Identifying a Middle Ground Between Global Agreements While Satisfying Needs on a Local Level

May 10, 2016 Adina Malearov

Tender Global, Implement Local

In an era of globalization, large international companies contribute to expanding this trend by using other large global suppliers to fulfill their need for products or services. It is all part of a vicious circle that takes skill, knowledge and sometimes courage to escape. The good news is that many experienced, global purchasers in multinational companies still believe that selecting suppliers should go beyond savings percentages and focus on local offer and demand. In this article, we will try to identify a middle ground between having global agreements while satisfying the products and service needs on a local level; we will focus on indirect spend such as facility management, marketing, HR, services.

Running a global tender in a nutshell

There are many challenges – as well as benefits in running a global tender for the same spend category. Having a higher spend can attract many interested suppliers, generate better discounts and can save purchasers plenty of time and energy. On the other hand, experience tells us that global contracts, regardless of category, are difficult to implement. Every region, country or continent has its strong players. What works best for one location may not fit another, even within the same country.

Creating awarding scenarios to get the bigger picture

In a recent tender for training services, one of our large customers ran a European tender for 5 countries – in which all local purchasers invited their list of large and small training providers. We created 3 different awarding scenarios:

1) Single European supplier – this option was not feasible, since no single supplier was able to fulfill the conditions and pricing requirements for all locations

2) Single supplier per country – the ideal scenario, since it would generate the highest amount of savings and in theory guaranteed the same level of service throughout all involved locations; however, this scenario was not well digested by most local purchasers

3) Different local suppliers per location – although it did not bring the highest savings overall, some locations had strong arguments why local providers should be preferred to national or European suppliers

The final decision was a balanced one – in which 3 out of 5 countries decided to implement one large multinational supplier per country – while in the other 2 countries the local purchasers decided to award small local companies that offered original training solutions. 

Why global suppliers are not always the best choice

Due to significant differences in rules and legislation and the dependence on a network of people, most suppliers operate on a national or even local level. Most countries have their own market leaders and depending on the category, few brands can manage a complexpresence and be the best in multiple marketplaces. Although multinational brands are smart enough to adapt to local demands, the local needs can be better understood and fulfilled by a local supplier. From another perspective, working only with global suppliers and contracts will take away any decision power from your local purchasers, creating a lot of discontent among your employees.

The power of small businesses

Small businesses understand that innovation is the only way that they can gain market advantage in order to survive in a competitive world. Small business owners are usually driven by passion and personal interest and they will strive to promote their ideas or products to large companies in order to achieve success. Things are done quickly because managers can reach to their operations and skip hierarchies or approval flows – impediments that make changes difficult in larger business environments. By working with small local companies, you can prototype ideas and experiment with new services in a rapid manner. This high-speed market process makes small businesses very powerful.

Creating a win-win situation

Large companies can benefit from small businesses and be the first to use and promote an innovative product or service. At the same time, small companies will grow their sales and get the deserved publicity, opening the way to new potential business. Both parties get an equal share of the success. From a tendering perspective, running a global tender will offer a broad view of how much your organization is spending on a certain category and what are the differences in cost components, structure and quality in various locations, countries or regions. Global tenders should not always target a leverage of your supplier base; they are also a good opportunity to discover new providers and solutions and leverage contractual terms with different suppliers.

The savings dilemma

Trusting your business to a small and young supplier can be compared to hiring a graduate student for one of your senior positions. Quite risky at a first glance, but the energy and dedication of a young work force can push your business in the right direction faster and better than someone that seems to know it all. Once the focus shifts from savings percentages and long lists of references, you may find that there is plenty of potential out there ready to be explored.

How to take a balanced decision

The idea of putting all of your eggs in one basket is never a balanced decision, but you can make sure all baskets look the same. In concrete terms, you can make sure that any supplier, small or large, local or global, can comply with the same terms and conditions of purchase, delivery terms, cancellation policies, pricing model or quality standards.Create global frame agreements that can be applied on a local level, as well as on a regional, country or global level. Involve your local purchasers and give the opportunity to choose the best solution for their location.

The idea of “think global, act local” has been widely explored and discussed in various aspects of modern business and economy. With our international experience in managing tenders of different sizes and scope, at Elemica we can analyze your spend category and provide you with a choice of awarding decisions for your project that would bring the optimal results for your company.

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