It’s widely reported that around 80% of buying decisions are emotional and 20% based on logic. Certainly, personal buying decisions would fit with this statistic, but you’d be surprised how many business buying decisions are also emotional or hurried and could not be attributed to solid logic! Not only that, but we are all susceptible to marketing and sales influences. A true purchasing professional will facilitate you through a process to improve your choices.
Slow it down – and start with your Business Needs.
Start by Understanding Your Business
All professionals need to understand the business they are working for before making decisions. Are you a new start up or mature organisation? Do you have budgets for the investment? How does this purchase impact the success and priorities of the business? What are the priorities of the business; bottom-line profit, competitive advantage or time to market? There are then a series of questions you need to understand before you start;
- Do you need to buy this item at all or now? Do you have other options such as outsourcing a service?
- What are the risks of making this purchase now versus the risks of not buying, or buying later?
- Do you have the budget for only a short-term fix or is it appropriate to invest in a long-term solution?
- Who do you need to consult with in any potential purchase? Often there will be a finance element, user element, or an IT, HSE and quality element to the decision.
What Do You Want?
Some small consumable buying decisions should be made quickly as it is not worth the time investment. However, where your organisation is about to make an investment or a change in how things are done, it is critical to understand what you want before you start, and build a solid business case.
- Start by summarising the situation. What is the problem you are trying to resolve? What do you know, what do you not know? If your list gets too long, you need to summarise into a couple of bullet point conclusions.
- Start with the end in mind. What is the goal, target, vision? When must you have this in place? Challenge yourself of what is critical and what is ideal, and what is just a wish list. Summarise to a single phrase and keep this in mind at all points in the process.
- What are the business needs for this purchase? Most purchases need to consider the following criteria;
- Assurance of Supply. How do you ensure you have the purchase when your business needs it? That could be a single delivery, or it could be a consideration of ongoing access. How quickly can the purchase be delivered or implemented? How critical is the purchase to your business success? There may also be contingencies to consider regarding ongoing demand such as guaranteed stocks or availability. The item you are buying might also need to be compatible with other infrastructure at your company.
- Quality/Regulatory. In your environment, what are the true requirements? You’ll want to challenge the requirements to ensure you are neither too unnecessarily tight nor fail to buy to the right spec. Quality and Regulatory is not just about GMP or legislation. It could be the lifespan of an item or reliability which might make a better investment. It could be an investor or financial markets requirement. You might need an item to be manufactured to accredited GMP standards, maybe also validated.
- Service. What support are you going to need in order to take full advantage of the purchase? Will you need training, implementation support, will users not involved in the purchase need ongoing support? What kind of turnaround on support do you need? What experiences have you had in the past which might help shape your decision? Do you need 24/7 support (which might be very costly), is a manual enough or something in between?
- Price and total cost of ownership. All purchasing professionals care about price, but the ultimate skill is to evaluate the value and total cost of ownership to your business situation at this time. Once the minimum criteria are met, then it’s time to concentrate on price. Costs of associated consumables, software licences, maintenance and upgrade charges may be more than the initial purchase! What might the hidden costs be? Consider footprint, practicalities of delivery and even related salary costs. Some purchases may even reduce your need for additional planned purchases or headcount – reducing the total cost of ownership accordingly!
- Innovation. It is really important to consider innovation with some purchases and not at all with others! This is something you need to evaluate for each purchase. For example, buying new technologies that keep innovating can expand the options of your purchase or lead to supplier partnerships.
What Do You NEED?
In making your list of wants, it can be helpful not to place too many restrictions on yourself. The difficult job is to take that list and evaluate what you truly need vs would ideally like vs nice to have. You might consider using the words must (critical), should (desirable) and wish list as helpful headers. Make sure the Critical criteria are truly deal breakers. What is an ideal and what is a wish list? Once you’ve fully understood your business need, you should think about drafting a User Requirement Specification (URS) and how you will make your decisions.
If you’d like Amici to guide you through an evaluation of your business needs, please get in touch.