How do we make it easier for suppliers to give buyers what they want?
As part of its post-Brexit transition, the UK government revisited its procurement policies.
“We propose enshrining in law, the principles of public procurement: value for money, the public good, transparency, integrity, efficiency, fair treatment of suppliers and non-discrimination.” (emphasis added)
In many organizations, the focus is on procedures that guard against the oft-cited triumvirate of “waste, fraud, and abuse.” The procurement process has evolved into something fundamentally adversarial
Buyers have taken so many steps to protect themselves that they have made it significantly more difficult to maximize the benefit from an acquisition. The tradeoff between risk and reward is out of whack.
The only thing an adversarial approach to procurement does is to dictate the kind of company that can win in a sourcing situation: corporate gladiators who know how to play the game.
These winning vendors are quasi-insiders. No wonder laymen assume that the procurement system is rigged.
An adversarial approach to procurement risks crowding out potential suppliers. It can discriminate against firms with certain characteristics. It substitutes complex layers of often conflicting rules for integrity. It is transactionally wasteful. It can be difficult for vendors to understand what buyers actually need.
If buyers do not get enough relevant suppliers to show up competitively in their reverse auctions, then they end up overpaying for a second-best solution.
None of this is consistent with “value for money.”
You can see this in the systems and the business models that buyers use.
How can we characterize the current, common approach to sourcing?
Onboarding a supplier can take months. Suppliers need to answer massive questionnaires and provide buckets of documents. (Side question: do buyers actually read these?) Suppliers can only respond to RFx they receive. Buyers often send suppliers irrelevant solicitations. Or worse, they fail to send suppliers RFx for products that the supplier actually does sell. The decision cycle takes far too long. Statements of work are often poorly written. Buyers and suppliers lack ready access to contemporary market intelligence. Frequently, a single supplier will “shape” a statement of work subverting the integrity of the process.
The systems people use reflect this reality. They are large, cumbersome, and bureaucratic. They do nothing to adapt the model; they only seek to capture the model.
These approaches are indifferent to the needs of suppliers: a simpler process, a faster cycle, and better access to potential customers who want what they sell. Smaller suppliers cannot compete. These include firms run by minorities, women, and other historically disadvantaged groups.
Why is this the case? It is so because buyers are the ones who pay for the systems.
If you asked suppliers to design a sales system (as opposed to a sourcing or procurement system), you would get an entirely different answer.
A supplier would like to have some key features:
- Collaboration: The supplier wants to get to know the customer’s business and the problems that get in her way to see if the supplier can help her succeed
- Data: The supplier needs to have a way of organizing his own data, but also a tool for seeing what other people are doing to the extent that it’s available
- Speed: The supplier doesn’t want to spend weeks or months trying to navigate a sale once the process has started
- Standardization: Ideally, the supplier would like to see the use of common templates across buyers, where possible to make onboarding and responding easier
Ironically, if buyers give suppliers these features, they are more likely to obtain value for money in a competitive process that makes “waste, fraud, and abuse” impossible than with an adversarial approach.
If you make it easier for suppliers to give you what you want as a buyer, you’ll be more likely to get it.
Of course, buyers still need to have protections in place. But you can’t expect to win a medal in competitive swimming if you’re wearing a life preserver.
We built EdgeworthBox to help make procurement collaborative and effective. It’s an exchange with tools for hosting structured procurement data; standardizing and simplifying onboarding and RFx; and speeding up the sourcing process.
Our approach increases the quantity and the quality of responses buyers receive when they solicit vendors. Sellers like the simplicity and exposure to potential customers with the right product-solution fit.