Successful sellers know that winning bids are made before sourcing events begin. But capturing the hearts and minds of sourcing and vendor managers should be a significant part of your sourcing strategy. Paying attention and being aware of needs and preferences before and during the event can tip the scales in one’s favor and maximize chances of getting and keeping business.
So what do sourcing managers look for when vetting suppliers? To find out, we asked Karen Sherrill, Senior Commodity Manager at Ohio State University Medical Center.
Eight Dos and Don'ts in Working with Sourcing Managers
#1: Do learn the customer’s needs before trying to promote your product or service. Nothing frustrates me more than walking through the mall and having a kiosk salesperson try to sell me a remote controlled helicopter as if I were a ten-year-old boy, or spraying old lady perfume on me as if I wanted to smell like celery and rosewater. The same is true in the B2B world. Nothing frustrates sourcing managers more than being sold something they don’t need. “They need to become aware of what we need as well as when we need it,” Sherrill says. “One way to do that is to ask if the product or service is under contract, and if so, when it’s expected to come up for bid.” This tells you when and how to make contact again. “Another good question for them to ask is, ‘Okay, the initial term for your existing contract is three years; do you have any renewals on it?’ Because if things aren’t working out with the current supplier, I could decide to bid, but market conditions or resource constraints might make me decide to renew. So the supplier can check in with me six months before the scheduled conclusion of the term to see if I’m going to renew or bid.” Understand the supply management process for each potential customer and plan your approach accordingly.
#2: Do find out the sourcing manager’s pain points and offer ways to resolve them. When competing against other suppliers, it is important to differentiate and show a sourcing manager what your business does different, better, or faster than others. The best differentiation areas to bring focus to are the pain points a sourcing manager faces. Every sourcing manager wants to know about value, savings, or quality you can deliver that they’re not receiving—and may not even be aware of. “For example, a supplier might tell me about accepted industry practices that aren’t in the buyer’s best interest, like adding hidden costs such as freight or ancillary charges on the invoice, that they don’t do,” Sherrill says. “Or maybe the standard markup for a product is 20 percent, but they tell me their standard is 10 percent, and if they contract with us it’s only 5 percent.” Another approach is to provide solutions to problems the customer is having with their current vendor. “For example, one company was familiar with my current supplier’s practices because one of their employees used to work for the competitor. So they knew what my pain points would be and how they could bring value to me by fixing them. Other suppliers have done that too to make it more attractive for me to listen.”
#3: Do know why the sourcing manager is holding the bidding event. Sourcing managers bid out business for a variety of reasons, such as:
· Their current seller’s contract is expiring
· They want to leverage high levels of spend in a specific area to generate savings
· They’re not happy with their current seller’s performance or want value they’re not getting
Doing research allows you to respond in a way that best meets their needs.
#4: Don’t agree up front to terms that later have to be parsed by your legal department. “Sometimes larger suppliers will agree during the event to the terms we specify, and then later announce they have to send the contract back to their legal for review,” Sherrill says. “That’s a turnoff, since I ask specific questions about the terms for a reason, and they didn’t mention the need for legal approval because they were afraid it would count against them or cause them to be eliminated.” Such strategies may help you win the initial bid, they will always backfire eventually. “It’s better to just ask, ‘If I say no, will I be disqualified?’ than to say yes and then take exception to terms later during the contract negotiation process.” These situations tend to make people feel like they are being deceived.
#5: Do build long-term relationships at targeted accounts. Investing time and effort to develop relationships with specific companies can make enough impact to earn repeat business. “Keep up with the buyers and stakeholders as they change over time, and don’t expect results overnight,” Sherrill advises. For example, one seller interested in supplying uniforms to OSU spent two years getting to know both Sherrill and the end users. “It was a long process but it paid off big time, because they got all the uniform business for the university plus one of our hotels,” she says. “We asked for a ton of samples, and they kept driving down to deliver them. They also talked to our people to see what we needed. They had very good listening skills, and ultimately the comfort level and rapport they built up was a key factor in their getting chosen.” Like B2C transactions, B2B business is often awarded based on emotion. You are more likely to spend your money with a salesperson/ business that you know and genuinely like.
#6: Don’t assume that being small is a liability. Many sourcing managers are eager to contract with small or disadvantaged sellers, not only to meet legal requirements but for other personal reasons as well. “Personally I like smaller suppliers as long as they can handle the capacity, because they’re often more flexible and able to jump through hoops easier,” Sherrill says. “Of course it’s still important for them to submit their response in a professional manner, and to show they’ve done analysis and can address the need we’re trying to meet.” You can proactively allay fears the customer might have about your size by offering them a site visit and/or demonstrating how you can do the job. E.g., the small, family-owned seller that landed the uniform contract repeatedly met with Sherrill to explain how they could fulfill the university’s requirements. “They also asked the right questions to make sure they could provide the service, and made suggestions when we asked for things they didn’t think would work,” she says. The company’s small size meant they had lower overhead and prices, which worked to their advantage as well. We all like an underdog story and sourcing managers will sometimes lean toward the smaller underdog company over a larger company when all else is equal.
#7: Don’t take your customer for granted once you finalize the contract. Many sellers view a signed contract as the end point of their efforts – they made it to the finish line and now they can rest. But getting the initial business is only the first step. Cement relationships by watching for new opportunities to help the customer cut costs, work more efficiently, and make their life easier. If you don’t, you may lose their trust and ultimately, their business. “If a competitor points out ways my current supplier could be saving me money or bringing value-add that they didn’t tell me about, I may bid out that business and award it to someone else, whereas if my current seller had brought it to me up front I’d stick with them,” Sherrill says. “For example, if you’re providing e-catalogs for other customers, or using EDI or pCards or things like that, you should proactively say to us, ‘Do you want to use EDI? Because we can do it; please set us up.’ That’s always better than us having to reach out to you.” This is an easy way to earn trust and additional business.
#8: Do follow good financial practices. For example:
· Don’t invoice without a purchase order. Though the best practice is not to render service until you receive a PO, internal users will often ask you to move forward while promising to get the PO in the system. While that may be acceptable until a certain point in the process, be sure to get a PO before sending your bill. “Invoices that don’t reference a PO delay the payment process and cause other match exception problems,” Sherrill says. “Instead, they need to insist that the end user gets the PO to them so they can reference it in the invoice.”
· Know the buyer’s back-end AP processes and automate when possible. Dealing with the countless ways various sellers want to submit invoices creates headaches for buying organizations, so make it your priority to learn and use their preferred method. If e-invoicing is an option, be sure to offer it, since it saves you and your customer effort and expense and greatly increases accuracy.
· Manage your cash flow effectively. Do whatever it takes to ensure that your bills are paid in a timely fashion and your other cash flow needs are met. “We’ve had suppliers come into our office and wait for AP to print off their check so they could pay their subcontractors and prevent legal action being taken against them,” Sherrill says. “That doesn’t look good.” Resources like Ariba Receivables Financing and dynamic discounting can help you get the money you need when you need it.
To learn more, visit the Supply Lines group.