Creating supplier profiles is the best way to save time when preparing for supplier negotiations. They are a great way to help procurement and supply chain management teams understand their vendors and establish where they stand with them.
With the right information, procurement professionals can quickly assess suppliers’ strengths and weaknesses, their own procurement objectives, and the obstacles that stand in the way of achieving those objectives. And they can then use all this to strengthen their negotiating position.
For instance, understanding a vendor’s cost structure can help Procurement identify areas where it might be able to secure a price reduction — as well as places where it’s not possible, so it’s not worth trying.
Also, finding out about direct competitors can help those making a purchase compare a vendor’s offerings to what they could get if they were to switch, or help them recognize if their current supplier offers a competitive advantage they can’t get elsewhere.
Chart 1 lists what sort of information the procurement process team should gather. While the specific details those negotiating need will vary from vendor to vendor, the critical information topics listed in blue below are the most important: Procurement needs these details for most suppliers. The function can collect information on the market a specific supplier operates in, the supplier’s customers, and the suppliers’ competitors externally; Procurement can use its own internal analysis for details on the vendor’s products and the vendor company itself.
The procurement teams should use a template to organize and catalog this information. This will help the function understand what its findings mean so it can put them to use. Once the profile is complete, the team should update it regularly. Using out-of-date information can trip-up the best negotiation, and cause the team to miss new opportunities for cost savings or negotiating a better product or service.
For business partners who are managing their own buying process, it’s easy for Procurement to give them a completed profile and so help support better negotiations across the company.
Chart 1: Types of information to gather for a supplier profile Source: CEB analysis
Click chart to expand