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Should all suppliers be given the same information?

ESOURCING, EAUCTION SOFTWARE, SUPPLIERS, EAUCTION, eSourcing software, eSourcing solutions, ESOURCING TOOL, HOST, HOST TUTORIALS, host permissions, hosting an event
Best Practice Article, Best Practice

Procurement as a function has evolved over the years, transforming itself from an aspect of strategic purchasing, into a value-adding activity that’s integral to the running of an organisation.

Whether an organisation’s procurement function is to specifically focus on: minimising supplier risk, produce savings (that affect the bottom-line) or just increase the visibility of spend within an organisation. Procurement has become an evolving and vitally important focus within modern organisations.

However, there are still many misconceptions of procurement best practices within organisations and it’s incorrect to believe that there is a ‘One size fits all approach’. This is largely due to differing industries and sectors, requiring different suppliers and potentially facing altered organisational supply chain structures.

One of the key misconceptions is that: “All the same suppliers must be given the same information”.

Although there are many key aspects as to why suppliers should be given the same information such as:

  • Maximising Competition – Suppliers without key information are likely to be unable to put forward true and competitive bids
  • Fair Competition – Clear information can bolster fair competition between suppliers and ensure that the buyer gets market value from the chosen supplier
  • Transparent Sourcing Process – Depending on the industry/sector, legally it’s also important to ensure that the sourcing process is as transparent as possible as their might be obligations on the part of the buyer
  • Minimising the time on the part of the buyer – Giving clear information to all of the suppliers in a tender may avoid unnecessary support issues or supplier questions
  • Audit-ability in the Sourcing Process – Giving all supplier the same clear information can ensure that the sourcing process can be fully audited
  • Winning Internal Stakeholder Support Internal stakeholders may already have ‘preferable’ relationships within an organisation. Ensuring that the process is transparent and fair to all suppliers will likely win overs those stakeholders
  • Avoid Commercial Mistakes Without a transparent sourcing process, the buyer would be unlikely to be able to make an educated decision and choice on suppliers

However, this approach assumes a ‘one size fits all’ and will not always be appropriate.

 

Image result for one size fits all

 

So when is it not appropriate to give all suppliers the same information?

The issue with giving all suppliers the same information is that certain suppliers might be considered unsuitable, even from the initial market research (RFI process). Thus, continuing to provide the same level of information to this supplier would provide no benefit to either party, ultimately leading to wasted resources being spent. 

For example:  imagine a large food production company was looking for a new food-produce supplier for their new ‘Mushroom Soup’.  If they were inviting suppliers that weren’t capable of delivering the quantity requirements and wanted a single supplier for their needs, then any resource spent training the supplier, as they might with other more suitable suppliers, would be wasted. Whilst potentially providing full and clear information, might be advisable to do after the NDA (Non-Disclosure Agreement) process.

 

Related image

 

Summary

There are situations that suit both scenarios, however perhaps the best advice to take from this is that the more information you can initially give a supplier, the easier the process is going to be for all parties moving forwards. What we mean by this, is that if you were to send out a detailed initial brief with exact criteria to all your suppliers, those not able to match the criteria will be able to self-exclude themselves there and then. That way you will not be continuing to send information out further down the line to suppliers that are not relevant or able to partake in an event.

But what should you include in your Event Brief? Well luckily our Customer Success Manager, El, has written the following blog on just that: Creating an Event Brief

 

June 10, 2019

3 comments

  • Hi Callum, That’s exactly the reason why E-Auctions should always be run on TCO level, and not just to negotiate a purchase price down. Switching costs should be included via handicaps, and potential preferences should be quantified and included via bonuses. You’ll never convince suppliers about E-auction benefits for them if you can’t guarantee them a contract in the end... Potentially once, but definitely sustainable for the long run if you’d ask me. You’re better off understanding and comparing the TCO of all potential suppliers after data gathering in a RFP round. And afterwards, decide to conclude (!) your negotiation process with an E-Auction, or potentially without. If you don’t feel comfortable with one of your E-Auction participants winning the business, then you shouldn’t invite them for the E-Auction. What’s in it for the suppliers to give their very best offers in a high pressure E-Auction if they’re not even sure to be awarded for those efforts anyway...? You might be able to trick them like that once, but probably not a second time.

    Wouter Passtoors, 11 July, 2019
  • Hi Wouter, Thank you for taking the time to read and reply to our content. We are definitely in agreement that you need to be transparent with all suppliers. And Ideally, you would always ensure that they're each given the same opportunity throughout an auction process. However, the logic behind this blog was that this inevitably depends on your situation and the stage in the sourcing process. If you've conducted an RFI, you might only be able to identify afterwards that the suppliers cannot match your specification. In regards to your point that the winner of an eAuction should always be rewarded with the business, again this depends on the situation. If there are costs involved with switching from the incumbent supplier, then even if a new supplier beat the incumbent on price in an auction. It still may not be worthwhile changing suppliers if that saving is less than the cost of switching suppliers and that's without taking into account the understanding of "value" of the suppliers rather than just the "Cost".

    Callum Fyfe, 28 June, 2019

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