If somebody gave me £100 every time a business services provider told me that PSLs (preferred supplier lists) were inappropriate  in their part of the market I could probably afford to take a six month sabbatical. PSLs are a big bone of contention to many sales organisations – particularly to those not on them!

Clearly this is often a case of ”well they would say that anyway” but putting that to one side I do think that procurement professionals should critically reflect on how they create, deploy and most importantly manage PSLs.

If you are a buying organisation that engages many different service providers at varying levels of cost and quality then clearly going through a qualification process to identify who is offering  best value is a worthwhile exercise. BUT once this exercise is complete the resultant ‘list’ has to remain dynamic and this means much more than running a refresh every 2-3 years;

  • It has to be designed around the level of choice that internal budget holders situationally need (taking into account that service providers of different shapes and sizes will be appropriate at different times).
  • The companies on the ‘list’ have to be judged against their most recent quality of delivery and they certainly need to be reviewed if notable events occur to them e.g. key personnel move to a competing organisation (that may not be currently on your list!).

In my experience much of the PSL negativity felt by the service provider community relates to the use of the word “preferred”. When the word is implemented literally by a buying organisation it is not really congruent in a world where suppliers are continually trying to innovate better, be more agile and deliver more competitive advantage than their rivals. It doesn’t really fit in a world of constant evolution and change.

I think they might have a point.

I would advocate exchanging the word “preferred”for something like “qualified” instead. This would put a totally different complexion on the selection process within a buying organisation. It would give procurement professionals and their internal clients a much more solid foundation for a collaborative and productive business conversation i.e. “what attributes will qualify a service provider to work most effectively with our organisation… how can they effectively demonstrate these attributes… who do we know in the marketplace that have already demonstrated these attributes to our organisation… who else might be worthwhile talking to”. Then when a situational need emerges the question turns into “which of our currently qualified service providers are best suited to this specific requirement”. If none are considered suitable then the pathway is open to find someone new.

A ‘Preferred’ approach to supplier selection is often process rather than value driven and means “you should or you must”… which is rarely the basis for a positive conversation between the person with the internal need and a procurement professional. A “Qualified” approach means “who is most suited” to this requirement… which is a much more business oriented way to move forward.

Just some food for thought… let me know what you think.