This week Zycus and Ardent Partners presented ‘Sourcing for Value: Using Non-Price Attributes to Find the Best Suppliers’. Historically, not making an award decision based predominantly on price has been a reason stakeholders give for not wanting to follow the strategic sourcing process. Today, procurement professionals and the technology they use are accustomed to incorporating quantitative and qualitative measures of value into optimization scenarios and award decisions.
From Ardent Partners’ perspective, the event was a follow-on to a series of CPO Agenda blog posts from earlier this year (see the end of this post for links). Although savings will always be a top priority for CPOs, so is increasing the amount and success of collaboration with internal stakeholders. One way to do this is to make sure the organization knows that procurement’s projects are not strictly price-driven.
Although it is not possible to remove all subjectivity from projects where non-price attributes are factored into the award decision, it is possible to formalize their inclusion. When procurement increases their working knowledge of non-price attributes, more categories can be put on the table as candidates for sourcing projects. In fact, procurement should research markets and categories in advance of meeting with internal stakeholders so that they can lead the non-pricing portion of discussions rather than just responding to feedback.
Although not all non-price attributes will makes sense for use in all projects, here are some common examples as given in the event:
Conversations with stakeholders about non-price attributes should be looked at as an opportunity to shed light on the category and how it is managed. What are the criteria for each attribute, and can they be modeled? Are the attributes true requirements or ‘nice-to-have’ features? Even once the attributes have been identified, systematized and weighted, they should be experimented with – especially in cases where the optimization or award scenarios can be automated. How much of an impact does the weighting have on the awards? How do the attributes affect incumbent suppliers versus prospective suppliers?
In advance of a sourcing project:
During a sourcing project:
If you are interested in reading more from Ardent Partners on the use of non-pricing attributes in the supplier selection and evaluation process, check out these posts from CPO Rising:
Sourcing & Supplier Selection – Non-Price Attributes (13 January 2012)
Sourcing & Supplier Selection – Non-Price Attributes (Market Share) (17 January 2012)
Non-Price Attributes: Quality & Past Performance (20 January 2012)
Non-Price Attributes: Production and Delivery Capabilities (24 January 2012)
Non-Price Attributes – “Who” is the Supplier? (26 January 2012)