Getting Best Value

You want to receive the most desirable combination of cost, quality and sustainability from a supplier and your supply chain to meet your organisation’s goals and requirements. But weighing up the balance between these qualities is difficult, you find too low a cost, and you’ll likely lose out on the quality of products and service, or, you find the highest quality supplier in the industry and your paying for a premium that isn’t available in your budget. Which way are many going to sway when it comes down to the nitty-gritty of targets and goals… the low-cost option.

Risking quality of service for a lower cost will likely look good on initial budgeting spreadsheets and presentations, and you may also be able to show some impressive costs cuts that will make your boss happy. But what can happen as time goes on? Suppliers don’t turn up on time and when they say they will? Do initial promised costs begin to rise? Do assets begin to slip into non-compliant states? Does work become delayed and impact your businesses overall operational activity and drive up costs again?

Potential Result

A back-log of maintenance costs that you can’t keep up with, a flow of emergency maintenance issues begin to pile up at a steady rate and assets not meeting government and industry standards. More hassle, at much more expense than originally anticipated.

But how can you work to determine whether a supplier is a good egg or a bad one?

Obtaining Best Value Procurement 10 tips to take into consideration during a competitive tendering exercise or on consideration of potential suppliers to achieve a value for money outcome.

Purchase Price (Cost of Goods and Services)
The whole life costs (Combines the total cost of maintenance, operation and disposal).
Functional and Aesthetic Features (does it achieve the task required?)
Technical Merit (Do the offers meet your specification requirements from a technical point of view?)
Quality (Defined in ISO 8402-1986 as ‘the totality of features and characteristics of a product or service that bears its ability to satisfy stated or implied needs.’)
Compatibility (The ability of two or more systems or their components to work together without user invention or modification).
Use of Additional Resources (Consider whether the proposed product or service solution will require any additional resources to be used and add the total cost of this within your evaluation).
Delivery Time (Can the product or service be delivered by the timescales required).
After sales and technical assistance, evaluate the options provided for any services included customer service options and warranty, or maintenance provided within the offer, or, at an additional cost.
Consideration of the Supplier’s Company Culture (What does the supplier value most in their ethos, and is this in line with your own organisations? Good suppliers will first seek to understand your company, it’s industry and it’s needs, and work with you to help you reach your targets and responsibilities).

Combine the above factors, and select the option which achieves the most economically advantageous outcome.

On completion of a procurement exercise and on the nomination of a successful supplier, it’s important you continue to maintain accurate records of the exercise and the offers submitted. A record can then show that value for money has been actively sought and achieved with evidence.