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Eight Things Your Purchasing Department Wants You To Know
I work as an indirect buyer for a large corporation in the Midwest. What’s an indirect buyer? We purchase everything that isn’t a direct material or finished goods for the company. Everything from toilet tissue, to computers, to consulting services. We cover it. At least, we try to when our internal business partners allow us to do our jobs.
I’ve heard plenty from business partners that they look at procurement as “being in the way” or “too slow” when it comes to getting products/services purchased. Well, there is a reason why we slow the process down: we (and you) have to follow company policies and legal requirements. You (the business partner) rarely ever think about “all that” since you are in a hurry to get the project done.
You, my dear co-worker, are a vendor’s dream! Much like a used-car salesman, they can see you coming a mile away.
My job is to protect the company and, in doing so, you source good products and services at a reasonable price and develop a good contract that won’t bind you to the vendor for the next decade. I don’t tell you how to design a product, develop the company website, or run a press, so let me to my job without doing it with one arm tied behind my back.
How are you hampering my job? Please see the following things you should never tell a vendor:
- You need or love their product. They’ve shown you the brochures, website, even let you kick the tires a bit… and you swooned all over it as they took you to lunch and/or took you to a ball game. Don’t go down this rabbit hole. The sales guy has a big budget to reel you in. Don’t be impressed by all this.
- How much money you have to spend or that their price is reasonable! Seriously? Don’t tell a vendor your budget and — if you do — please don’t call me to help you save money when they already know that you’ve got the money to pay for it.
- Who the decision maker or budget owner is. If you aren’t the budget-owner or decision maker, the vendor doesn’t want to talk to you. You can’t help them. They are ready to get in front of whomever will write that check.
- That you need it fast or have a deadline. Other than an emergency, most purchases should be planned. Vendors who know you are desperate give you a big price to “make it happen” fast.
- That they’re the only vendor being considered. Boom! Drop mic! Game over! Thanks for playing! The vendor knows he won’t have to work hard to get the sale. He has no competition.
- Share who their competition is. A good vendor knows who his competition is; if he doesn’t, he isn’t terribly sharp. All we need to tell them is that you are looking at multiple offers.
- Don’t sign their agreement. Do you have the approval to sign on behalf of the company? Has Legal or Procurement reviewed the agreement? At our company, we have are own templates for agreements and they should always be favored over the vendors agreement. Why? Because the language in our agreements is more favorable to us. It’s like always having the home-team advantage.
- Don’t over-share information. Most information is confidential and a non-disclosure document should be used in many situations. It’s to a vendors’ advantage to know as much as possible about you, the company, and the project. If you are unsure whether to share something, we can advise you.
Please remember when you purchase something, it’s the company’s money. You might sign an agreement that binds the company to language that is unacceptable and against policy.
Sure, it’s tempting to be nice and telling a vendor to back-off or trying to negotiate a price may not feel polite. This is where I can step in and discuss the details with the vendor. We can play good cop/bad cop. You don’t have to get your hands dirty and you will still have a wonderful everyday relationship with the vendor.
Procurement isn’t the enemy… well, maybe we are to the vendor. But if we work for the same company, the earlier you engage me in the process, the more I can help you and our company.
Sincerely,
Your Procurement Co-Worker
Published in Culture
Actually this is often a good tactic – let ’em know just what else or who else you are looking at, then drop casual hints that you are leaning in that direction. “Oh, I like your software, sure, but your price includes a bunch of stuff we’ll never use. Your competition is stripped down and faster, and half the price. My engineering dept is leaning strongly toward theirs over yours…”
If you look like you’re walking away from the table it’s amazing how quickly they’ll jump up with a better offer.
As an engineer here is what I want my procurement manager to know.
The price of the product is not the only cost.
First it needs to work. It may be worth paying double for something that consistently works rather than buy something that requires rework or causes manufacturing problems, or worse a recall.
Second the supplier needs to be responsive to changing customer/market requirements. When I need to make a design change to a purchased component, I don’t want to hear complaints about the cost of scraping 6 weeks of inventory that is in transit from China. I didn’t choose to go to China to save a few cents per part.
