KNOWLEDGE SHARE

Accepting lower value to get the deal done faster?

Jason Lowry

Pressures of rapid in year savings sacrificing time is impacting greater value from your supplier negotiations.

Organisations are constantly under pressure to meet the in year financial business plans and Procurement is a great source for value creation, supporting organisations to achieve those financial plans and more. Question: Are procurement professionals sacrificing the right amount of time to realise bigger and better value, accepting a lower value to get the deal done faster as Procurement is under its own pressure to meet in year savings targets?.

We hear many terminologies of rapid, quick, agile etc. in year savings delivery methods, which, one must point out “they come with a major health warning of achieving mediocre results”, doing the complete opposite, working against your in-year savings delivery if those methods are not affording the right amount of time for your supply chain to respond to your requirements. Hence, the wrong strategy of sacrificing time and falling short of maximising the value for greater in year benefit.

Procurement must ensure where possible it’s affording the right amount of time for suppliers to respond to their business opportunities.

What often occurs with sacrificing time:

  • Poor response with major gaps in understanding
  • Not given the best value solution but the quickest to meet the deadline
  • Reduced commercial benefits not meeting the business expectations
  • Increased unknown risks leading to an increase in costs
  • Supply market disengaged not getting the best supplier(s)
  • Shows sign of lack of understanding of supply market and taken advantage
  • More questions and answers opening greater unknown risks
  • Result in a land and expand strategy getting mediocre in year savings

Here are 10 good reasons why not to sacrifice time:

  1. Correct dialogue between supplier and client removing gaps in understanding
  2. Suppliers can explore greater options with their supply chain to pass back
  3. Give you credibility you are aware of the complexities and know the supply market
  4. You will receive a better quality and greater commercial response
  5. Choose the best supplier(s) that meet your requirements the closest
  6. Engaged supply market given favourable pricing
  7. Can establish which suppliers have taken it seriously and which haven’t
  8. Minimising the unknowns reducing risks and reducing costs
  9. Be more creative in the value and exceed savings expectations
  10. Results in the right solution getting excellent benefits in year and beyond

Affording the right amount of time for your suppliers to respond to your opportunities is a proven method to achieve greater value, gets the best results for both you and the supplier (win-win) and is a strategy that stands the test of time.

ABOUT THE Guest Author:

Jason Lowry

Jason Lowry

Jason is currently the Head of Group Procurement and Contracts for FM, Engineering and Maintenance at the MAG Airports Group. As a chartered member of CIPS with 16 years’ in procurement, Jason has a wealth of experience to call on. He is also a member of the senior leadership team that achieved the CIPS award for Best Procurement Process and European Overall Winners.