do business with.  Some of these policies (such as ones relating to specific geography) may need to be examined so that companies that can provide good value to your company can still be considered for your business.

For more information on gathering information and pricing from vendors and assistance with the evaluation of that information, please contact a SafeSourcing Customer Service Representative.  

We look forward to your comments.

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