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What is a winning strategy for businesses?
That answer is clearly individual and depends on both company/industry factors and the strategic goals of a company.
For suppliers working with the public sector, one measure of success is in terms of public contracts won.
We explore 3 different strategies used by suppliers, each with their own strengths and weaknesses.
We start with Strategy #1: Conveyor strategy. See our other posts on Strategy #2: Focus strategy and Strategy #3: Magnet strategy (coming up!)
Strategy #1: Conveyor strategy
The first strategy we explore revolves around quantity.
A supplier using the conveyor strategy typically submits bids to many tenders, with the expectation to win at least a few. This strategy typically results in:
We call this the conveyor strategy, as suppliers approach the tendering process as a systematic pipeline of projects - and success often hinges around the efficiency of the “conveyor”, incl. minimizing the costs to bid a tender and costs to process RFP-related information.
Typically, this strategy is employed in industries with
Consider an example of a supplier, which offers logistics services and bids many tenders within their area of operation with their standardized pricing model, and gets the contracts where they are most economically advantageous. In this case, the supplier is not particularly interested in the nuances of the Buyer, but will likely make the bid based on a few, standardized parameters, such as the distances (km), regularity and type of logistics services. For this kind of supplier, a conveyor strategy could work well.
Advantages of conveyor strategy
1. Low costs on sales and marketing
If the Buyer already knows the market well (low informational asymmetry), this likely means that pre-tender supplier contact is limited. In this case, the Buyer can announce tenders with very little information gathering, and suppliers often learn about tenders only when they are launched. This means suppliers can focus on the tendering and contract execution stage, instead of investing in pre-tender sales and marketing efforts.
2. “Take it or leave it” attitude
By bidding many contracts, suppliers have a strong negotiating position vis-à-vis Buyers - losing a tender is not a big deal, as there is always another tender. This means suppliers can bid tenders with a “take it or leave it” attitude and offer terms that are acceptable to them, especially since the cost/prepared tender is low.
Disadvantages of conveyor strategy
1. Competitive pressures
If a supplier employs a conveyor strategy to a tender, while another supplier has a cost advantage or better Buyer contact, it is likely the other supplier is better situated to win the tender, either from better information, better understanding customer needs or having a favorable reputation with the Buyer. This can leave conveyor strategy suppliers at a competitive disadvantage.
2. Contract risks
If suppliers only meet Buyers at the tender stage, then suppliers may miss some critical information about the potential contract, which is not directly seen from tender documentation. This is especially true for new customers, which the supplier does not know well.
For example, if a supplier of medical x-ray systems wins a tender, only to find out that the system installation is planned in a building with very narrow passages, the supplier poses new risks and costs, which could be unaccounted in the tender bid. Ideally, such information should be reflected in the tender documents, but in reality Buyers cannot foresee all information suppliers require. Such risks could often be avoided with Focus or Magnet strategies.
Countering the conveyor
If a competitor is using the conveyor strategy and seems to often under-cut your company’s prices intenders, you need to use the strengths of your strategy against the supplier and exploit their weaknesses. Typically, this competitive advantage will come from quality, reputation or better understanding customer needs.
The following tactics can be used against the Conveyor:
1. Convincing the Buyer pre-tender regarding the inclusion of
2. Learning about Buyer contract scope and risks in detail
The conveyor can be a viable strategy for suppliers in industries with standardized products and services, however, suppliers should understand the limitations of a “robotic” ,quantity-focused attitude to tendering, especially for projects, where quality matters and customer needs can be harder to understand.
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