Precisely how Your Procurement Practice Will certainly Affect Your Sales performance

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The worst thing that may demoralize your sales force are these claims: your salespeople made someone buy for a very important customer right after clearing numerous obstacles in the long sales cycle which seemed to take forever, And then have the products delivered in poor condition. The customer started to be furious, asked for a money-back guarantee, and then vowed NEVER to invest in you again.

In fact, below is the real case study of any foreign company in China and Taiwan that took every inappropriate step in its procurement process, such as:

While it claimed to obtain its products imported via Germany, it actually took them from a factory throughout Guangdong province. It won’t take long for its buyers to find out which factory the idea is sourced from;

The factory which produced those products did start to sell them using a universal brand at much lower price ranges;

There are frequent product problems that ranged from incorrect specifications to damaged products found in the packaging to shipping of the wrong products;

It requires an exceedingly long time in order to refund customers, or offer suitable replacements, largely simply because payment for the supplies happens to be made upfront;

Prices for your procured products are either continuously fluctuating, or consistently increasing without improvements in high quality, which makes it harder to sell.

Whenever asked to look for better providers, the procurement staff answered that other suppliers tend to be colluding with the current 1, and they will all quote exactly the same prices at similar conditions.

Unfortunately, this is not a separate case for foreign companies throughout China. It is in fact rampant among many foreign firms here, and such issues should be resolved if sales functionality were to improve.

Getting into typically the Sellers’ Minds

It is a fact that China is the “factory of the world”. What this means that China also has some sort of surplus production of all kinds of goods, which is why Chinese exports are traded in virtually every corner of driving.

What this means is that most factory bosses are facing cut-throat opposition where vicious price battles are common. However, some manufacturer bosses are smarter to delete words. They provide tailor-made products with regard to customized orders.

When a provider provides customized products, it will likely be much more difficult for consumers to make comparisons between solutions. What many procurement professionals usually do is a reference for a supplier who can make products to specification within the desired quality for a fair price. Then they just keep to that ONE supplier for after that orders.

In fact, many inventory managers are unwilling to modify suppliers because there will be the price of re-casting the conforms used to produce those goods. Besides, who is to guarantee the new supplier will be a lot better than the old one? So except if the current supplier really anchoring screws up big time, it is less likely that they will be replaced in the foreseeable future.

These kinds of practices range from procurement regarding spare parts, architectural hardware, professional adhesives, food ingredients, traveling + accommodation, or even revenue training programs.

While this the actual work of the procurement supervisor easier, it will unfortunately offer tremendous bargaining power for that supplier. Here are some examples of whatever they will say to you:

“Since we should instead cast the mold to provide your product, we will have got to collect upfront payment”;

These people didn’t say that you don’t need to pay them in advance for everyone’s subsequent orders

“I’m i’m sorry for the product defects (or delays), but we will be considerably more careful next time”;

These people didn’t mention the pay out for the defects, which is relatively difficult, since you have already given them, and they know the item.

“I’d like to inform you this due to rising costs, below have to increase our selling prices by 10% from the following month onwards”.

This is usually said in case you have an upcoming big order along with a tight lead time, therefore you don’t have alternative suppliers YET them.

“If you don’t enjoy business with us, you can always try to find someone else”.

By then you can find no concrete alternatives nevertheless the current supplier’s neighbors, to whom have already agreed to pay your existing supplier a “referral” payment for every deal they make. In reality, the products may just be shipped from your previous supplier to the fresh one, and then to you.

The inner conflict between Sales and also Procurement

Now, why is it that will despite all these painful concerns, many procurement managers may take the necessary actions to further improve the situation?

One of the reasons is very simple: while procurement makes the mistake, at times it’s the salesperson that normally takes the heat (from the customers)!

Since it is the salespeople, along with perhaps the customer service people, that happen to be facing customers’ complaints, quite a few procurement managers are just covering up behind their desks. Of course, they rationalize that if the sales team is paid the revenue and bonuses, then be sure to let them handle those customer difficulties.

If you are a salesperson caught in the best tough situations, there are 3 courses of action to take.

Only some procurement managers are self-centered people who are only concerned about their own personal convenience, at the expense of others. They just need to end up being engaged to make things far better. If you believe that your purchase colleague is such kind of particular person, then perhaps you can persuade the woman to go with you on shared customer visits. Not just the particularly nasty ones where you have on bearing the brunt of consumer complaints for defective goods, but also the good ones the location where the product was delivered in time in good quality. This is to signify to your procurement colleague the way her work will affect your sales performance. And carry out let her know that it’s not your personal commission that is at stake, is it doesn’t the company’s earnings and track record that’s on the line.

However, when your procurement colleague is indeed self-centered and believes that customer-satisfaction responsibility does not lie in having procurement, you need to take more severe measures. Perhaps you may want to date records of product anomalies, delays, shipment errors, and so forth, and then reflect on elderly management and how such situations have negatively impacted your current sales performance, and you ask for their intervention.

Measuring the particular KPIs

The Key Performance Signal (KPI) for many procurement supervisors is how much savings the particular procurement manager made for the business by squeezing to reduce buying prices. Product efficiency (or defect-reduction), maintenance, and also supplier responsiveness issues tend to be left out of these KPIs.

Still, for customized products, it is quite difficult to have a benchmark concerning comparing prices

Hence, providing the customized product is acquired at an acceptable price, th job is done. If the distributor increase prices over time, it can be accepted as part of monetary inflation, and the procurement manager does not bear responsibility.

Perhaps it is high time to re-think the way procurement managers are paid as well. Just like when forking over salespeople commission based just on sales volume is absolutely not viable anymore, measuring the potency of your procurement staff determined by products bought at lower costs is simply as inadequate.

Perhaps management should look into variable pay for procurement staff members, and measure them as outlined:
Defect-rates;

The seriousness of disorders;
On-time delivery;
Reduction involving shipment error;
Maintaining charges over time;
Timeliness of product information; etc.

It will nevertheless be the procurement managers’ prerogative to decide if they would like to help with exclusive suppliers. However, it can be a good idea that if the supplier is usually on an exclusive contract (i. e. we will only invest in them), they had better display their capabilities, AND their determination to put our interests before theirs.

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