Added value…..you’ve read several hundred pages of specification, T&C and annexes and answered what feels like 500 (often seemingly repetitive) tender questions detailing exactly how you are going to provide the service for the price of two buttons and a safety pin and then you come across this….
“Please detail what added value you will provide in delivery of the service”
WHAT???? THEY WANT YOU TO GIVE THEM MORE?
Well I’ve been chatting to some fantastic procurement professionals recently, so I thought I would ask them what makes an award winning response to questions about added value and here’s what I gleaned.
The first thing you need to know is that procurement teams are targeted on savings in the same way that sales people are targeted on revenue. This means that everything has to be measurable. A sales person won’t be rewarded for a sale unless they can demonstrate the value of the business in hard cash. In the same way, a procurement professional won’t be recognised for fluffy, intangible benefits – they need to provide demonstrable savings. As sales people, we’ve always been taught about features and benefits, but I want to take it one step further:
Features —— benefits ——- VALUE
This amorphous thing called value is what it’s all about…..the features of the product or service are important to allow the evaluator to understand the context of what is being offered, but the bit missing from our tenders is going on to demonstrate “what does this mean in terms of cost or time saving?”….and this is the key bit that a procurement professional is looking for.
So here are a couple of examples of added value:
1. VOLUME RECRUITMENT OF INDUSTRIAL STAFF ON LONG-TERM TEMPORARY ASSIGNMENTS.
- Features of the service – perhaps you offer your workers a particular package of benefits that is attractive to workers (explain the features of this package) combined with consistent work (explain how this means you are able to keep them in regular work).
- Benefits to the customer – this means that you can attract a better calibre of worker than your competitors and you are able to retain them on assignment longer, which means less attrition and a reduction in costs associated with induction, client training and improvements in productivity.
- Value – you then need to make this tangible. One way of doing this is to provide an example of the process and savings achieved by a similar client. It might look something like this: all workers have to go through a full day of client led induction and health & safety training prior to starting the work. Your existing client’s previous supplier had an average length of service of 4 months for temporary workers. To maintain numbers, they had to provide an average of 30 new workers in four intakes each month to maintain the volume of workers required in the warehouse. Since starting work with you, the average length of service has increased to 7 months, which means the client now only needs to take on an average of 17 new workers in two intakes each month. This has reduced training time for the client by 14 hours per month (at an estimated cost of £45 per hour), offering an immediate saving of £7,560 per year. Worker retention has also impacted performance, generating an improvement in productivity of 8.7% in the last 12 months.
In the above example, you’ve been able to demonstrate two types of saving. The first is clear cut as it is a tangible saving of £7,560 per year based on a reduction in the number of client run inductions. The second is slightly different – although it is tangible, you can’t put a value on what an increase of 8.7% in productivity delivers in terms of £, but you have given the client the tools to work out the financial impact that a similar increase in productivity might make in their business, and this can be considerable when translated into value.
2. SOLE SUPPLIER FOR PERMANENT PLACEMENT OF PROFESSIONAL STAFF.
- Features – perhaps you work with a client who uses your services to recruit all of their permanent professional staff. You develop and maintain their job descriptions as part of your recruitment service by conducting a full job analysis with all decision makers for each role and writing up the job description and person specifications accordingly on the client’s behalf each year.
- Benefits – this enables you to identify candidates with more relevant experience and brief them more thoroughly, leading to improved commitment and a better interview to offer ratio. It also cuts the workload for the HR team in terms of administering and managing the company’s portfolio of job descriptions.
- Value – you then need to make this tangible. By engaging with the key stakeholders you have been able to iron out anomalies in their requirements, align their expectations and establish essential and desirable skills and experience for each role. As a result of introducing this, the interview to offer ratio has improved from 2:1 to 3:2, reducing the number of client interviews by 14 per quarter and releasing these important employees to focus on other work. The client runs panel interviews (always with three employees on the panel) and each interview takes an average of 2 hours to complete (time valued at circa £50 per hour by the client). Based on this, the process change has generated an estimated soft saving of £16,800 per annum. Maintenance of job descriptions throughout the business was the role of a part time HR Administrator working 9 hours per week. This individual has now been redeployed elsewhere in the business, cutting the headcount in the HR team and delivering a hard saving of £5,600 per annum in salaries.
This example provides both soft and hard savings. Soft savings include things like “freeing up people’s time to do other work” which can be difficult to quantify. Hard savings are clearer and more definitive (e.g. reducing headcount). Procurement and Finance Teams are much more interested in hard savings which they see as more tangible, so you want to ensure where possible that your “added value” includes hard savings wherever possible.
So over to you!
- What have you done differently or better?
- What innovations or technology have you introduced?
- What are the benefits to the client?
- And most importantly, how can you put a tangible value on these?
Oh yes, one final thing. When it comes to added value, you don’t need to provide a great long list…..two or three things is enough…..or even one if it’s really good!
Why not put some time aside at your next team or board meeting? Write up two or three examples and then use these on a regular basis to respond to the dreaded “added value” questions. It will make life a lot easier in the longer-term!
If you need more information about added value or help with a specific bid please contact us on 01688 400319 or email email@example.com.