Read The Case Of Fetim Group
Robert Le Loux, CPO
The main reason for us to start using WTP was because we found it challenging to reach a sufficient margin. Furthermore, the traditional way of negotiating was no longer effective. The lack of well-presented and accurate data is a big disadvantage during negotiations. All of these issues are solved by using WTP.
What I didn’t look forward to was how the bill of materials would be expanded and if this expansion would achieve the desired result. Additionally I also kept in mind the resistance some buyers would have against a new way of purchasing. Several buyers have a long history at the company and were not as willing to alter the standard way of buying. Even though many of them realise the current way isn’t working, they’ll attribute that to factors outside of their sphere of influence.
Since I’ve started using the WTP software I’ve gained many insights into the separate sectors and the correct pricing within them. It has given me a huge advantage during negotiations with suppliers. Due to WTP we now focus on the cost price instead of the purchasing price. The insights give you a lot of authority and provide a different dimension to the negotiations. The suppliers can no longer get away with the way they currently conduct business by overcharging their customers. Once again, it’s been proven that knowledge is power.
In practice, I have gained a lot of positive experiences using WTP in just a brief amount of time. The first was with a floating shelf. The seller could not explain why I had to pay a lot more than the calculated cost price. Based on this they eventually lowered the price.
Another supplier announced they were raising their prices and they provided fact based arguments for everything they were raising the price of. I could however present all raw materials and exchange rate changes on a single sheet and by doing so I totally invalidated their analysis. This led to a large saving as the price increase was no longer valid according to their arguments.
The insight into EBIT and the influences of the fx-rate give a significant amount of negotiating power. The supplier cannot or is unwilling to explain why I should pay a lot more than the calculated cost price. Based on this the suppliers would eventually lower the original price.
Finally, I can help Sales substantiate any price increases for their customers. A clear overview in a graph about price mutations is very powerful and leads to conclusions you can barely argue against.
Every buyer (apart from our customers…) should work with WTP. It provides lots of insight whilst remaining extremely clear. I can use the graphs which are of importance to me whilst showcasing the periods that are relevant. The best thing is that everything is updated on a monthly basis and I always have the most up-to-date overviews at my disposal. Once a product has been entered everything happens automatically and during talks you can make use of the prints. The selection per vendor and the possibility to make prints of all aspects make WTP a really valuable tool. Which, just like all KPI’s, should become a standard to be used during all supplier negotiations.
Making a bill of materials is a fairly large task, but it gives you a huge sense of satisfaction once it’s been completed and the results are visible. We now have 1.762 products available in WTP! It also provides you with a lot of insight into the composition of an article and it makes it easier to manage a larger proportion of articles and groups of articles. I can most definitely recommend WTP. It is not a trick, it’s a new way to work, and that is cultivating into a cultural shift within the purchasing organization.
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