Editor’s Note: Ardent Partners recently published a new sourcing-themed report, Beyond Price: Finding the Right Suppliers Using Sophisticated Sourcing Strategies. If you would like to access the report, it is available for download here (registration required).
During the sourcing process, there are many qualitative attributes that procurement teams should take into consideration. Attributes like market share, supplier performance, and supplier production and delivery capabilities are all a part of the sourcing process, and play an important role in what will bring the greatest value for your sourcing dollars. Sourcing is not about identifying the lowest price, but identifying the greatest value for your organization. In addition to price, a mature sourcing organization should be able to incorporate these other market differentiators into their final evaluation and award of a supplier contract.
At first, it may seem difficult to be able to weigh both pricing and other market factors in an evaluation evenly. Many times, business stakeholders think that competitive sourcing is not the right strategy for their particular category. But with the advances in eSourcing technologies over the past five years, it is now much easier to incorporate multifaceted award criteria into an automated sourcing process. Sourcing teams must be ready to run sourcing projects that incorporate other market differentiators into the decision-making process. Below are a few examples of the most frequently utilized qualitative factors and how their use can help sourcing teams identify the best suppliers.
- Supplier Market Share – Understanding a supplier’s market share (the percentage of sales that one supplier has relative to their competitors in a given market) is a good way to identify shifts in the supply market and understand where value and innovation are being generated. It is an important indication of a supplier’s success within its industry and will provide sourcing teams with some context to what the supplier’s differentiators are.
- Supplier Performance – While the components of supplier performance are highly dependent on the situation, the supplier, and the good or service being provided, it is something that can be quantified. Beyond price, product quality, on-time delivery, ethical and sustainable measures, and general customer service are all measures of supplier performance that can (and really should) be considered. Sourcing teams should use supplier performance evaluations to help them make smarter sourcing decisions, and help them improve the quality of future supplier contracts.
- Production & Delivery Capabilities – There are many factors related to supplier production that need to be considered when managing a sourcing project. Factors like any value-added or complementary products & services, the supplier’s production process and the technologies being used, the operational and technical capabilities of the supplier, the capacity that the supplier is operating at, and their geographical reach should all be taken into consideration when working on a sourcing project and/or negotiating a contract.
Utilizing additional market attributes is a critical strategy when making a supplier decision. By combining both pricing and other qualitative factors into the overall evaluation of supplier bids, a sourcing team will put itself in a great position to become more sophisticated and advanced in their capabilities. Leveraging eSourcing tools will go a long way in ensuring that optimal results are achieved and the unit is more agile in today’s hyper-competitive business environment.
Download the new report here, and learn more about the all the strategies sourcing pros should use in their evaluation of supplier bids.