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Public Procurement in Difficult Markets

Sep 14, 2017

In the wake of political uncertainty, rising commodity costs, and increasing global trade, public procurement operates in varying purchase environments. While entering emerging or difficult markets, organizations can gain market knowledge and understand the competitive landscape by leveraging public procurement intelligence that will help themSE_Demo2 negotiate better with suppliers. Before initializing the negotiation process with potential suppliers, awareness of the market’s buyer power score can help in planning and adjusting the public procurement strategy to help identify cost savings opportunities. By leveraging procurement intelligence and supply market intelligence services, organizations can analyze various markets and competitor pricing strategies to develop strategies and tactics to improve spend efficiency.

Long Term Contracts Eliminate Pricing Woes

In public procurement, long-term contracts are the only solution that can eliminate pricing woes. How you ask? The sudden surge in input material costs leads to a rise in the sales prices as the raw materials constitute a large portion of the supplier’s total expense. In this case, buyers can negotiate the contract terms and seek out long-term contracts with the suppliers to ensure set rates over the period of the contract to avoid paying a hefty price.

Lack of Competition in Supplier Market Results in Low Buyer Power

Usually, in difficult markets, there are suppliers that control the majority of the market shares.  This gives them more power to dictate the market conditions due to the absence of competitors in the market. Buyers can evade premium charges and high price quotes by renegotiating prices for long-term contracts and seeking out small-scale suppliers to fulfill their product requirements.

Public Procurement – Product and Service Bundling

Often, buyers cannot opt for small-scale suppliers or product substitutes to negotiate prices due to regulatory compliance and lack of substitute options. In certain industries, such as construction and manufacturing, buyers are bound by legal frameworks to purchase from accredited providers, preferred vendors, and substantiated suppliers. In difficult markets, buyers can negotiate terms with the suppliers and ask them to bundle products with services to seek volume discounts.

In today’s competitive and dynamic environment, public procurement professionals must adapt to the changing trends, especially while devising new market entry strategies for operating in difficult markets. By leveraging supply market intelligence, buyers can uplift their public procurement plan, make effective purchase decisions, enhance their negotiation skills, and minimize costs.

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