In the last month I’ve heard 2 buying trends from a half dozen service contractors around the country.
These trends aren’t from a statistical survey, but from anecdotal evidence (which means people told me). I love that term: anecdotal evidence. First heard it in grad school. I toss it in to make business gossip seem academic and important. You ought to try it next time you get the chance.
Here are the trends, and they’re probably no surprise.
#1 – Procurement is Playing a Bigger Role
In the past procurement acted more as a gatekeeper. Now procurement is the primary decision maker selecting service contractors. Facility or departmental managers used to have that position. Not as much now.
This changes the way contractors must communicate value, position against competitors and sell their services.
BEEN THERE, USED THEM
When facility or departmental managers had decision clout they brought expert knowledge to that contract service. Hopefully, anyway.
This was important because experienced customers could distinguish between high quality and low cost service providers. And they’re opinions counted when important services where being contracted.
That’s changed. To some degree.
BATTEN DOWN THE HATCHES
Procurement’s increased power may come from a recession-frightened economy. Companies are squeezing more profit from existing business because they’re not sure how fast new business will come on.
That puts the emphasis on procurement to wrestle lower costs from suppliers. Contract services included.
CONTRACTORS’ CONCERNS
From the contractor’s perspective procurements’ bigger role comes with a number of concerns, such as:
- Price sensitive – focus on purchase only, misses the total cost over contract’s life
- Qualitative service not valued equally against low costs in bid evaluations
- Less understanding of service – doesn’t live with daily repercussions from selections
- Commodity mind set – reverse auction friendly, if it’s a commodity, why not?
- Want to believe low cost providers equal to high quality services – easily fits procurement’s immediate goals
- Less chance to sell to procurement – relationships are less important
#2 – Procurement Staff Churn Rate
Procurement suffers turnover like any other management position. Contractors are seeing more churn here than in recent years.
This means less experienced, new comers are in positions of increasing decision-making authority. And many without the business experience the position demands.
CONTRACTORS’ CONCERNS
Contractor concerns regarding these less experienced procurement managers include:
- Don’t understand the service they’re contracting out
- Unable to differentiate purchasing subtleties between services & products
- Hesitant to use contractors as learning resources – fear perceptions of favoritism
- Low job security means decisions fall heavily on low price – hard to get fired for spending less
- Low place on organizational totem pole tends to avoid choosing innovative contractors or services
What trends are you seeing in the buying of contract services?
image by: Thomas Hawk
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Chris Arlen
President, Service Performance
Technorati: procurement, contractor selection, purchasing service contracts