Finally, when a supplier has a technical problem don’t ask me to go to their plant to help them solve the problem. I have other important work to do. If they don’t have the technical knowledge to fix their problems why are we buying from them?
Now as the owner of my own business I can see both sides of this. I’ve had customers with whom I’ve been unable to do business because their Vendor Agreements were so execrably lop sided. Good rule for buyers is to know when to be flexible and overlook certain “requirements”, particularly if the vendor offers a unique or revolutionary product. If I’m half the cost of my competition, or can offer engineering capabilities you can’t find anywhere else, let’s work out a non-standard agreement. If you insist too strongly that “it’s your way or now way” then, well, I know who your competitors are rest assured that I can offer the same tech to them.
The flip side from a vendor POV is this: If your engineering department can’t adequately define what it wants or write a coherent spec, I shouldn’t be on the hook for feature creep or implementation problems. We build what you actually order, not what you think you order. Good procurement rule here:
Be crystal clear in what you are asking procurement to buy.
Another good rule:
As a buyer I have little control over lead times. If my vendor says “12 weeks” then it’s “12 weeks”. I can’t call them 2 weeks in and start griping.
I expect a vendor to redline our agreements. I don’t expect to get everything I want. Some items on the agreement are business-related and often I have wiggle-room. The other items are legal-related and must be reviewed by legal, risk management, etc. I have less wiggle-room but generally, a good agreement that everyone can live with is manageable.
I’m in the automotive industry. Redlining agreements will get you an instant “NO” at many manufacturers. Had one customer tell me “to get into our system, you have to get through about 100 different people, from engineers to plant managers to buyers. If any one of them says ‘no’ then you’re sunk.”
I would say that you need a new buyer. Only you know whether a piece of equipment will work for your solution and your buyer should be working with you and the supplier to move toward the best solution. I never emphasize the cheaper choice if it’s not a good option. Re: going to the supplier’s location…they can come here. I arranged a visit by a Japanese manufacturer once (due to problems with their press). No cost to us and I even had a translator to get our point across. Problem fixed.
What is that old adage about failure to plan…?
But, sometimes, for an additional cost of course, the vendor can decrease the lead time…but I would never endorse this unless “heads will roll” if something doesn’t ship in time. That’s where a little CYA comes in handy so you can point the finger back at whomever asked for the emergency ship/cost.
And ensure that we (and the supplier) know HOW we will be using the product/equipment. I’ve had vendors who never knew that we were using a piece of equipment (in the manner we were using it) and their safety features had to be increased.
No! I wanted 5 red lines in perpendicular blue ink which form an octagon. This is not hard!
I’m sorry, but as a research scientist the purchasing department is one of those departments that is to be gamed rather than utilized.
A good deal works for both buyer and seller.
You know what makes me laugh? The idea that owing to our experience of shopping in retail establishments with fixed prices, Americans are constitutionally incapable of negotiating adroitly in the Middle East, where everything is likened to a mysterious “oriental bazaar.”
We do, indeed, have fixed prices in retail establishments — although even there, there’s lots of room for negotiation. But pretty clearly, Americans fully understand the elements of bargaining hard, and are used to doing it every single day. We don’t usually do it at K-mart. We sure do it at this level.
If we’re not getting a good bargain in any given Middle East negotiation, it is absolutely not because of a cultural inability to relate to “bargaining” or a lack of bazaar culture in America, is it. I mean — read this (very interesting) post and really think about how silly that idea is.
Vendors would be better suited not to low-ball their offers. We generally see right through the offer and often select a different offer. The last thing I need is for the vendor to call me six months in the agreement and cry about losing money on the deal and want to change the terms of the offer.
Indeed. I’m quite bad at bargaining myself, but have friends who constantly amaze me by asking for discounts on things I’d thought of as “fixed prices” — and getting them.
Ooo. That one sticks in my craw too. YOUR costs should never become MY problem.
Indeed.. this is essential, especially if both are looking to create long term value.
