13 ways sustainable sourcing and procurement drive ESG efforts
The strategic sourcing process is a cycle, so it cannot be done once and forgotten about. A cycle approach to […]
Procurement 101
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Written by
Majdi Sleimen
We are susceptible to illusions, even if we naively believe that a so-called rational mind makes us impervious to such deception. There are countless examples that illustrate the unpleasant consequences of being seduced by a low cost: that ridiculously cheap plane ticket means three long layovers, additional baggage fees, and no inflight meals, while a scandalously affordable piece of real estate is less than a mile away from a factory that manufactures industrial sulfur products. To put it another way, many have succumbed to a plate of $5 oysters that later demanded an offering to the porcelain gods. Perhaps all that glitters isn't gold?
These personal repercussions are insignificant when compared to the devastation caused by corporations that don't use a Technical Evaluation Score (TES) or overlook the Total Cost of Ownership (TCO) when purchasing goods and services. As a result, expenses may accumulate, reputations might be tarnished, and customers can easily be lost. The intelligent approach to ensuring your business will be able to negotiate optimal terms with suppliers (and remove the risks associated with the low cost trap) is by using both TES and TCO in combination with a regular bidding or sealed bidding process. Purchasing with these 3 strategies in mind allows you to get the highest value for your investment.
Let's investigate the 3 tactics for exposing the low cost illusion...
"But wait," we hear you shout, "does this mean I'll never be able to purchase anything at a low cost without worrying about poor quality and hidden fees?!" Don't panic, there's still hope for securing genuine low costs that aren't an illusion, thanks to a concept known as disruptive technology. In brief, this encompasses any technological advancement that has displaced established technology, or "shaken-up" an industry. Most noticeably, cloud computing and big data technologies are continuing to "disrupt" developments in Supply Chain Management software. As a result, effective tools are now available for procurement professionals at a fraction of the cost of legacy software. It's safe to bet that these value gains will only multiply across an organization (which is a pretty magical outcome if you ask us).
If this blog has piqued your interest, check out Tradogram - no illusions required to summon procurement management tools when innovative technologies are in the bag.
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