Part 2 – Buyers Guide to Cost Savings

Our last post on spend analysis was part 1 of our cost saving series and we are going to stay focused on this topic by providing areas to save money both within and outside of your organization.

We noted the importance of going after your class “A” Vendors or your top 20 which account for 80% of your spend. This is our target list and we will review how as a Buyer you can better leverage your vendors experience to help you generate cost savings.

In this scenario, your pricing on products you purchase is acceptable and lets assume they are under contract. Now where do you turn to find the next round of savings? More cost savings can be found in your suppliers’ organization. Pardon…you want me visit my suppliers and tell them what they can do to reduce costs so I can get a better deal? Not at all, we are suggesting you get into the heads of their technical and support staff to mine their knowledge, experience and ideas.

Your Vendors are in an excellent position to help review your processes and reduce your costs for the following reasons:

  1. They have a long list of clients which use their product and have experience and knowledge of potential best practices. This can be useful information. While asking vendors to divulge proprietary information is not appropriate, you can ask for suggestions on what we can do better. Keep in mind Vendors would rather you seek cost savings elsewhere versus from their pocket so they should be quick to jump on this approach.
  2. The technical knowledge of their own products. There is no better source to suggest alternative specifications or practices which can reduce expenses without sacrificing quality.
  3. They are a known entity.

How do you approach this? Read the rest of this entry

A rejection letter is another term used by purchasing personnel and it is used as part of the notification process. You are notifying your unsuccessful bidders that they will not be awarded the tender. It is a formal way of notification much like an award letter or how a notification of award is used. They inform all the vendors of your position in respect to your bid. Issuing an award is enjoyable, completing rejection letters are no fun but they are important.

Why is this important?  If you consider the recipients position, their manpower and scheduling needs then you can quickly appreciate the importance of locking up the vendor if you need them and releasing the vendor if you do not.  Regardless of whether it is for supply of materials, manufacturing requirements or service related work it is still the same. It is prudent to efficiently review all bids during the tender process and not allow it to drag out for 3 months.

Vendors  are partners in your supply chain and they do incur a cost when it comes to submitting a bid to your RFQ or RFP. It is a professional courtesy to always inform bidders of either award or rejection and it is important to be on good terms with vendors as you do want them to participate in future tenders of a similar nature. So, a simple rejection letter can go Read the rest of this entry