Now more than ever, it’s critical to be able to convince the budget keepers that the lowest unit price doesn’t always translate into the best value.

That’s because companies need to take a big picture approach to procurement, focusing on more than just price. What’s more important, experts say, is the lowest cost to the organization.

For example, what’s the use of buying the cheapest widget if it has a higher breakage/fault rate than widgets available from other suppliers?

By the time you factor in how much the breakdowns cost you in production, in paperwork, in deductions — it might be worth paying a little more and get a higher-quality product in return.

Your internal costs could outweigh any advantage you think you’re seeing from making procurement decisions based solely on price.

For many supply chain managers, this can be an uphill battle.

First, there’s the pressure to go with the lowest unit price.

Then, there’s the effort and difficulty involved in demonstrating that the lowest unit price is actually increasing operational costs.

It can take a while to document the additional costs, while the purchase price of the “cheap” unit remains front and center.

Finally, there’s the expectations many companies put on procurement/purchasing people to manage costs, right down to the unit level. This means you’ll need time and evidence to make your case for spending a little more.

Remind other managers that this is a time when many organizations are cutting corners, in addition to trimming prices. Some of these companies are cutting so many corners they’re not likely to be around for much longer — which will leave you in a lurch.

Then, you might want to mention the recent (and costly) peanut product recalls, and the resulting bad publicity. Those companies thought they could buy at the best price … and you see what happened.

Tags: costs, delivery, procurement, purchase