Bidding Agent Or Consultant Advisor Which Is Right For Your Business

Bidding Agent or Consultant – Advisor….which is better for your business?

Jim AgnewAugust 2011

2Copyright Expense Reduction Analysts 2008

Presentation Objectives

How Bidding Agents OperateHow Bidding Agents Operate

Bidding BasicsBidding Basics

Understanding the DifferenceUnderstanding the Difference

Making the Decision - Bidder or Advisor?Making the Decision - Bidder or Advisor?

Asking the Right QuestionsAsking the Right Questions

When Is Advising Not Appropriate? When Is Advising Not Appropriate?


Bidding is Big Business….

• Buying Groups, Associations, Networks, Clubs, Reverse Auctions

• One simple objective – lower prices

• Cost – above all else – is the goal; product quality, application, fitness for purpose are a distant second

IS PRICE THE ONLY CRITERIA??


Components of Cost-Based Approach

Purchase Quantity

Brand Case Pack

Product Cost per Unit

Bidding Agents focus all their efforts on a select few points – with success measured by a single result – Driving down costs.

Quality, application, suitability are not included


Bidders Have a Limited View…

70%

23%

60%

90%

Most believe that their clients are driven solely by reduced costs

Few Bidders actually ask the Client about other needs / priorities

Many lack aggregated data to negotiate with Suppliers on any basis but price

Believe they are providing valued services to their Clients


Procurement

Experience

Detailed Product

KnowledgeMulti-

Faceted Approach

In depth Analytical Skills beyond price

NegotiationAsk, Ask, and Ask Again

Specific Application Information

Advisors Operate on a Different Plane


Client Corporate Initiatives

Personal Preference

Employee Work

Schedules

Life-CycleCostingMethods

EnvironmentalImpactors

Looking Beyond “Price”

CollateralCosts

WasteQuestions

OperatingEfficiencies

Operating Hours

SupplierScheduling

ApplicationMethods

Labor Component

In-UseDilution

Cost

Equipment


It’s All About the Questions………….

Bidder Bidder Advisor Advisor

What Items Do You Buy? What Items Do You Buy? How Did You Come to Use These Items? How Did You Come to Use These Items?

Who Are Your Suppliers? Who Are Your Suppliers? How Did You Select Your Current Suppliers?How Did You Select Your Current Suppliers?

What Are Your Current Prices? What Are Your Current Prices? What, Besides Price, Is Important to You? What, Besides Price, Is Important to You?

How Often Are the Rest Rooms Cleaned? How Often Are the Rest Rooms Cleaned? In Rest Room Care, what is most Important?In Rest Room Care, what is most Important?

How Often Are the Floors waxed? How Often Are the Floors waxed? What is the standard for floor appearance? What is the standard for floor appearance?

Do You Use Brown or White Towels? Do You Use Brown or White Towels? Is There a Standard for Hand Drying? Is There a Standard for Hand Drying?

Are You Happy With Your Supplier? Are You Happy With Your Supplier? Based on performance against standards, how does the current supplier stack up?

Based on performance against standards, how does the current supplier stack up?


Staff and Management have adequate time to

address Non-price issues

Employees with limited purchasing experience makethe buying decisions

Belief that price is the only important objective

Believing suppliers arelooking out for our

best interestsCurrent practices are based on logical decision-making

The only way to realize savings is to buy cheaper

Buyers always consider all components in the buying decision

Suppliers don’t respond to quality /

application questions

Some Common Challenges to Overcome

Companies don’t clearly understand why they do what

they do

BiddingVs.

AdvisoryConsulting


From Bidder to Advisor - Strategies

• Set the stage early in the project – asking the right questions• “Pure” bidding is not sustainable…service will suffer• Ultimately, Client becomes less valuable to suppliers

• Increase buying power through program purchasing• Services Only? Supplies and service? Managed Purchasing?

• Develop deeper, longer-term supplier relationships (as you would with strategic costs)

• Fewer, more professional negotiations w/RFPs• Negotiate with senior supplier management• Allow for cost-driven price increases and recognize savings derived

from other than lower unit costs• Involve supplier in application evaluation


Adopt a Global Perspective!

• Price is important; but, not sacred• It takes time to find the best fit solution• Investment in equipment may yield long-term savings• Ask, Ask, Ask, Ask Again

Understand the entire organization, operating philosophy, environment, employment strategy……….!

RULES:

No cost is sacred

Is this the only option?

Opinions Are Important

“Feelings” directly impact success

Ensure implementation happens

Monitor/record results


The Truth Is – Most Companies Won’t

• Find the time to pursue the BIG PICTURE• Too much happening to look beyond basic price needs each day

• Actively engage in effective supplier negotiations on a program / process improvement basis

• Time / talent/ expertise / energy not there• Suppliers maintain an advantage in the buy-sell relationship

• Realize the bottom line impact opportunity available from areas other than price

• Unprofessional negotiations• Negotiate with sales reps instead of management• Allow for price increases based on local market input


A Consultant –Advisor Will Provide……..

• Knowledge, Information, Support• Real category/industry expertise and experience• Understanding of Processes and Scope of Work• Detailed analysis of past and future spend activities• Resistance to “First Answer Acceptance”• Development of alternate methods, products, solutions• A confident, competent partner in all decisions

• Recommendations Beyond “Best Price”• Alternate Methods, Products• Investment Options• “Creative” solutions


Summary• Bidders are a dime a dozen

• Put in the effort if you want results

• Visualize the “End State” – it’s more than just the price

• Go beyond the simple cost-driven solution

• Focus on “BIG Picture”

Thank You