Supply for many products has gotten tighter this year then ever before, but don't automatically assume you have to just sit back and take the higher prices and lower service..
The time to Re-Invent your supply chain and in particular your purchasing model has come.
Have you taken advantage of Ebay.com or another online auction site to get the best deal possible on a product? Well the web has revolutionized procurement and purchasing much in the same way. Generic Pharmaceuticals as an example are just that, they are generic and can be purchased from multiple sources with different skus/NDC numbers and packaging. But they are the same product. This purchasing paradigm puts you as a distributor in a unique situation. You can pick and choose your supplier.Since this is the case you should make them compete to earn your business.
The same paradigm can be found in many other industries, and while contracts and purchasing agreements may seek to lock you into a specific vendor, before you agree to the terms lets see if you can negotiate from a position of power.
Knowledge is the key to this plan.
Freedom of information
We are living in world which allows small to medium enterprise businesses to compete on exactly the same footing as huge conglomerates. No longer do you have to go through a formal leveraged buying exercise to deliver the best possible combination of price and service when buying products.
Creating competition with the web
Utilizing the web and your MDS software, you are able to essentially create competition on each individual order and procurement is a very different, much better process, because you can create fundamental competition and a broader supply chain.
Using the MDS Tender and Bid Systems a user can interact with suppliers and actually review information provided easier because they all deliver it in standardized format. This allows you to compare apples with apples. This is fundamental to proper procurement.
- Create tenders or requests for quotations
- Select from a pre-approved list of vendors
- Send those vendors the list of products
- Enter the bids received from vendors.
- Compare the bids received and
- Have the system automatically review and select the best vendor to purchase from
Since we are able to capture every element of the interaction. We can create a service agreement or a contract which is the combination of everything submitted over the web, all the detail around the conversation.
One type of procurement model that delivers best value is restricted tendering, which limits the request for tenders to a number of select suppliers. This is also sometime called competitive bidding. From a procurement perspective, if the due diligence is done in creating your list of approved suppliers, then ultimately the bid response is going to be very high and accurate.
The other model would be Open tendering or a more generic auction concept , There are many disadvantages to open tendering (a type of auction); including limited time frame for completion; but the primary issue is that it focuses only on cost as a solution. IE Lowest Total Bid/Price.
If it is price driven then it stifles innovation, and that is a major risk to choosing the wrong type of approach.
Restricted tendering has clearly been shown to be better over and above any other tendering process, it certainly has delivered value for money and enhanced innovation. Restrictive tendering delivers value. The right suppliers get invited to tender, the procurement process is really informative and it doesn't begin and end with price.
By changing your procurement model to a competitive bidding process you can build a resilient, cost effective and sustainable supply chain for the future.
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