Purchasing Habits Cost Big Dollars
Larry Winget, the Pitbull of Personal Development®, professional speaker, TV personality, and well-known author, makes this very important observation: No one likes to hear these words, “Well, that’s the way we’ve always done it!” He then continues to say, “Well then, I have good news for you… today you have a chance to do things differently.”
Merriam Webster Dictionary defines habit as, “a settled tendency or usual manner of behavior.”
The words “settled” and “usual” in the definition caught my attention. When we “settle” for the way things are always done are we truly giving our best? If we get stuck in “usual” are we thinking innovatively?
Now you might be asking yourself, “What does this have to do with my purchasing habits or processes?” and I think that is a great question.
As a well-trained negotiator, I’ve been taught to answer a question with a question. So which process offers the greater cost savings: An apples-to-apples Request for Quote (RFQ) or a Site Audit that allows a sales professional the opportunity to see how the product is being used and determine if it is the right product for the application?
Let’s play this out…
- Currently purchasing Widget X for $1.00 each
- RFQ with exact specification for Widget X is released to multiple distributors
- Low Bid comes in at $0.98
- Annual Usage of Widget X is: 100,000 each
- Annual Spend for Widget X is: $100,000
- Piece Price Savings: $0.02 each
- Annual Savings: $2,000
- To understand how and why Widget X is being used
- To ask the question: “Is Widget X the best solution for this application?”
- To evaluate and understand the process and present an alternate solution
- Based on site audit, new and innovative product Widget Y is proposed.
- Widget Y eliminates need for Widget X
- Widget Y only cost $0.45 each
- Annual Usage for Widget Y: 100,000 each
- Annual Spend for Widget Y: $45,000
- Annual Savings: $55,000
The Apples-To-Apples (RFQ) Process represents that purchasing habit of “Well, that’s the way we always done it.”
The Site Audit Process represents the habit breaking thought of: “Well then, I have good news for you… today you have a chance to do things differently.”
Which process yielded the greatest savings? The Site Audit
Don’t allow a purchasing habit, the “settling” or “usual”, influence your processes. Challenge yourself and your vendors to reach for more. Breaking habits will help you achieve your goals and initiatives of cost savings, increase productivity, and impact the overall profitability of your company.