Spend Matters Papers – Is your Supplier Selection Process a Source of Competitive Disadvantage?

So here’s a plan - through August we’re going to highlight all the research papers, briefings and so on that we’ve produced in the last two and a half years. We’ll  include what we said when we first launched it, and of course the link so you can download – free on registration. Why not use the quiet time in August to brush up on some procurement thinking? And they haven’t dated, in our opinion.

Today we have "Is your Supplier Selection Process a Source of Competitive Disadvantage”?

 Here’s what we said when we launched it back in July 2012.

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We launched our latest research paper last week at a breakfast session with the nice people at Achilles (who also sponsored the paper, although as always it is written independently by Spend Matters).  It’s titled – Is your Supplier Selection Process a Source of Competitive Disadvantage?

In it, we cover the pre-qualification process – why it’s important, the four purposes that sit behind it, and how to execute the process effectively and efficiently.

We’ve tried to make it useful and interesting for both those who want a “how-to” guide to pre-qualification, and to more expert practitioners who are interested in more strategic issues around the topic, such as verification, risk analysis, and use of third-parties.  Over the next few weeks we’ll publish some excerpts here, but we obviously recommend you read the whole document if you’re interested in the subject.Here’s today extract…..

“Within the whole sourcing process, pre-qualification is often seen as the ugly sister to the exciting, glamorous tendering phase. That final element of choosing the supplier, negotiating the contract, or running a dramatic auction or sourcing event – that all seems a lot more exciting than the process of gathering information and assessing your initial range of potential suppliers in order to select a short-list list for the final stages.

But of course a tender, and the final contract, is only as good as the suppliers who are competing for it. And if the pre- qualification process is not effective, the major risk is that you end up with a short list – or even a final supplier – that does not meet your needs. The wrong supplier wins the contract, because their failings were not identified through the process, or because a better supplier was eliminated or did not win the final competition. It is clear that many of those failings could be driven by a poor pre- qualification process.

By the “wrong” supplier, we mean one who does not offer the best value for money, or has a shortfall in their capability to actually carry out the required work, or (potentially even more seriously) one who creates supplier risk such as reputational damage. Such suppliers should, we would argue, be identified and eliminated at pre- qualification stage.

Recent research work for Achilles found that CPOs at 71% of businesses, rising to 80% in larger businesses, considered pre-qualification very important. But there were large variations in the time taken to pre-qualify suppliers and the number of sourcing events each procurement was required to undertake. And in our experience, the cost of pre-qualification is not always well understood or analysed – that’s a subject we’ll return to later.

The tender stage is often perceived as the most important within the overall sourcing process, but if the wrong suppliers are included on the short–list; or if the risk profile of the short-listed suppliers is not appropriate; or if they don’t have the required experience, accreditation or capability, then the final tender might look competitive and successful, but the chances are that contract delivery will bring problems because the wrong suppliers were included in that final stage”.

Download the whole Paper here….

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