Paper Available Now: Full Value Buying – Moving Beyond Price Negotiation

We published a new Spend Matters briefing paper last week, written by our Managing Editor Peter Smith in conjunction with the Business Development Director of Comensura, Jon Milton. Comensura is a vendor-neutral managed services provider focusing mainly on the contingent (temporary) labour market, with clients in both public and private sector. The paper is titled Full Value Buying - Moving Beyond Price Negotiation. You can download the paper free on registration here.

In the paper, we point out that too many procurement people and functions put the greatest amount of effort into price negotiation and price reduction. Perhaps that is driven by crude cost savings targets and measurement, but it means professionals are often missing real opportunities.

Areas such as demand and specification management have the potential to deliver far greater value benefits in many cases. Spending more time thinking about opportunities in those areas is likely to pay back more strongly than simply bashing away at headline price. So in the paper, we illustrate that and give some suggested areas of focus, applicable to any spend category. We also give some practical examples from the contingent labour spend category to show what might be done to drive better value.

Do download the paper - it's not too long or "technical" but we think it will give most readers some ideas at least that could be valuable. And here's an excerpt.

 Full Value Buying - Moving Beyond Price Negotiation (an extract)

It is then interesting to consider the potential for that benefit which might be gained from addressing these different areas. So focusing simply on the purchase price, through typical category management routes such as aggregation, tough tendering, negotiation or similar processes, might lead to a value improvement (price reduction) of perhaps 10 or 20% in many cases.

Whilst that would be a good result, focusing on the specification of what is being bought can often lead to even greater benefits; and of course demand management has the potential to save 50% or even more of the cost (indeed, the saving is 100% if the entire purchase can be avoided)! When we come to the relationship between output and value, it can even be more than 100% of the purchase price – consider an amazing marketing campaign where the third-party agency and media costs might pay back 10 or 20 fold in terms of additional revenues and profit.

Fig. 2 Potential Benefits Through Different Value Mechanisms

Chart comensura paper

 

For the rest of this paper, we will look at two of those drivers in more detail – demand management and specifications. And we will use the contingent labour category to illustrate the ideas with some more tangible and specific examples.

 

 

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