Businesses can use market forces to gain detailed information on the prices suppliers charge for goods and services, say procurement advisers Efficio.
In its latest Viewpoint report, Efficio says a lack of transparency in suppliers’ pricing is a growing problem for buyers.
It emerged as a serious concern in a survey of procurement professionals due to be published by Efficio later this month.
In the Viewpoint piece, Creating Transparency, Efficio Vice President James Jenkinson says tough economic conditions are forcing many suppliers to look for extra profit margin in all the component materials making up the products they sell.
But if buyers can analyse the supplier’s costs and margins it will put them in a stronger position when negotiating overall prices.
Purchasers can work collaboratively with incumbent suppliers to persuade them to provide pricing information, perhaps offering to provide a longer sales contract or to buy more from them.
But the most effective approach is to use competition between suppliers to encourage them to provide figures on their costs and margins, Efficio says.
Requests for detailed information can be built into a request-for-proposal (RFP) sent out to suppliers in the marketplace. Many suppliers will want to comply because they will be eager to secure the contract on offer. The information from different suppliers can be pieced together to give a complete picture.
Jenkinson says: “In most markets it is likely new suppliers will be eager to gain your business, so they are likely to accept your request for information as a way of helping secure the contract.
“In this way you can take advantage of the market forces at work in the supplier market to secure the information you need to complete a full analysis of supplier costs and margins.
“If you inject competition into the bidding process in this way and the product or service you are purchasing is well defined, the pricing data from the various suppliers can be pieced together to provide visibility into appropriate cost structures.”
An action checklist provided by Jenkinson says procurement professionals should carry out an initial analysis of the cost of the components of goods and services being purchased using publicly available information, before sending out the RFP asking for details.
Notes for editors:
Creating Transparency can be downloaded from: http://www.efficioconsulting.com/_uploads/documents/view-poi...
Efficio is a results-focused procurement consultancy, with a track record of helping leading organisations achieve more value from their procurement. Comprised of experienced professionals with a blue-chip consultancy heritage, Efficio combines the credentials of a top tier firm with the depth of expertise of a flexible niche player. Clients include 3i, AstraZeneca, Barclays, BAT, Biffa, Deutsche Post, Ford, Goldman Sachs, HBOS, KKR, Nokia, National Grid, O2, Philips and Thames Water.
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