Unfortunately the relationship between buyers and seller in the technology space is often asymmetrical, especially when new, cutting edge technology was being developed in a small shop. Much of my experience in technology development and acquisition at at super-major oil companies involved very small vendors with great ideas and technology, but much less business sense.
There’s been more than a few times that I’ve told a small vendor that his quoted price was too low, and that neither of us would be happy if he either went out of business, or had to spend time frantically chasing new customers because he low-balled a bid in our shop.
Capital equipment is a negotiable item. If there are enough manufacturers / vendors out there, you can use Claire’s advise and dicker with them. If they want your business, they will pony up.
Sometimes the capital equipment is available at about cost because they want to sell you a service contract, usually at an inflated price. They can recoup a lot of money should you purchase a service contract from them, so you might want to visit the costs of parts and of labor outside of normal office hours and negotiate that as well.
This is one of the reasons why (I used to work as a cost estimator at a defense contractor, so I’ve seen, well, let’s just say, a derriere-load of vendor quotes in my day) you should seriously consider throwing out the lowest and highest quotes, in terms of award. The lowest quote guy probably does not know how technical the part is, so they’re not assuming a lot of unanticipated cost in their quote. They also might be throwing the quote out there to gain business, eat the cost, and jack up the next quote – which is not necessarily a wrong thing to do, but it raises warning flags on reliability, especially for milspec parts.
Also, the vendor already knows you’re shopping quotes unless it’s single-sourced. You don’t need to tell them you’re considering other quotes – of course they know that. That’s not going to change their quote one penny.
As an IT Manager, all of my IT related purchasing is done by me. In my line of work, I find that the more people in between me and the vendor, the greater the chance of me getting the wrong thing.
Some of these lines are useful if you are negotiating with a vendor, and you want to show interest. If you look like a sale to them, you can often get free samples and discounted prices. “Your product looks amazing, but right now I just don’t have the budget for this. Could I get a sample to try out / Could we work something out?”
Also, with a lot of my vendors we pay them using standing orders – think of buying a gift card from the vendor. That means they know our budget to some extent. I’m usually cagey about how I want to spend it.
I am an indirect procurement/ strategic sourcing professional. I am very willing to admit that our value is more strongly felt in the macro, as opposed to the micro. The art to the practice is being able to generate unique added value, which I find comes in the form of advocating what I call Strong Customership. No matter how friendly or cooperative a relationship may be, the partner is always the seller…and they work hard at being the strongest sellers they can be. It is beholden then on the customer to be the strongest customer they can be. And most of my clients don’t realize how weak they are as customers. The cost they incur are indirect themselves.
All this being said, it takes a skilled an artful communicator to get one’s stakeholders to think differently about how to deal with their suppliers. And buyers who fret more about back door selling than relationship management are always doomed to remain in the eyes of their clients’ a necessary evil and a gate to navigate through.
Here are the 4 pillars of Strong Customership…
1. Own your status quo
2. Know what you want
3. Set your suppliers up to succeed.
4. Protect your best interests
I can help in all these areas, but they are ultimately the responsibilities of those whose budgets are being spent.
And no one is a strong as they should, and could be. Because it means thinking differently, and operating differently…smarter and more considerate of the long term over the immediate.
It is irritating how often my customers neglect this. Let’s deal with the situation NOW, not how you wish it might be or who is to blame.
And remember to ask for it up front. Nothing ticks off your suppliers more than unwritten expectations or getting the blame for your own errors in application or design. I am selling you my design, as it is. I am not selling you what you hope it will be. If the instructions say “do not install it this way” do NOT go blaming me when you install it wrong anyway. Those warning labels are there for your edification.
I will not do business with customers who see their warranty programs as profit centers, nor with customers who insist that I cut my prices by 2% per year. If I am not making a profit, I will not supply you and I will not support you. My prices are fair and stated up front. Don’t keep trying to undercut me after we’ve shaken on a deal.
It’s nothing personal if, as your supplier, I tell you I cannot work on your terms. If you require those terms, and I cannot deliver, man up and move one.