Adopting the effective sourcing method in an organization can assist in ensuring successful supply chain process. Organizations purchase products from multiple suppliers. Procurement department focuses on procuring the products at optimal prices. Competitive bidding and negotiating with suppliers are some of the methods used in tendering. These methods have benefits and shortcomings that should be analyzed. Competitive bidding refers to procurement methods whereby suppliers, vendors or contractors compete for the bids. Negotiating with suppliers focuses on identifying the needs of the company and establishing the best position for the bids. Competitive bidding and negotiation are considered in diverse situations.
Competitive bidding is associated with various advantages and disadvantages. Under competitive bidding, the lowest bid price is selected. Also, it enhances competition between suppliers, which leads to value for money. The method is transparent, which helps in mitigating corruption and favoritism. The suppliers have the opportunity of winning the bids that are advertised (Miles, 2000). Competitive bidding is a simplified method of evaluating bids. On the other hand, competitive bidding can lead to low quality of work. The best suppliers may not bid, which means that the purchaser has few options to choose. Also, the method does not focus on evaluating the qualified suppliers. Competitive bidding can be very slow; hence, the customer can wait for long before receiving the service of the product.
A negotiated bid is mostly associated with various advantages and disadvantages. In this method, the contractors have no opportunity to compete against each other. The advantage of the methods is that the quality of products or services is of high quality (Weele, 2006). Also, the process is very quick, and the customer can receive the services or products within a short period. It is possible to review and maintain a formal record of purchases enabling the managers to use the experience in the future. The method is very costly.
References
Miles, M. (2000). Competitive bidding in the 21st century. Toronto: Master Point Press.
Weele, A. J. (2006). Purchasing & Supply chain management: Analysis, strategy, planning and practice. London: Thomson Learning.
