The Expense Category Manager Doesn’t Include A Large Enough Vendor Sample In Their Industry Analysis

There is a well-known saying in the business world: “Always get three bids.” It’s good advice, but I’ve found that it doesn’t go far enough.

In the hundreds of expense category analyses that I’ve been involved with, there’s a little magic in including more vendors in your expense category analysis, and often, the “magic” isn’t found directly but rather as an indirect result of your extra effort.

Your company is likely already using a vendor in the expense category being analyzed, so getting three bids entails only getting information from two additional vendors.

What I’ve personally experienced by soliciting only two more vendor bids is that I don’t get a complete picture of the evolving products/services, pricing, or vendor support options available in that industry.

That takes including between 6 and 12 total vendors (including your incumbent vendor) to get a complete picture of what’s currently available within the industry that supports the expense category you’re analyzing.

The total number to include depends upon the number of unique vendor product/service and support offerings available in the expense category you’re analyzing.

You don’t need duplicate offerings just for the sake of including more vendors. You do want to include all vendors that offer products/services that meet your criteria and that offer something unique within the parameters of pricing, the product/service, and/or vendor support.

Each additional vendor that’s included adds time and effort on the expense category manager’s part to evaluate and “score” the vendor’s bid response, so only include vendors with unique offerings.

The expense category manager should always be able to find at least six vendors to include. During your research, determine which vendors to include and discover new information, product/service, and vendor support options.

The expense category manager should compile a master list of what the best offering looks like and benchmark that when requesting bid packages from the vendors on their short list.

Even though this takes more time and effort, it’s always paid back by having a more comprehensive bid request package. The bid requests are received by the vendors as being from a person with a deep understanding of the vendor’s industry.

Vendors, in turn, respond with a more competitive bid, and that increases your cost savings, product/service quality, and vendor support.

Next week…Reason # 18