According to the Chartered Institute of Procurement & Supply, organisations can spend more than two thirds of their revenue on procurement, so even small reductions in costs can have a significant impact.
Many firms have well-established relationships with their suppliers, the result of years’ worth of mutually beneficial trade. Over time, it becomes easy to develop a routine – you order from the same suppliers simply because it’s straightforward and safe.
But familiarity becomes complacency, at which point supplier laziness can set in. If this happens, your business will probably receive less than the best service, advice, prices and value.
Why you need to challenge your suppliers
Periodic reviews of procurement policies should be a regular activity – as should challenging your suppliers. Here are four reasons why you should be asking some hard questions and benchmarking suppliers to see if they’re still a good fit:
- Maximise value for money
One of the primary responsibilities of the procurement department is to ensure they’re getting full value for money for the organisation. You’re reliant on your suppliers to help achieve this goal – but there’s nothing wrong with asking them to prove they’re delivering.
- Different business priorities
Although your suppliers have a duty to you, their customer, they also have a responsibility to maximise revenue and profits for their shareholders. If this balance tips too far in favour of the supplier, you will not realise the full value of which you expect to be entitled.
- Budgetary expectations
When supplier quotes fall within budget it seems pointless investigating further. But what if you have overestimated your budget? Or your supplier is using the existing relationship to overcharge? Again, you should ask your supplier to demonstrate value for money periodically.
- Agenda divergence
For many businesses, the pandemic has accelerated digital transformation projects. During this process, your strategic roadmap may have diverged sufficiently from your supplier’s that their forthcoming developments won’t support any changes to your agenda.
A lack of alignment is not only wasteful but may actually prevent your business from reaching its strategic goals, so it’s important to encourage your teams to regularly review supplier roadmaps against their own to identify any emerging gaps. That way you can assist with any new requirements early on.
How to challenge your suppliers effectively
Challenging a supplier relationship is not a combative action. You’re not trying to start a fight, just to confirm that your business is receiving a fair deal and getting the best expert guidance.
An effective challenge has three key steps:
- Research new technologies and the wider marketplace
Before challenging your supplier, do your homework. What is available in the market – are there products that would better suit your needs? Don’t be afraid to talk to other buyers and players in the market to get a true picture of the current state of play and the alternatives available to you.
- Assess your tender processes and purchasing frameworks
Challenging suppliers means challenging your own operations too. Are your purchasing processes as speedy, efficient and cost-effective as they could be? Could upgrading your procurement processes open new opportunities that will grow your business? Could framework agreements help you escape the traditional three to five year “big buy” purchasing cycle? And does your tendering and purchasing process properly accommodate the needs, preferences and priorities of your stakeholders? These are just some of the things to consider when assessing where you could improve.
- Perform competitive benchmarking
Comparing pricing is just the start of a supplier challenge. You should work with your teams to define evaluation criteria that provide a proper comparison between suppliers, including capacity, experience, and approach to solving your problem. Does the supplier understand where you’re likely to struggle? Is their business approach and problem-solving methodology aligned with yours? Do they behave in ways needed for success? Are they a good cultural fit for your business?
Cost is always a factor, but you must assess the value-add factors that justify not choosing the cheapest option. Ultimately, you’re looking for a partner to help your business meets its strategic goals quickly, efficiently and reliably.
Maple has a proven track record of delivering hundreds of thousands of pounds worth of savings to public and private sector organisations. For example:
- Maple delivered a new five-year disaster recovery architecture platform including support to a large NHS shared services organisation for the cost of a single year renewal with their incumbent supplier.
- We helped an NHS Trust save £500k on a project spend on the price quoted by their incumbent supplier.
Maple works closely with all of our clients – we’re always happy to provide tactical assistance so you can benchmark us against your current suppliers. We also maintain close relationships with key vendors, allowing us to be flexible and provide impartial expert advice across storage, infrastructure and cloud vendors.