With limited budgets, corporate buyers often focus on price – and gain bonuses for coming in below budget. This risks them making the wrong choice for what they see as the right reason – saving the company money. But too often the wrong choice ends up costing the company money, as the lowest cost option delivers less value.
Increasingly – and reassuringly – professional procurement experts recognise this and focus more on the value they want to create with the purchase. This means doing three things:
- First, work with the relevant business units to understand the problem to be solved and the potential value of any purchase.
- Second, investigate the problem’s root causes – deeper analysis will identify long-term opportunities to add value to your business and to select offerings that go beyond solving the immediate problem.
- Third, choose to work with flexible suppliers that are willing to deliver more value to you by adding to, or adapting, their product or service, rather than simply cutting the cost.
Of course, there’s a lot more to this process than these three steps. But it starts with identifying value, not minimising cost.
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