Price Should Almost Never Decide Which Supplier You Choose: The Real Process That Creates Value
Industry veterans say procurement’s true value is delivered before the RFP goes out. Yet most stakeholders only engage the function after the critical decisions have already been made.
In many companies, supplier selection looks like this: a rushed RFP, a few price comparisons, someone saying “they seem good,” then procurement is asked to sort the contract.
Then everyone is surprised when the supplier underperforms.
“Price should almost never decide which supplier you choose,” wrote Tom Mills recently. “Selecting the right supplier is not a gut feel decision.”
The statement sparked extensive debate among procurement and supply chain professionals about where value is truly created in the supplier selection process, and why so many organizations miss the mark.
The Late Engagement Problem
Mills presented a structured 12-step process, from identifying the need through to collaboration and improvement. But he highlighted a fundamental dysfunction: “Most stakeholders engage procurement after step 3, but the real procurement value is delivered steps 1 to 3.”
Cesar Herrera, a senior procurement and sourcing transformation leader, confirmed this pattern from his FMCG experience. “That step 3 point is the one that hurts most in practice. By the time the requisition landed, the supplier was already chosen, the budget already committed, and the timeline already impossible. Procurement just showed up to do the paperwork.”
His conclusion: “Better process helps, but the real fix is being in the room before anyone needs you.”
Hamilton Lindley, VP of Procurement, Compliance and Risk, reinforced this point. “Steps 1 to 3 are where procurement actually matters. But by then stakeholders have already decided. Getting a seat at the table before needs are defined is where the real negotiation happens.”
Omer Sasson, a director specializing in product sourcing from Asia, identified the consequence. “The biggest mistake I see is when procurement is brought in after step 3. By that point the supplier shortlist is already biased and the conversation becomes purely about price.”
Why Price Is a Trap
Romain Ducrocq, a global indirect procurement leader, explained why teams over-index on price. “Price is usually the easiest variable to compare, which is probably why so many teams over-index on it.”
But the real cost shows up later. “The real cost of a supplier often shows up later, like during implementation friction, poor fit, weak delivery discipline, hidden dependency, or other risk exposure.”
He shared a lesson learned the hard way. “The best supplier decisions I’ve seen were never just about ‘best price.’ I also learned it the hard way to be honest, poor delivery, etc. It is all about choosing the supplier the business could actually win with.”
Dipith Sharma, a supply chain analyst, provided a concrete example. “A car manufacturer chooses a cheaper semiconductor supplier. Price difference: €0.40 per chip. But the supplier delays deliveries. Production stops for 3 days. Factory idle. Loss: €12 million production loss. Saving €0.40 created massive cost.”
Tomasz Tyras, a senior supply chain and operations expert, identified where the real costs hide. “Price is just one line. Total cost is hiding in expediting, firefighting, inventory buffers, claims, and lost service.”
The Culture Challenge
Neal Falcone, founder of Peregrine Vantage, raised an obstacle deeper than process. “One of the uphill battles that many procurement teams face is related to business culture. Specifically, how procurement is perceived throughout the various organizations within a company.”
He described the dichotomy. “I have found that those procurement champion organizations engage appropriately, early, and often. I have also found, unfortunately more so, that many organizations see procurement as a necessary checkbox due to policy.”
The consequences are predictable. “When procurement is perceived as a checkbox in the process rather than a value add, doesn’t matter how much of an organized process for new supplier onboarding there is in place, everything gets rushed and ultimately becomes a fire.”
Mathew Schulz, a trusted voice in procurement, raised a tension between process and speed. “Imagine being at a MM startup in the tech sector and you grind things to a halt with a sequence that adds unnecessary friction. I wonder how that’s being taken into consideration, when the result is slower to market and your competition just closed another deal.”
Mills responded with a counterpoint. “You preach fast. I preach diligent. The two combined is the sweet spot and the controls in place need to be appropriate to the size of the purchase.”
Beyond Price: Carter’s 10 C’s
Mills recommended using a structured model like Carter’s 10 C’s to assess suppliers across multiple dimensions: Capacity, Competency, Cost, Cash, Commitment, Culture, Communication, and others.
