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Understanding The Buyer's Next Move

The Purchasing Chessboard Model

Do you know the buyer's longer term strategy for the purchase of your products and services?

In this whitepaper we will use a model normally hidden from salespeople to illuminate your buyer's next move. It can even help you to shape your customer's buying strategy/approach.

The chessboard is often used as a metaphor for strategy...

The Purchasing Chessboard

Finding the best procurement strategy for your products and services is something that buyers are approaching in an increasingly scientific manner. Nowhere is this clearer than by reference to Purchasing Chessboard model. AT Kearney's Purchasing Chessboard is the ultimate in buying tools. It helps buyers to set their buying strategy for a chosen product, or service category, including; The attention it should be given. The sourcing approach to use. The importance of price and non-price variables. How suppliers are to be treated. The level of sophistication of the Purchasing Chessboard goes far beyond that of almost any other model. In fact it extends to a total 64 strategies, or approaches to further organizational goals through optimum procurement choices. For the seller it is a complete map of the buyer's options. The Purchasing Chessboard is a powerful tool in the hands of a professional buyer. It is equally powerful in the hands of a salesperson. For the seller who is familiar with the model, it offers a means of anticipating and matching the buyer's next move.

Buying And The Game Of Chess

The chessboard, so often used as a metaphor for strategy, views procurement 'in the round', seeing it is a complex strategic function deserving of the same degree of analysis and planning as any other. Sellers will be delighted to know it's role extends well beyond the quest for lower supplier prices.

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The Chessboard recognizes that the approach of the buyer should be both market and strategy dependent. It therefore plots the various goods and services to be bought on a grid with the following axes: Supply power Demand power Finding out where a supplier and his, or her products fit on the matrix requires a bit of strategic thinking. It involves Porter-like considerations of strategy such as; Switching costs Availability of substitutes Concentration of suppliers Barriers to entry Proprietary technology Bargaining power of buyers. Those familiar with the 5 Forces model and the Value Chain (popular tools among strategist) will see the model's approach as further proof of just how strategic procurement has become.

The Purchasing Chessboard gives sellers up to 64 potential moves.

The 4 Key Procurement Strategies

Once products, or services are placed on the chessboard matrix the four strategic procurement choices available to buyers are revealed: 1. Manage spend is recommended where supplier and buyer power are both low, leading to the identification of strategies such as; demand management, volume bundling, co-sourcing and mining commercial data. 2. Change the nature of demand is suggested where the balance of power is in favour of the supplier. This can, the model suggests, be achieved through; innovation, re-specification, risk management and mining technical data. 3. Leverage competition among suppliers is the recommended strategy where the buyer has the power over suppliers. The
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model then suggests tendering and global sourcing strategies, as well as reviewing and enforcing supplier prices. 4. Seek mutual advantage with the supplier is the recommended approach where both supplier and buyer power are high. The Chessboard offers a menu of choices that include; cost partnership, integrated operations planning, value chain management and value partnership. These above descriptions are just a snapshot, with the model going well beyond the 4 generic strategies to get a whole lot more prescriptive. Indeed, it offers a menu of 16 approaches for each generic strategy. For example in respect of managing spend (the low buyer and low supplier power quadrant) the buyer can drill down to the next level that includes a menu of such options as: Demand reduction Procurement outsourcing Buying consortia Contract management Standardization Supplier concentration Spend transparency Bundling purchases Closed loop spend management.

The Chessboard Reveals The Complexity Of Buying

The tools, models and frameworks used by a buyer reveal a lot about how they buy, in particular the level of science and sophistication applied to the purchase decision. The Ferrari of such models is the Purchasing Chessboard by AT Kearney Consulting. The Purchasing Chessboard is similar to other portfolio models in that it uses a grid. For example while The Kraljic Model has 4 strategies, the Purchasing Chessboard has a sum total of 64 potential moves. The difference between them is partly explained by the fact that almost 30 years separates the two models. The complexity of the global supply

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chain of the modern economy could only have been dreamt about by Kraljic in the 1980s. The Purchasing Chessboard is a visible demonstration of the complexity of modern buying. It is the appliance of science and strategy to purchasing decisions. It reveals how procurement is increasingly; formalic, category driven and strategy led. Those buyers using the chessboard are likely to be in the top 10-15% in terms of procurement best practice. But it has even greater potential to distinguish salespeople using it from the rest of their colleagues.

How Can Sellers Use The Chessboard?

Sellers need to help the buyer to recognize the needs of their category and to adopt the right strategy for their goods and services. They also need to know the range of options available to buyers and they need to remind buyers of them from time to time. An understanding of the Purchasing Chessboard can help in this regard. Savvy sellers can use the model to refine their proposition or source of value based on the levers and methods appropriate to their quadrant on the buyer's chessboard. That gives sellers a menu of up to 64 strategies that they can connect with through their proposals and pitches. One of the greatest uses of the tool for sellers is that it puts price negotiation in its proper context. It highlights 64 ways for the buyer to achieve what he wants and the majority of them have nothing to do with price. It encourages buyers to focus not just on the obvious (sometimes dumb) strategies of pitting suppliers against each other, or endlessly re-negotiating price.
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The Science Behind This Paper

These insights and tools are based on:

1. Buyer Research our ground-breaking research into how modern buying decisions are made and the implications for sellers.

2. Best Practice Research Over 1 million pages of best practice sales case studies, books and research.

3. Common Practice Research Our peer comparison benchmark of 1,000s of your competitors and peers.

The Sales Engine and SellerNav are trademarks of The ASG Group. The entire contents of this document are copyright of The ASG Group and cannot be reproduced in any format without written permission.

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