Tough Sell

It’s a new trend and it looks like it’s here to stay: Companies are adopting disciplined procurement methods that may make it more of a challenge to sell to them. Here are two telltale signs: detailed requests for product information and notifications of deadlines from prospective buyers. “Customers are taking charge and defining what they want supplied,” says Frank McGinnis, vice president of consumer industries practice for A.T. Kearney, a Chicago management consulting firm.

According to Kearney statistics, 28 percent of Fortune 1000 companies have developed disciplined procurement methods for all external purchases or selected product categories over the past three years, and 40 percent will have developed them by the year 2000. The goal is to minimize expenses, improve quality and decrease the number of suppliers used. Is this good or bad news? Well, both.

While it may be bad news for salespeople who are learning that selling strategies from the 1970s and ’80s won’t work anymore, it’s good news for salespeople who are able to make the transition to the new buying process. This new process, McGinnis says, has become “scientific,” with a series of standardized procedures overseen by procurement teams. The teams comprise individuals from a variety of departments, from financial and marketing to the technical users of the products, and they typically spend two to six months analyzing the market for the categories they will purchase. When the analyses are complete, such teams are so well informed “they understand the market better than most salespeople. They’re also trained in negotiation skills so it can put sales at a disadvantage,” McGinnis says.

The teams issue formal documents that suppliers must complete to win the business, including requests for information (RFIs) and requests for proposals (RFPs). RFIs, issued first, ask for general product information and RFPs ask for specific information about an actual purchase, from price and additional services to terms for delivery and repair procedures. Companies issue deadlines for when suppliers must return RFIs and RFPs.

The documents enable the companies to “take control of the whole purchasing process,” McGinnis says, describing the products they want and the prices they’ll pay and eliminating the suppliers who can’t match product specifications or meet the price. They also eliminate the need for sales presentations, since products aren’t presented in person but described in the responses to the RFIs.

Disciplined procurement methods change the buyer-seller relationship in a number of ways. The use of RFIs and RFPs formalizes the process and removes the personal element from it. “In the old days, sales developed personal relationships with procurement people, but today they are no longer selling to an individual but to a team of people who may have a committee overseeing them, making the sale much more difficult,” McGinnis says.

While one goal of disciplined procurement is to get the best price, of course, another is to improve the quality of purchased products. Jim Morgan, editorial director of Purchasing magazine, says the buying operations of large companies are “changing the ground rules for new product development.” He says companies that want to buy fewer products to do the same work are influencing the way suppliers design and manufacture new products. He notes that the resulting standardization of products also tends to freeze some salespeople out of the market.

Another goal of disciplined procurement is to limit the number of suppliers because it is easier and more economical to work with fewer suppliers. And in an era of downsizing, fewer is always better. “Cumulative transactions with a smaller number of suppliers and long-term agreements instead of purchase orders” are the trend, Morgan explains.

Lisa McCarty, manager of transportation practice for A.T. Kearney, says that between 1992 and 1995 the number of suppliers for a typical Fortune 1,000 company dropped 23 percent and by the year 2000 the number will decrease by an additional 39 percent.

This drop increases competition among sellers and threatens to freeze them out of major accounts, but it also enables the winners to win big. “With the suppliers narrowed down, the winners could get double or triple the business,” McGinnis says. But he warns that losers will be stuck with nothing and locked out of the account for two to three years, which is the length of most contracts these days.

How can sales meet the demands of the new purchasing methods? “One trick is to understand when companies are using the new systems,” McGinnis says, noting that requests for information and notifications of deadlines are two probable signs. Then, salespeople must “reply to the requests and demonstrate value in a more sophisticated way.”

Morgan says the new procurement methods demand thoroughness and follow up, a greater knowledge of the market, better preparation for sales calls and diplomacy in dealing with procurement departments. While these are skills all salespeople should have, they are even more important now that buyers have gained the upper hand with the new procurement methods.

The new methods were started in private industry by General Motors about 10 years ago, McGinnis says, and have been picked up by many other major companies since, including Bristol- Myers Squibb. If these are the companies you are selling to, you’d better be prepared for the new selling environment in which buyers are calling the shots and issuing stringent demands all sellers must meet.