On Bids

bidEvery so often a bid lands on my desk. It’s either a current customer seeking lower prices or a prospect looking to see if we’ll compete for their business. Whatever the case, it usually means someone asking for bottom dollar, or close. No other qualifications matter. Such exercises drive me nuts.  Any company can find someone desperate or dumb enough to buy business.  Even we’ve been guilty of such stupidity, always discovering it doesn’t pay.  Some customers can’t help themselves.  Supplier madness is just too tempting.

Sometimes we run into a company that takes an entirely different approach. They work to find a way to create a win-win. I know that sounds cliched,  but it does happen. It requires hard work on both sides, a willingness to find creative ways to cut costs or limit price increases.  The process works because it cements partnerships that lead us to bring new ideas to them first and help them through hard times when needed.

Two or three times this year customers took this approach. They stated up front that they value what we bring to them, usually quality and new technology. Another appreciated our willingness to extend terms when they ran into a financial blip. Each wanted to trim cost, but they wanted to understand what we needed as well.  They didn’t want to disrupt a supplier relationship that worked, and valued that over the lowest price.

The approaches varied. One customer sat down with us and reviewed their packaging cost drivers. Plastic resin is one, but they understand we have little control over price movements pounded through by oligopolists like  Dow Chemical and Exxon Mobil.  However, this customer had an obvious way to reduce their prices. They used several different packaging sizes for the same item, an old practice that wasn’t required anymore.  Multiple bags meant we had to run smaller batches, which lead to higher prices. Together we worked to rationalize their bag sizes, taking four down to two, which allowed us to produce larger orders and reduce their prices.

Another customer took an entirely different approach. When they did their biannual bid we sat down and talked over their current prices. We contended they needed to go up, thanks to low prices exacted on prior bids and our need to cover cost increases in other parts of our business, like health care. We’ve done business with this company for many years and they appreciate the new ideas we bring to the table, and the consistency with which we meet their specifications. So they listened. In the end we compromised. We still provided highly competitive pricing, but we got enough bump to help. We kept most of our business.

On the opposite end of the spectrum there’s a company that bids their business every two years. They send a multi-page questionnaire asking about our technical ability, financial stability and willingness to help them develop new products. I spend hours answering the questions believing for some reason that even if we are not the lowest price, our service orientation and our engineering prowess will win the day. It never does.  The buyer awards the business to the lowest price, and my impassioned pitch goes to waste. Someday I won’t accept their invitation to bid.

Our company takes a holistic approach.  We do check resin prices rigorously, but award most of our business to the company that has delivered consistently good product. We work with our ink company to find ways to reduce cost, but we don’t toss them if someone shoots in a lower price trying to buy our business.  That doesn’t mean we never cut lose a supplier. Currently we have one on the way out. They didn’t deliver, rarely reduced cost and never brought new ideas.  So why be loyal?

Bid can cut prices. But they guarantee nothing when it comes to quality or service or willingness to work with a customer to reduce total cost.  Bids won’t reveal if a supplier will work with you when you run into trouble, as most companies do at some point. I know those companies that have gotten us where we are remain the ones which will drive us into the future. We hitch our wagon to them. We appreciate and value and help those customers that do the same.

6 thoughts on “On Bids

  1. Greg Golin says:

    Great !

  2. Julie Miller says:

    No truer words ever spoken. Very consise!

  3. Caroline Langley says:

    As we call it in the legal world “a race to the bottom”. Great article Kevin.

  4. Kurt says:

    Great summary of your experiences Kevin.

  5. Travis says:

    Well put Kevin!

  6. Anonymous says:

    Love it

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