Strahinja Jovanovic, a supply chain expert, endorsed the framework but added a caution. “Selection covers capability. Execution gap appears later. Vendor passes: Capacity and Cost and Competency. But fails: using capacity when needed, maintaining cost without scope creep, applying competency consistently.”
He proposed an addition. “I would add Step 13: Pilot validates they deliver what the selection predicted. Framework is very solid. Pilot proves they’ll use capability when you actually need it.”
Aleksandr Bondarenko, a strategic procurement professional, suggested a “Step 0” even earlier. “Stakeholder Alignment is just as critical. If Engineering, Finance, and Procurement aren’t aligned on KPIs before the RFP, even the best supplier will struggle to deliver.”
He also emphasized total cost of ownership. “Focusing on TCO rather than just unit price is what truly protects the bottom line in the long run.”
Post-Signature Governance
Alex Farr, a specialist in procurement networks and technology, raised a question about the phase after signing. “I have had countless discussions in the last year where professional services contracts don’t get continued oversight from procurement post-signature. The general discussion is that delivery oversight and monitoring of success and spend fall to other teams.”
Mills acknowledged a variable principle. “It depends on the category and it’s a long story. Some categories benefit enormously from continued procurement engagement. I wouldn’t say procurement should be the owners of reviews. But they should be invited to add a commercial perspective if needed.”
Paul R., co-founder of a services procurement governance platform, added a dimension. “How established is their internal infrastructure for managing governance of delivery and performance? They may create solid SOWs but if their governance doesn’t exist during delivery then they are less likely to have the management controls needed to identify issues before they become a problem.”
Preparation Before the RFP
Sascha Walleser, an expert in sourcing mechanical parts, added a crucial layer of preparation. “Many companies move by far too quickly into supplier comparisons without first understanding the supply market.”
He detailed what strong procurement teams do. “They invest time in analysing the supply market, understanding cost drivers and building should cost models, mapping supplier capabilities and assessing supply and geopolitical risks.”
His conclusion: “In my experience, the supplier selection is rarely won in the RFP. It is usually won in the prep and in the depth of supply market understanding before the process even starts.”
Shared Responsibility
Mark Strange, founder of Möbius Nexus, offered a nuanced perspective on supplier underperformance. “One pattern I see repeatedly in large organisations is that supplier underperformance is often attributed to the supplier itself, when in reality it originates in the way the commercial model and operating environment were designed.”
He detailed the real causes. “Even a highly capable supplier will struggle if the specification is unstable, incentives are misaligned, governance is unclear, or the organisation engages procurement too late in the process.”
His insight: “Supplier selection therefore is not just about choosing the ‘best’ supplier. It is about designing the conditions in which a supplier can actually perform.”
The Supplier Perspective
Guy Mandler, a product sourcing and procurement specialist, offered the view from the other side. “The teams that do steps 1 to 3 properly are also the easiest to work with as a supplier, because they actually know what they want before reaching out.”
Iain Lawrence, a sales professional, noted the symmetry. “As a sales professional who had been involved in many a tender process which clearly came down to price, it’s refreshing to see a procurement strategy such as this. And what is very notable is how similar that process and approach is to the one any sales professional worth their salt will apply to an RFP process.”
His conclusion: “If both parties approach tenders in this manner, that’s where you get a partnership, not just a supplier, and a win win for both parties.”
The Bottom Line
Saleh Aljneibi, a senior procurement and contracts manager, captured the root of the problem. “Many supplier challenges originate from rushed sourcing processes rather than supplier capability itself.”
Robert Cataldo, a procurement transformation expert, framed the guiding principle. “We should always choose the supplier that provides the best overall value. If you look only at the price, there can be many other cost drivers embedded in there somewhere.”
His message: “Let the procurement experts do their job.”
Tanya W., a senior procurement transformation advisor, added a dose of pragmatism. “Unless you are buying pencils. Pencils do buy cheaply.”
Mills concluded with the real objective. “The goal isn’t just to pick a supplier. It’s to build a low-risk, high-performing supplier portfolio. Because the right supplier can create enormous value. And the wrong one can create enormous pain.”
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