Yes, we’ve been spending a fair amount of time talking about ePayables in recent weeks and we hope you’ve enjoyed it (we did after all, just announce the publication of our big ePayables research series – hence the recent focus). But, for our core readership of dyed-in-the-wool sourcing junkies, despite all appearances and superstitions, today is your lucky day.
Soon, we will begin to ramp up our coverage of the Strategic Sourcing marketplace which means many more sourcing-related articles. We’ll start by looking at the use of non-price attributes in the sourcing process and later we’ll dust off the list that we used many times to help sourcing teams identify and then quantify the right evaluative criteria.
Everyone Uses Non-Price Attributes
Seasoned sourcing pros know that there’s more to awarding a contract than price, much more. But when engaging a group of category stakeholders, they often face one classic push back for why eSourcing (or strategic or competitive sourcing if you’re doing it offline) is not the right strategy – that there are too many other non-price considerations to be accounted for with this contract. As such, sourcing can’t be done and the procurement team really can’t add any value. WRONG!
Using non-price attributes to make an award decision is speaking the language of the Chief Procurement Officer, it is part of the fabric of a mature procurement organization, and it is a critical strategy used by today’s sourcing pros.
Now, as was the case in my strategic sourcing consulting days, more than half of the time, the group that said “we award contracts based on many factors besides price” was unable to name more than one other non-price factor, and even among those that could name two factors, almost no group was able to articulate and/or quantify any of their non-price factors.
Quantify non-price factors? Yes. I did not stutter.
If a team has used non-price factors in an award decision, it has already quantified these factors. They may have done so unknowingly, but they have done so. Here’s a simplified example using hotels. Where most people stay when selecting a hotel is usually based on variations of four factors: location, price, quality, and points – where did you stay the last time you were on the road and on your own dime? Did you stay at the Marriott Courtyard, that wasn’t ideally situated but was nicer than the Motel 6 and less expensive than the W? You may not have used excel or an eSourcing tool, but you weighed these different factors and made a decision based on that. In other words, you quantified non-price attributes.
Stakeholder teams, if they aren’t just rubber-stamping renewals, are making decisions like this all the time. I recall that when helping the newly developed sourcing team at one US-based airline develop their strategic sourcing process, one sourcing director told me how the group had sourced toilet paper for corporate HQ in one of its earliest sourcing projects. They chose the cheapest supplier and found that by paying the lowest price (literally) for “TP,” the entire corporate staff paid the painful price (literally) for that decision; at least, that is, until sanity was restored and a higher-valued product was chosen. True Story. Sometimes it is only about price, many more times, it’s about non-price attributes too.
I was tempted to offer “13” of the attributes on our list today (being Friday the 13th), but that will have to wait until next week since we have so much to do to prepare for my favorite television viewing weekend of the year – we have the “Divisional Round of the NFL Playoffs” also known as the “NFL’s Best Weekend” capped by a pop culture treat – “The Golden Globes.”
Predictions: 49ers, Patriots, Ravens, & Green Bay. No predictions for the Globes, as we run about 9 months behind on movies in our household, relying on cable, Redbox, and my youngest brother to catch us up. I would like to see Idris Elba, (Stringer Bell from the legendary Wire series – the link is NSFW for language, but worth watching – the whole series is worth watching, actually), win for his starring turn in Luther on BBC America. Happy watching!
Postscript: If things go as planned, we plan to launch our January newsletter in about ten days. Many of you have registered already – in fact, the response has been overwhelming. If you haven’t it is not too late. Our inaugural newsletter will include a free report that can be accessed without any registration. You can sign up here.