Last week I moderated a webinar on the subject “Sourcing in a Downturn”. The webinar was presented by Christer Hallqvist and Björn Stenecker, two of IBX senior managers, sharing more than 30 years of purchasing experience between them. In the 45 minute webinar (webinar and presentation can be downloaded here) Christer and Björn shared their insight into how one can make the most of sourcing in the current downturn utilizing a matrix framework to structure and identify categories with high savings potential.
In addition to the downturn matrix, one of the key take aways from the presentation was the fact that one can exploit the existence of the correlation of a suppliers bidding behavior considering the industry cost structure (in which the supplier is active).
By being able to predict supplier bidding behavior; buyers can amplify the effect by clearly communicating the award strategy. As Christer Hallqvist eloquently put it while presenting the different behaviors:
You may be surprised to learn how important this really is and it could either boost or weaken the dynamics significantly. As a general rule of thumb, the more clear communication strategy you impose e.g. Winner takes it all, Single Source etc. the higher is the likelihood for a Price reduction behavior. If expressed more softly such as “we will select the top 3 suppliers” or “price is only one consideration in our evaluation”, you will probably see a Price Compression behavior.
