A Suppliers Predicament
In the middle of finalizing a multi-million dollar deal, and then you get the dreaded call. Sourcing wants to chat.
You’ve won the RFP, reviewed terms with legal, and finalized negotiations.
And you still got side-swiped at the last minute, despite checking all the boxes.
It stings because you may have done everything right.
With the business partner.
A Signal to the Suppliers
There a multitude of reasons that suppliers could end up in this position. Most of the time, you’ll find this issue when dealing with small to medium sized corporations. That said, I’ve also worked for mult-billion dollar corporations and it’s the same story.
Here are a couple of reasons you could end up getting a last-minute phone call stalling all progress:
- Your business partner isn’t aware of policies/procedures
- They are knowledgeable and are trying to circumvent them
- Someone is in a rush to get the project started
- The business has had bad experiences with Sourcing, so they are trying to avoid them
- Executives believe they are the exception to the rule
- They are trying to bring you in as a new supplier (but under the radar)
There are a bunch of reasons why someone might find suppliers and then go around strategic Sourcing, but these tend to be the most common. This is why it helps to know the background of who you are working with.
If you’ve worked on the sell-side for more than a couple of years, you know better. Even if you can get away with it once, you won’t like what happens when Sourcing finds out.
If you are working with a mature organization, the department will have power. I’ve personally stalled out on approving PO’s for months when policies had been violated (severely). Even if they aren’t able to do the same, being on their wrong side, probably isn’t in your best interest.
Who do you think the rest of the organization goes to when they need a supplier? Who gets a seat at the table when suggesting and blacklisting suppliers for RFPs? I’ll give you a small hint, it starts with “S.”
I know, you think you can get the highest rates possible if you don’t deal with us. Some business partners won’t even think about negotiating. Best to gouge us early on, to ensure your highest level of profit at some point, right? Not really.
How long do you think it will last? If the account (or spend) becomes large enough, guess what – it’s coming under the scrutiny of the finance organization. Whether it’s from FP&A, Sourcing, or the audit team – we’ll be looking in your direction.
That’s the key, too; there are multiple layers always looking for inefficiencies. Oh, and let’s not forget we can always retroactively go back to audit you and potentially get money back.
Even after all of that, say it does slip under the radar. The moment you move into the 250k+ range, you should be crossing your toes. Especially if you are taking a 500k project and creating five 100k PO’s to skirt proper signature authority.
By the way, we have a special present for you. Even if the business partner suggests it, you’re the one to be taking the blame at the end of the day. There are very few times that this would even be recommended.
All of these tricks are great for the short term, but not for the long-term. If you don’t mind being a one and done vendor, then you are okay. But if you’d like to continue the business, Sourcing will make sure to put you on their naughty list, which isn’t the greatest place to be.
Long Term Thinking
YES, I can offer something better than gouging us. Because your vision is narrow in thinking so, and what we bring is long-term strategy and partnering.
This is why understanding ROI is so important!
Would you rather have three years at 20% profit or ten years at 10% for a 10M dollar account? Simple math tells us the three years will never be higher than the 10, which doesn’t even take into account potential additional business.
Sure you could get there without us, but have you ever thought it might be easier if you did?
1. Having an advocate makes it easier to expand internally
2. We can help mediate issues with the business partner
3. Sourcing can help eliminate inefficiencies of the business that are driving up your costs (for all your buyers)
4. We can become a champion in finding you new external business
5. You won’t be on our radar when consolidating or eliminating suppliers
6. We can help expedite internal processes (legal, financial, etc.)
7. You won’t have any last minute phone calls that stall your project
8. Insight into internal office politics that could change scope, size, spend with us
9. Sourcing can give you feedback to help you refine your RFP/on-site pitch to better your chance of winning new business
10. We have access to Executives / C-Suite