The Shopping Model
There is little doubt that if you put enough effort into it, you will be able to find someone willing to sell or make a product at a lower price. But is the reward worth the effort?
The opposite of vendor consolidation is vendor proliferation which is often encountered by those who adopt the open competition model. What is the cost of issuing so many P.O.'s and writing checks to a host of vendors? Many labs grossly underestimate these costs!
There are two types of people - those who love to haggle and those who hate it. If you love to haggle / bargain, you can only reduce costs and not generate revenue. Is it the best use of your time? Really?
Are there ethical lines crossed in the quest for the best deal?
How much market knowledge do you have? Do you really know what is a good deal? Do you rely on Google to find new vendors?
Is this your hat?
Which of these strategies do you use?
The Shopping Model
As a lab manager, I doubt that many would wear this hat in the lab. However there are a select group of lab managers who just love to find (and brag about) the low price they found on an item. Used, refurbished, demo, whatever it takes! For those who ONLY care about price, the reverse auction may be the ultimate tool. (Reverse auctions have fallen out of favor because they just don't work.)
For most people, haggling is not just unpleasant, it is a huge waste of time. Who hasn't bought something online and found out that the "shipping and handling" (or other hidden fees) erased the savings. With all of this, there is one undeniable fact. If you want the absolute lowest price on an item you have to drive a hard bargain with your suppliers.
This method requires that you have the following:
- 1.) Product knowledge - you know what the products are, their technical specifications, what defines a quality product.
- 2.) Market knowledge - you know who makes the product, who distributes the product, and the supply chain.
- 3.) Pricing knowledge - you know when to stop haggling because you have reached a price where further time spent is wasted.
Amazon and Google have given hope to the bargain hunter who now perceive that a bargain is just a few clicks away. If it were this easy, why don't more people do it this way? Why would anyone need help from a sales rep? Who would need a lab supplies distributor?
The Pros and the Cons
- - With few exceptions, shopping will yield the lowest price on an item. There is always someone out there willing to sell for less.
- - There are a few people who just enjoy shopping - it's fun!
- - Vendors will NOT ignore you!
- - You are always assured of a second source of supply.
- - Even the most hard core bargain hunters rely on people like Groupon to help them find even better bargains. The question is, you are getting lower prices COMPARED TO WHAT? the price you paid last time? How do you know the lab down the street isn't paying less than you are?
- - Watching your budget is the fiduciary responsibility of every lab manager. However being "penny-wise and pound foolish" is never smart.
- - Vendor proliferation is the opposite of vendor consolidation. You CAN reduce your cost of product. But it comes with a cost.
- - Is this REALLY the best use of your time?
The Open Competition Model and LPS
Competition is the best way to lower the cost of an item, What if your lab could afford to dedicate a team of people to continually monitor what you buy, keep an eye out for a vendor willing to supply the item at a lower price or with better terms? What would your prices be?
Now imagine if this team did all this work for you at no cost to you. You just sit back, decide if they have made a good choice and enjoy the savings.
The beauty of the LPS model is that w have the incentive to keep looking on your behalf. We are never satisfied with the results! And best of all, with each lower price or additional vendor, your cost per P.O. is not impacted. You issue one P.O. and get one invoice, every time.
How can LPS assist the buyer who believes in Open Competition? Find out more!
- About Lab Procurement Services
- Services Overview
- Vendor Consolidation vs. Competition
- Vendor Management Services
- Strategic Sourcing
- Procurement Consulting Services
- The Four Purchasing Paradigms