You go to two different grocery stores – Store A and Store B.
Which product do you buy?
Store A
Store B
Beyond price, which one of the two provides the best value?
Now, how would you respond if you were told that you could only buy from Store B because they are a preferred store?
Vendor Irrationalization
Before answering that question, read the following excerpt from an April 2009 paper, “Utilizing an Intelligent Filtering Platform to Enhance Contract Performance (A Procurement Insights Knowledge Leadership Publication).”
“A 2004 automotive study by the Power Transmission Distributors Association (PTDA) found that of the 45 percent of their membership’s U.S.-based customers who have contracted vendors, 33 percent of all purchases were from non-contract suppliers. In Canada, the number of off-contract purchasing reached a staggering 79 percent.”
Why were 33 percent and 79 percent of all purchases off-contract – otherwise known as maverick spending?
The answer – Vendor Rationalization
So, given the above, when does vendor rationalization make sense in 2024?
30
Procurement Insights
A visual illustration of vendor rationalization
Posted on April 21, 2024
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You go to two different grocery stores – Store A and Store B.
Which product do you buy?
Store A
Store B
Beyond price, which one of the two provides the best value?
Now, how would you respond if you were told that you could only buy from Store B because they are a preferred store?
Vendor Irrationalization
Before answering that question, read the following excerpt from an April 2009 paper, “Utilizing an Intelligent Filtering Platform to Enhance Contract Performance (A Procurement Insights Knowledge Leadership Publication).”
“A 2004 automotive study by the Power Transmission Distributors Association (PTDA) found that of the 45 percent of their membership’s U.S.-based customers who have contracted vendors, 33 percent of all purchases were from non-contract suppliers. In Canada, the number of off-contract purchasing reached a staggering 79 percent.”
Why were 33 percent and 79 percent of all purchases off-contract – otherwise known as maverick spending?
The answer – Vendor Rationalization
So, given the above, when does vendor rationalization make sense in 2024?
30
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