Negotiation Excellence: How Holistic Supplier Evaluation Delivers Big Wins

In today’s fast-paced procurement landscape, choosing the right supplier isn’t just about getting the lowest price. A successful strategy requires evaluating the entire value a supplier brings to the table—from pricing and quality to sustainability and location. This is where holistic business case evaluation comes in, offering a comprehensive view of all commercial and non-commercial factors—sometimes known as TCO (Total Cost of Ownership) or TVO (Total Value of Ownership). With the added power of Bonus/Malus, it can all be captured in a single, actionable number, helping companies make both quick and smart decisions.

Leveling the Playing Field: Like-for-Like Supplier Comparison

Holistic business case evaluation allows procurement teams to put suppliers on equal footing, even when their offers appear to differ significantly at first glance.

Equalizing Every Quote: By factoring in all variables—from costs to product quality to sustainability—companies can see who truly delivers the best value for the business.
Streamlining Supply Chains: Beyond individual supplier selection, it helps spot potential substitutes and harmonize supply base across regions and business units.

Bringing to the Next Level: Monetization of Differences with Bonus/Malus

The Bonus/Malus approach enhances the holistic supplier evaluation by converting all differences across suppliers into monetary values and creating a simple, common metric.

Bonus Explained: A Bonus captures supplier’s strong areas like higher product quality or longer warranties and improves—artificially decreases—the quoted business case.
Malus Explained: A Malus reflects areas where the supplier may fall short like failing to meet environmental targets and worsens—increases—the quoted business case.

Setting the Stage for Stronger Negotiations: Fact-Based Decisions

Investment into thorough, holistic evaluation of suppliers before negotiations begin arms procurement teams with fact-based insights and compels them to objective decision-making.

Bringing Everyone to the Table: Accounting for needs and requirements of all relevant stakeholders—from procurement to engineering to finance—and applying clear, data-driven reasoning foster the invaluable collaboration like nothing else.
Empowering Suppliers with Data: Providing suppliers with a clear understanding of where they stand and what they can do to improve leads to value-driven negotiations.

Negotiating with Confidence: Agility of Decision-Making

With a holistic view of suppliers at hand and especially when applying the Bonus/Malus approach, procurement teams can make not only informed but also quick decisions.

Benefiting from Fast Decisions: In negotiations, opportunities can come and go in a blink of an eye, making the ability to decide on the spot invaluable for success.
Leveraging Competitive Pressure: Monetization of supplier characteristics enables negotiation approaches with open competition like auctions on strategic commodities and in the end leads to greater savings where it counts the most.

Seeing Success in Auction: Procurement of Production Vehicles

KGM Strategy has recently partnered with a global aluminum producer to streamline their procurement of customized production vehicles across three facilities in different regions. Their procurement process was bogged down by misaligned sourcing efforts and decision-making dominated by technical teams, leaving commercial considerations on a sideline.

Application of a holistic supplier evaluation, including Bonus/Malus, enabled us to:

Align our client’s procurement strategy across all sites,
Empower their cross-functional teams to make data-driven decisions,
Achieve over 10% savings and enhance the technical solutions at the same time.

Conclusion: Blueprint for Future-Ready Supplier Negotiations

By adopting the holistic business case evaluation—together with the Bonus/Malus approach—companies can revolutionize their procurement processes. It provides the clarity, objectivity, and speed needed to make smarter supplier choices, fostering cross-functional collaboration and leading to value-driven negotiations and significant cost savings.

Investing the time and resources into such an approach pays off both financially and strategically and will help your company stay ahead in the competitive world of procurement!

Get to know our negotiation expert

Dr. Daria Khromenkova

Senior Project Manager

daria.khromenkova@kgmstrategy.com Contatto

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