Tweet

Measuring Buyer and Seller Performace A PI Q and A

Written by: Jon Hansen

Article Overview: Member Question: What methods are available to measure purchasing performance for both buyers and sellers? My Response: The challenges associated with quantifying (re measuring) performance extend beyond the mechanisms for capturing the data to include its timely application relative to ongoing real-world decision making. Specifically, is the current methodology capable of incorporating centrally established acquisition guidelines or parameters (i.e. price, quality, delivery performance, terms offered etc.) into front line buying decisions without negatively impacting operational capacity and performance.

Measuring Buyer and Seller Performace A PI Q and A

Member Question:

What methods are available to measure purchasing performance for both buyers and sellers?

My Response:

The challenges associated with quantifying (re measuring) performance extend beyond the mechanisms for capturing the data to include its timely application relative to ongoing real-world decision making.

Specifically, is the current methodology capable of incorporating centrally established acquisition guidelines or parameters (i.e. price, quality, delivery performance, terms offered etc.) into front line buying decisions without negatively impacting operational capacity and performance.

Leveraging one of an increasing number of web-based applications that are now becoming available through a variety of SaaS vendors, here is how it would work:

The buyer submits a request which is sent to registered suppliers via the Internet. Within a pre-determined time period, suppliers wishing to participate in the “bid” process respond online; simultaneously, the tool queries the data tables of different couriers to determine the best shipping option taking into account rates, geographic cut-off times, and past performance.

Once supplier “bids” have been received and the opportunity closed, the tool assists the buyer in selecting the best possible supplier for the requested item; this is accomplished within a matter of seconds through the utilization of advanced algorithms, which compare a supplier’s price against those of competing bidders, as well as “best value” parameters such as delivery and quality performance. (Note: with each and every purchase, the “intelligent” data base is automatically updated as part of the transactional process - no manual entry required. As a result, the data pools by which the algorithms make their recommendations are always reflective of the most current information.)

The tool then provides the buyer with a list of possible sellers, ranked in accordance with purchasing guidelines established by the company’s management. The buyer can then purchase the item(s) from the recommended supplier, or with an explanation (which is recorded and tracked), chose a lower ranked supplier. In either instance, the order is processed quickly, and in accordance with pre-defined standards. Furthermore, the tool’s web services component enable a somewhat easy integration with existing back-end ERP systems.

The sole caveat is that the process be linked to a firm understanding of the commodity characteristics of the goods that are being procured. In essence, the company has to know the characteristics (re dynamic flux or historic flat line) that define the commodities being purchased to ensure a proper technological alignment.

In part 7 of the 7 part Dangerous Supply Chain Myths Series (see article on this site), I touch on both the emergence of the Metaprise in terms of technology as well as quantifying the impact that commodity characteristics have on identifying and measuring realistic buying parameters.

I would also suggest supplemental reading on commodity characteristics as well as the impact Double Marginalization has on developing a effective supply chain practice (which of course is the whole reason behind measuring purchasing performance).

I can also provide upon request a graphical outline of past commodity characteristic analyses that were gathered and studied over a period of 14 years. This research was partially funded by the Government of Canada’s Scientific Research and Experimental Development (SR&ED) Program. Just drop me a note at procureinsights@rogers.com.

Related Articles
  The importance of choosing the right buyer when selling your business
  Seller Financing - A Benefit to Buyers and Sellers
  5 alternatives to Seller Finance when selling your business
  When selling my business - The importance of choosing the right buyer for your business
  The Sales Meeting Objective – Is It Mutually Beneficial?

Article Tags: bidders, buyers and sellers, couriers, current information, data tables, delivery performance, e price, intelligent data, measuring performance, operational capacity, performance note, performance terms, price quality, purchasing performance, quality delivery, quality performance, shipping option, timely application, transactional process, value parameters



Related Forum Posts
New Business - Hi Guys, My name is Felix Trogare. I´m a student of Philosophy at New York University. My new small Business is a Books Seller on Internet. Anybody could buy with a credit card books of any topic related with academic topics in all areas. I want to learn about strategies for made my company popular in Google. Do you have some special tips? Thanks for your help! Felix Trogare Philosopher New York jous
Re: Buy An Established Affiliate Marketing Website - Hi David and GT, thanks for posting this here. My site is going for way below value and will be a great deal for someone. The links provided are a great resource for anyone looking to buy and sell websites. The Internet is all about information and you can know what you are getting before you buy. It's a little better than days past where it was "Buyer Beware". Steve
Re: Anyone Uses Elance.com? Guru.com? Rentacoder.com? - I've had quite a bit of success on oDesk.com. I've never used Elance so I can't compare. I like oDesk.com 'cos I get to sort thru people (e.g. within a certain bid range) with a single click. I find their help response very quick and I like the oDesk Team software that "providers" must install. This gives me the Buyer more insight as to what I am paying for. The Team software takes screenshots of the Providers screen on 10 min increments so I can see that the person is infact doing work for me.
How do you set a value on a business? - Hello there! I have a friend that's looking to sell their business. I would like to know how a business gets valued. Can someone help me here? Here's some fairlyaccurate numbers: Gross sales: $153,000 (3 year avg) Income: $75,000 (3 year avg) I've heard that there's a ratio that can determine the value. Does anybody know what it is? The buyer wants to see P&L's. Is their some type of disclosure agreement that protects the seller... How is this typically done? After all, the buyer is a competitor... Buyer has suggested deposit, then pmt plans. I'm under the impression that this is common practice in the sale of a business. If so, what's the best way to approach this proposition as a seller? Thanks in advance for your feedback!


Share this article with your friends. Fund someone's dream.

Leave a comment below or share on the left and you'll help support entrepreneurs in Africa through our partnership with Kiva. Over $50,000 raised and counting - Please keep sharing! Learn more.

Tweet

Newsletter

Get advice & tips from famous business
owners, new articles by entrepreneur
experts, my latest website updates, &
special sneak peaks at what's to come!

Name:
Email:

Popular Articles

Four Reasons Why Entrepreneurs Should Blog

What Type of Business Should I Start?

Good News Travels Fast

Suggestions

Email us your ideas on how to make our
website more valuable! Thank you Sharon
from Toronto Salsa Lessons / Classes for
your suggestions to make the newsletter
look like the website and profile younger
entrepreneurs like Jennifer Lopez.