Why purchasing needs to interfere
It is generally not appreciated that buyers interfere in the procurement of services. But the purchasing department can help the corresponding departments from marketing to production to IT to get more services for the same budget. The secret lies – as so often – in the processes and benchmarks.
The procurement of service providers in the five-digit range in particular holds enormous potential. The department in turn can get more for the same budget. Savings of between 10 and 40 percent and more are possible, especially for services that can hardly be standardized, such as marketing or IT. And even with more comparable services such as cleaning services or maintenance, the potential is often more than 10 percent. Especially if contracts have not been renegotiated within the last 24 months, large profit estimates are hidden here.
Create comparability
In contrast to screws or other standardized demands, it is not so easy to compare services depending on their complexity. Let’s take the complex services of a marketing agency to illustrate how to make services comparable.
One agency recommends the client strategy A worth 100,000 euros to achieve the goals set. And a second agency presents a strategy for 50,000 euros. The prices lie far apart and clarify the problem. Which is now the correct strategy and/or agency? This is where the professional competence of the marketing manager comes into play. Purchasing must not bypass this. Rather, they must try to understand their work. Ultimately, the head of the marketing department is paid for his expertise in making the right decisions. Nevertheless, the purchasing department can support the departments with tenders.
Hand in hand with the specialist department
First of all, the buyer asks the marketing manager for a briefing or the preparation of a specification as well as a pre-selection of the service providers. Then the buyer first obtains offers from two to three service providers, who have to break down their various positions and costs in detail according to the specifications. This also makes clear:
- What are personal contributions?
- What services does the service provider purchase?
- Can different projects be divided into different work steps or cost blocks?
- How high are the travel costs?
- Etc.
After that, the various positions of the submitted offers are evaluated with the marketing department or the corresponding department, for example in an ABC analysis. This gives the purchasing department an overview of which services are required and how they are weighted in order to be able to create a clearly structured tender template.
Comparison makes rich
With this tender template, the actual tender takes place. This procedure is particularly worthwhile for large orders with more than five digits. Finally, in our example, the marketing department selects the best agencies from the submitted bids for a pitch.
This process can also be transferred to the many other service providers of a company. Above all, the purchasing department must succeed in getting the relevant specialist departments on board and in establishing comparability by means of figures and detailed specifications or offers. This also includes that the purchasing department learns to understand the business of the specialist departments. For services that are easier to compare, purchasing consultants such as Kloepfel Consulting rely on corresponding benchmarks.
Cost control
The procedure described above also helps to keep an eye on costs during the project:
- Are there deviations over time and why?
- Have the framework conditions changed?
- Has your company or service provider made a mistake?
Flat-rate allocations
In the case of simple recurring services, such as winter and summer services, cleaning, simple maintenance work and similar services, the purchasing department can also agree flat rates. In a 3-month cycle, for example, these flat rates are gradually reduced until the supplier has reached his pain threshold. On the one hand, purchasing forces the service provider to optimize the services. On the other hand, this simplifies handling processes and puts buyers in a better negotiating position.
Further savings levers
- Give the service provider a maximum budget that you are willing to pay.
- Ask for prices for different contract periods. After all, the service provider has an interest in long-term cooperation.
- Discounts for successful recommendations are also a way to reduce costs.
Potential analysis
In order to optimize costs within a few weeks, it can be worthwhile to commission purchasing consultants such as Kloepfel Consulting with a potential analysis. In this case, if a project is carried out, the purchasing department is upgraded. At the same time, you also increase the satisfaction of the departments, as they usually get their service providers at better conditions.
Penalty agreements
We also recommend that you conclude penalty agreements with your suppliers. In this case, the service provider will make a binding commitment to pay a certain penalty if agreements are not or not sufficiently adhered to.
Author
Thomas Wandler
Senior Partner
Kloepfel Consulting