The most successful sellers know that winning bids starts long before the sourcing event begins. Sure, it’s important to manage the actual event well, too (go to “How to Come Out on Top in E-Sourcing Events” for helpful best practices). But capturing the hearts and minds of sourcing and vendor managers should carry equal weight in your sourcing strategy. By paying careful attention to their needs and preferences both ahead of and after the event, you can tip the scales in your favor and maximize your chance to get and keep the business.
So what do sourcing managers look for when vetting sellers? What do they love—and just as important, what do they hate? To find out, we talked to buyers with years of sourcing experience. In this article, part 1 of a two-part series on strengthening sourcing relationships, we include tips from Karen Sherrill, Senior Commodity Manager at Ohio State University Medical Center.
Eight Dos and Don’ts in Working with Sourcing Managers
Tip #1: Do learn the customer’s needs before trying to promote your product or service. Nothing frustrates sourcing managers more than being “sold” on something they don’t really require. “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 how and when 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—for example, some may bid new business annually, while others follow a specific calendar—and plan your approach accordingly.
Tip #2: Do find out the sourcing manager’s pain points and offer ways to resolve them. 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.”
Tip #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
- They need additional sources of supply
By doing some research, you can respond in a way that best meets their needs.
Tip #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.” Though such strategies may help you win the initial bid, they tend to 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.”
Tip #5: Do build long-term relationships at targeted accounts. Investing the time and effort to develop relationships within a specific company can make the difference between success and failure. “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.”
Tip #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 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.
Tip #7: Don’t take your customer for granted once you finalize the contract. Too many sellers view a signed contract as the end point of their efforts. Yet getting the business is only the first step; keeping it is something else again. 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.”
Tip #8: Do follow good financial practices. For example:
- Don’t invoice without a purchase order. Though the best practice is not to render service till you’ve gotten a PO, internal users will often ask you to move forward while promising to get the PO in the system. While that may be okay to a certain point, 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 myriad ways 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.
This article is part of the current issue of Ariba Supply Lines. Ariba Supply Lines is a quarterly newsletter that provides valuable tips, best practices, and the latest thinking to take your online business relationships with your buying customers to the next level.
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