Strategic Sourcing

Strategic Sourcing

Sourcing: 4 Ways to Slice Buying Results for Facility Services

Sometimes “you can’t see the forest for the trees” when you’re walking into the woods, but if you get in a plane and fly above it, your broader view gives you a greater perspective and understanding of not only the forest, but the surrounding landscape as well.

Your RFP process is designed to help you buy smart — to help you make a good decision, but how often do you fly up to 30,000 feet to get a global perspective of the value that your RFP process is delivering.

Here are four ways to fly above it all and get a higher view of your RFP results.

Plot your RFP on the Buying Matrix

The Buying Matrix helps elevate your perspective so that you can view your process at a higher level. Buying objectives found in RFP’s often fight between two prime objectives: Cost Reduction and Value. If you combine those two, you get the buying matrix. According to the Buying Matrix, purchasing results will fall into one of four possible quadrants:

  1. High cost, low value
  2. Low cost, low value
  3. High Cost, High Value
  4. Low Cost, High value

Quadrant 1: “Oops, I made a Mistake”

If your RFP results are in Quadrant 1 you’re in trouble. Let’s just say the buyer whose results land here earns the dunce hat, and should sit in the corner! Seriously, Quadrant 1 is a RFP result that no professional buyer would pursue. Who wants to pay a lot for the lowest value, right? However, many buyers do pursue (unintentionally) Quadrant 2, which can eventually turn into Quadrant 1 if the soft costs begin to turn to hard cost. For example, say contractor cuts training for their fire suppression inspectors to meet a new low price, and the inspector accidently sets off your fire suppression system. Yes, you could recover cost by charging the contractor, but what if you are a multi-tenant facility and you lose tenants due to the mistake?

Quadrant 2: Stuck and can’t get out.

Quadrant 2 is where I believe the current facility service RFP process most often lands. Buyers achieve low cost, but also low value (Look for my future post entitled, “The RFP Process is Broken”).  Quadrant 2 exists because of an artificial commoditization of services. Service is inherently responsive, individualistic and steeped in value when truly provided. Yet the current RFP process commoditizes facility services –reducing the service to the single factor of price while assuming all other factors are commonplace, ignoring differences like intensity of personal care. If you have ever experienced great service, you recognize it is anything but common.

As a price drops, there is a clandestine squeezing of value out of the deal. Nobody in the room wants to talk about what is really happening. Buyers think they are getting a better deal, and contractors want the business. What nobody is talking about is that there is a point of diminishing returns in strategic sourcing—that point is when hard costs go down (janitorial costs), but soft costs go up (i.e. time spent managing janitorial, less responsiveness to emergencies, less proactive); then short-term costs go down (monthly janitorial price), but long-term capital project costs go up (i.e. early carpet replacement).

Quadrant 3: You’re so popular!

Quadrant 3 is for buyers who value prestige. You see this in products all of the time—Rolex’s, Mercedes etc… For services, examples include executive catering, sports and entertainment agencies etc… Quadrant 3 buying, usually by nature of the prestige or brand, excludes aggregated buying. The buying behavior is highly individualistic.

Quadrant 4: I’ve hit the Sweet Spot

The sweet spot for every buyer is Quadrant 4: Low cost, high value — “the best bang for your buck”. In quadrant 4, you have reduced cost and maximized value. The significance is the value part of the equation. Value is quality; value is peace of mind; value is quick responsiveness to your needs by being there when you really need it; value is flexibility according to your business situation; value is cost reduction without sacrificing quality; value is time to pursue the core business otherwise distracted by the fall-out of bad service.

Without value, you risk trading hard costs for soft costs and short-term cost for long-term cost. For example, take janitorial services. If costs are lowered to the extent that insufficient supervision and training are provided in the service, then facility managers will have to trade a hard cost reduction (lower janitorial price) for an increase in soft cost (escalated time spent by the facility manager dealing with complaints and responding to disruption in service).

The tradeoff between short-term and long-term cost is also significant. Here are just two examples:

  • Reducing your preventative maintenance costs can lead to higher capital costs as components and complete systems break down over time due to poor maintenance.
  • Reducing your preventative maintenance schedule for your air-handling system to save cost in the short term can make the system work harder and reduce its life cycle ballooning long-term costs.

Quadrant 4 represents the most balanced and best results for these two tradeoffs. That is why Quadrant 4 should be the target for all cost conscious buyers. If you achieve quadrant four, it means that you have maximized efficiency from the facility contractor, but the contractor is still motivated and capable of delivering value.

If you are finding the results from your buying decisions are falling into either quadrant 1 or 2, look at your RFP process, and ask the question, “What about my RFP process is driving quadrant 1 and 2 results?” Start there and stick with your root-cause analysis and eventually you’ll find your deals falling into Quadrant 4.

Marc Collings

Senior VP of Sales and Marketing at Varsity Facility Services
Marc Collings is Varsity's Vice President of Marketing for Varsity Facility Services. Marc oversees the company's growth, branding, positioning, customer support and analytics. In this role, he has positioned the company as a customer solutions leader for lowering cost and improving quality. He also led the company-wide rebranding and strategically positioned the company as a sustainability leader, serving on a committee for the EPA, obtaining the Ashkin Group award for sustainable leadership, leading Varsity's CIMS Green Building certification with honors, and developing Varsity's S.H.A.P.E. sustainability strategy, which improves service results along five dimensions: Safety, Health, Asset Preservation, Productivity and the Environment.

In 2011, Marc's team won the large company category, "Best in the Industry" marketing materials from the Building Service Contractor Association International (BSCAI). Marc also directs Varsity's proposal writing, sales process and tools development, marketing campaigns, corporate website SEO performance and customer support center.

Marc has spent his career developing strategic capabilities that enhance value to customers and the company. A Lean Sigma Green belt himself, he developed the company's Lean Sigma offering, providing an innovative solution to customers' need to lower cost while raising quality. He led the development of JanOPS, an industry-leading janitorial operating system, which brings standardization and service consistency to large campus and geographically disperse national accounts.

Prior to this position, Marc was responsible for strategic management at Varsity. He has initiated or directed multiple strategic technology initiatives, ranging from a corporate website, a corporate intranet, a web/smartphone based quality control system, a learning management system, a corporate content manager and knowledge wiki, deployment and customization, and an Android app which facilitates the GROW sales process he has developed.

Marc is the author of several leadership and management training manuals, field guides, marketing collateral and case studies. He speaks Portuguese and Spanish and holds a bachelor degree in English/Technical Writing and a Masters of Business Administration in Finance from Idaho State University. Marc enjoys mountain biking, skiing, fishing and golf. He is happily married, and he and his wife Victoria enjoy raising and spending time with their four children.

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