Products included in this area are necessary raw materials, without which the company cannot function. They are of great importance for business continuity. They can be easily recognized because the volume of orders allocated to them is the largest. In addition, they are subject to the highest supply risk.
What products are included in this area? Server outsourcing maintenance (in the IT industry), advanced IT system (e.g. transactional or ERP), raw materials or components used to produce the final product.
Is it worth conducting auctions for strategic products? Probably not. It is worth focusing on improving relations with the strategic supplier and maximizing the value added from cooperation. The key is a long-term contract and supplier performance assessment.
Look out for bottlenecks. These products do not have a large impact on the volume of purchases, but they involve a huge risk of delivery. It may be due to a small number of suppliers on the market.
What services are included in the bottlenecks? Tax consultancy, legal consultancy, internal audit or consulting services.
How to deal with bottlenecks? Take care of continuity and security of supply. Focus on this, not price negotiations. At the same time, remember that it is worth having an alternative supply in the event of increased risk. It is not recommended to conduct electronic auctions on bottlenecks, because they are specialized products supplied by a small part of companies on the market.
Low supply risk and low purchase volume are the hallmarks of standard products. This area is of the least importance from the point of view of the purchasing department.
Standard products include: fire inspections, catering services, office equipment rental (e.g. coffee maker, printer).
Will the auction work for the standard? With a low purchase value that generates standard products, the auction may not work. Don’t count on spectacular savings. Focus on automating the P2P process (more about P2P HERE). Improve the process of submitting, accepting and completing orders. Control turnover and consolidate suppliers.
The leverage product area is the best for the Buyer. Why? A high level of turnover is associated with a low supply risk. An ideal opportunity to negotiate, because it is easy to gather many competing suppliers, compare products and standardize them.
What products and services are listed among the levers? Office supplies, printing, consumables, purchase of security and cleaning services, health and safety articles, electricity, car fleet, telecommunications and logistics services.
Is the auction the best use of the potential of standard products? DEFINITELY YES! Force competitive competition with suppliers! Take advantage of electronic auctions, because it is in this category of products that you have the chance to achieve the best negotiating results and use all purchasing opportunities.