Tendering remains a useful tool for procurement managers, though it’s effectiveness and relevance doesn’t suit every purchase situation.
In this article we’ll look at the pros and cons of using tendering to purchase labels and tags, as well as exploring the alternatives.
When is Tendering Relevant?
There is no doubt that tendering has a role to play in the purchase of standardised, commodity products where your objective is simply to deliver the best financial deal for your business. On the upside, tendering offers:
Transparency & competition: tendering can promote a level playing field for the parties involved meaning it’s seen as fair and transparent process.
Legal Requirements: public sector companies in particular have a requirement to tender. Furthermore, strict guidelines are in place to ensure money is spent efficiently and equitably.
Consolidating suppliers: Where you have a proliferation of suppliers providing you with similar products, tendering can be a useful first step towards rationalising your supplier list.
The Challenges Posed by Tendering
It may appear that labels and tags fall into the category of commodity products. However, ask any technical or operations manager and they’ll tell you a very different
story. Take traceability labels for example. The consequences of lost traceability through a torn, illegible or lost label can be very damaging. – think lost production time, costly product recall and damaged brand reputation.
Tendering may feel like the right approach for label supplies, but it can rob you of the opportunity to make improvements. In particular, the tendering process can be:
Time Consuming: the administrative burden of tendering is well documented. Moreover, the process can be slow and cumbersome; not ideal when you are looking to make quick gains
Complex: many traceability labels have complex specifications. Think about the processes your traceability label needs to withstand in your operational environment. It might need to be metal detectable for starters, it may also need to withstand freezing, damp or cooking environments – even all three!
Importantly, ensuring that each tender response it comparable and based on the same criteria can be tricky.
Stifles Innovation: perhaps the greatest reason to consider an alternative to tendering your label business is the negative impact on innovative ideas and new approaches to problem solving.
When the focus turns to price, as opposed to value, creativity is often a casualty.
Transactional Relationship: often tendering leads to focus on simply winning the bid. In contrast, building a long-term relationship is likely to lead to better results for both parties in the long-term.
The Alternatives
Collaborative and Strategic Procurement: a more collaborative approach built on long term partnership and transparency.
Where driving down label costs and driving up label performance is a shared objective, long term improvements can be achieved. Specific advantages of collaborative approach are:
- Increased innovation and creative problem solving
- Flexibility to respond to new industry innovation – like greener label substrates and thinner backing paper
- Quicker response to meeting changing market conditions
- Stronger partnerships leading to transparency and shared goals.
At Piroto, continuous improvement and innovation is at the core of our business. Furthermore, we strive to develop trusted customer relationships to deliver lasting improvements on your labels and tags. That could involve testing new, thinner label materials to help reduce your transport costs, or reducing your label size to reduce waste.
Negotiated Procurement: a negotiated approach is often suited to more complex label specifications. A typical tendering situation often misses the nuances and finer points that are important to your technical or operational manager.
Customised labels are a great example of where a multi-team negotiated approach blends your cost and performance objectives to achieve the best outcome.
Hybrid Approach: for larger companies with a wide range of label specifications it’s not uncommon to use a hybrid approach. For example, you may decide to select a tender approach for less technical label specifications and collaborate with a chosen supplier of more complex labels.
At Piroto we are known for our expertise in solving complex labelling problems. We take a personalised approach to your business needs and objectives and tailor labelling solutions to your needs.
In conclusion, businesses are increasingly exploring and adopting more flexible and efficient alternatives to tendering. This is particularly true where benefits can be gained from a more collaborative approach to procurement. The advantages of building a relationship with your label supplier and working towards shared objectives will be felt for years to come, long after a tender is forgotten about