The Risk of Choosing the Lowest Bid

We’re obsessed with price. Price seems to have become the single most important determinant in most purchases, with retailers offering to match each others’ price in a rush to the bottom. Similarly, price within the business-to-business marketplace has assumed an all-important position.  Given the realities of global competition, an emphasis on price at all levels of the business cycle is not only understandable, it is essential.  However, have we followed the historic human tendency and ‘carried it too far’?  How important is price; really?

Let’s admit right up front that price is important. When we compare competing proposals it’s a vital consideration, but what do you risk when it’s the only consideration?

When the cost of something becomes detached from the overall value proposition, it becomes the singular focus. Price is an honest measurement only when balanced against other factors.

Does price reflect quality?

When comparing the submitted proposals, is there a baseline quality that is presumed? Will some sacrifice the quality of material or design in order to achieve the desired price? When machine robustness, longevity, and ergonomics are important factors, sometimes it doesn’t pay to go cheap.

For every project within the manufacturing world, organizations are under a pressure cooker of dates, budgets and stringent quality controls.  Buyers run the risk of adversely affecting subsequent expenditures on maintenance, labour requirements, or the ability to sustain production if the initial investment was undercut. When equipment providers refuse to sacrifice quality to win the work, we protect our ability to provide sustained satisfaction for consumers in the long term.

Building more than custom automated machinery

Since equipment providers know we will be competing in the world of tight margins, we need to ask ourselves: Who are we selling to?  Does our customer truly understand the automated machinery world? Will they not only support their product but support our production personnel; or, are they responding to a price-only purchasing approach by providing minimal support?  A relationship with your customer is symbiotic, and in the end is most successful when common goals and best intentions are paramount.

We all know that there are substantial benefits to price competition.  Price competition drives efficiency.  Price competition drives innovation.  But does price justify our obsession with it?  A less than thoughtful response will cost us in the long run.