Mastering competitive outcomes in Procurement: Insights and strategies

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Achieving competitive outcomes in procurement is crucial for optimizing costs and ensuring high-quality supplies. In a recent discussion, Spend Matters Senior Analyst Bertrand Maltaverne and Arkestro Founder and CSO, Edmund Zagorin explored the nuances of procurement strategies, focusing on both traditional methods involving multiple suppliers and innovative approaches that leverage single-supplier engagements effectively. Below, we highlight key insights from their exchange.

The essence of competitive outcomes in Procurement — Procurement is a critical function that requires strategic planning to ensure the best value for the organization. Traditionally, competitive outcomes in procurement have been associated with obtaining multiple quotes from various suppliers. This process aims to discover the best fit for the company’s needs, balancing cost, quality and risk.

“Procurement needs to deliver value to the rest of the organization through a contract and selecting a supplier that’s going to offer the best price, lower risk and best quality,” Maltaverne said.

The competitive process is not an end in itself but a means to ensure that the organization is not leaving money on the table. By comparing different offers, companies can benchmark prices and make informed decisions.

Sourcing as a discovery and competitive process — Sourcing is fundamentally a discovery process. It involves identifying potential suppliers that can meet the company’s requirements and then engaging them in a competitive process to secure the best deal.

“Sourcing by nature is the cornerstone of procurement activities, aimed at discovering the best fit for the business need,” Maltaverne said. 

While more options can theoretically lead to better outcomes, too many choices can lead to “analysis paralysis.” This is where the decision-making process becomes so overwhelming that it leads to inaction or poor decisions.

Achieving competitive outcomes without multiple suppliers — Contrary to popular belief, achieving competitive outcomes in procurement doesn’t always require multiple suppliers. In many cases, a single supplier can provide a competitive outcome if the process is managed correctly.

“A vast majority of sourcing events are sent to one single supplier, and there are many good reasons for this approach,” Maltaverne continued.

Best practices for single-supplier engagement

1.    Establish strong baselines: Having robust benchmarks and baseline data is crucial. This data allows you to challenge the single supplier effectively:

• Ensure baselines are geographically sensitive.
• Examine the components of the price, such as shipping and order quantity.

2.    Implement a systematic process: Create a systematic process for challenging a single supplier using data. This process should be well-documented and easy to follow.

3.    Leverage technology: Use tools like Arkestro that utilize automated Intelligent Counter Offers to challenge suppliers on price. These platforms can combine internal data with market data to provide a comprehensive counteroffer.

“If you have good baselines, you can get a lot done. Data is power, and if you have the data, you have the power,” Zagorin said. 

Achieving competitive outcomes with single suppliers — Even with a single supplier, it’s possible to achieve competitive outcomes by using strategic methods to ensure that the supplier provides the best possible offer.

“You can achieve a competitive outcome with just one supplier by using data to challenge their offer effectively,” said Zagorin. 

Key Success Factors:

1.    Utilize e-auctions: Certain types of e-auctions are designed for scenarios with a single supplier. These auctions use time constraints and competitive pressure to drive better offers.

2.    Focus on relationship management: Building a strong relationship with the supplier can lead to better negotiation outcomes. Suppliers are more likely to offer competitive prices if they value the long-term relationship.

3.    Regular benchmarking: Continuously benchmark the supplier’s offers against market rates to ensure competitiveness.

“The purpose of getting multiple offers is to ensure that you’re not leaving money on the table. If you can achieve that outcome with one supplier, you’re still meeting your objective,” Zagorin continued. 

Achieving competitive outcomes in procurement is a complex but manageable process. Whether involving multiple suppliers or a single supplier, the key lies in strategic planning, leveraging data and using technology to streamline the process. By following best practices and focusing on minimizing money left on the table, organizations can ensure they get the best value from their procurement activities.

“The number of suppliers is less important than the quality of the process used to ensure competitive outcomes,” Zagorin said. 

In the end, procurement professionals must be flexible and adaptive, using a mix of traditional and innovative methods to achieve the best results for their organizations.

To learn more about how you can navigate the complexities of procurement to achieve optimal outcomes while driving value and efficiency in your organization, visit Arkestro.com.  

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