GFC has toughened up selection process for suppliers: Report
Tuesday, May 22, 2012/
Almost 100% of local businesses take a more rigorous approach to selecting suppliers as a result of the financial crunch, new research shows, suggesting the rules of engagement have changed.
The report – Major Commercial Buying Decisions – What’s changed since the Global Financial Crisis – is based on a survey of 3,000 local businesses, conducted by global consultancy rogenSi.
According to the survey, 92% of businesses say the financial crunch has led to a far more rigorous approach to selecting suppliers, changing the way organisations pitch and win business.
“Fear of wasting money by making a bad decision has become an overwhelming driver in the decision-making process,” rogenSi director Neil Flett says.
“[This] means we’re seeing creativity being compromised in favour of reliability and rigour.”
Not surprisingly, the study shows more than half (58%) of respondents agree the global financial crisis has radically altered the decision-making process.
Key impacts of the bidding process include lower budgets (56%), heightened risk avoidance (23%), less volume and frequency (14%) and longer processes (7%).
“Not only is a more rigorous process being applied, but control is getting tighter, criteria are getting tougher and processes more arduous,” Flett says.
“The challenge is no longer winning the business – it’s getting on the shortlist.”
Interestingly, almost 38% of respondents cited “understanding my business” as the single most important influence with regard to commercial buying decisions, compared to 32% back in 2008.
Meanwhile, chemistry with the bidder has fallen in importance from 23% in 2008 to 13% now.
According to Flett, the rules of engagement have changed, so start-ups need to take note.
“These figures signal the emergence of a more sophisticated pitching process, with the emphasis now placed on the ‘right solution’ rather than relationships and politics,” he says.
“Gone are the days when a game of golf might, on its own, be enough to seal a multimillion dollar deal.”
The survey also highlights a greater emphasis on sorting bidders out at the proposal stage, which is particularly important for start-ups looking to secure work.
For example, 77% of respondents believe written proposals and bidding documents have grown in importance, while 26% now claim the written proposal outweighs the presentation.
“We’re seeing a significant shift towards more formal processes, a demand for quality and value in addition to scrutiny of costs. The bar has been raised, and raised significantly,” Flett warns.
“What were once considered bid-winning tactics and strategies are now just entry tickets to the game.”
“If selected to play, that’s when the real fun begins. Bidders can then move beyond rational appeals with a heavy dose of inspiration and emotion to close the deal.”
“Winning pitches is not just about finding solutions – it’s looking at your own resources and asking smart questions.”