Most businesses believe they are getting the best prices from their suppliers without really knowing how their procurement fares against other competitors. Keeping track of what you are paying for a particular product, at a particular point in time and whether this price is a competitive one, is no easy feat to manage.
This is where the practise of price benchmarking becomes a fundamental activity within the procurement process.
Price benchmarking in its simplest form is comparing the prices you pay for products with that of other supplier companies on a like for like basis. Whether it’s a one-off price comparison at a point in time or an ongoing exercise over regular intervals – the process is one that will allow the purchasing team to make more informed and better purchasing decisions.
Price benchmarking is no easy feat. Keeping up with e-commerce environments that are in constant flux, tracking the forever changing supplier catalogues or using dynamic product pricing is a challenging proposition. Comparing what you pay for goods and services to your major competitors is nigh impossible with few businesses being transparent on what they are actually paying.
Understanding if you are getting a competitive price is time consuming and requires a fair deal of effort. You could partake in:
- Individually contacting different suppliers and making comparisons on their offerings
- Searching online for individual products
- Tendering through a lengthy request for proposal process
- Ringing contacts in other industries to see what they pay
With the constant pursuit for companies to gain a competitive advantage, it is easy to understand why most companies choose to allocate resources to less laborious tasks. However, this blissful ignorance can be damaging to business success. Paying incrementally too much for a certain product, can year on year add up to be a very costly oversight. Thirty years ago, American Airlines discovered that by eliminating just one olive from each passenger’s plate would reduce costs by $40,000 per year. The compound effect of such a small saving should not be underestimated, even for an arbitrary garnish.
How can businesses overcome the challenges of benchmarking in a business world where time is so valuable, and knowledge is power?
The first solution is to engage a Procure-To-Pay (P2P) platform, that has pre-loaded content at a discounted price. These platforms have negotiated on behalf of their aggregated user base and through the purchasing power of this larger base, deliver discounts that could not be achieved through individual negotiation.
think Procurement is one such platform that utilises this purchasing power for its uses. think has released an ‘everyday’ purchasing platform for all Australian businesses that will allow the user to gain access to a range of everyday consumable products (e.g. stationery, printing, cleaning, safety products) all pre-negotiated at the best price. This consolidated approach allows think to attract suppliers to its platform who are willing to provide these everyday consumables at the best price possible. The user experience is enhanced by having access to a number of supplier catalogues in the one intuitive platform. The purchase order can cover a range of products and suppliers and the platform automates the invoicing and reconciliation process.
Ultimately the user can feel safe knowing that these prices have been negotiated on behalf of the larger group (buying like the big guys) rather than having to go to a range of specific suppliers and attempting to negotiate an individual deal.
The second answer lies in competitive intelligent tools. These tools allow for companies to quickly compare other market offerings and expose price variances from different suppliers to ensure they are getting the best price. Such technology has been implemented by think procurement.
think’s automated benchmarking solutions continually scans the market, benchmarking pricing to ensure savings are delivered to its customers.
Overall, think’s platform ensures all businesses can achieve:
- Peace of mind that you are getting a good price
- Real time feedback about market prices
- Free up time that would be spend in sourcing and negotiation
In order to be successful a business needs to be responsive to market changes, this applies to shifts in market prices. Pre-negotiated content and competitive intelligent tools are two ways to effectively price benchmark and achieve an advantage over market rivals.
If you would like think Procurement to undergo a free price benchmarking activity for your business, register your details here.