Customer Supply Agreements

Customer Supply Agreements (CSA), Service Level Agreements (SLA)

Purchasing and procurement science has been developing aggressive and effective methods to extract maximum savings and additional value from suppliers over the past decade. As suppliers are rationalised, the importance of the Service Level Agreement increases as companies recognise the need for supply chain partnerships to compete in a global market place.

The CSA or SLA essentially assists the customer's attempt to buy the best value, not secure the lowest price. The buyer needs to get the most relevant benefits for the least relative cost. In other words they need to buy using Value Based Pricing principles.

If you don't use Value Based Pricing to set and manage contracts then you will have a "price only" negotiation.

These definitions are critical because they distinguish a good CSA / SLA from an also ran in the tender / bid process. The CSA / SLA is the tangible evidence that a procurement manager can use to show their board or management that they have bought best for the company. It is a protection from embarrassment when the inevitable opportunistic price seller wages a campaign to break into your accounts with low prices.

Without a clear and concise explanation of the value being delivered in your agreement, it becomes an ineffective document as customers turn to the last page containing the price structure. Too often the agreement is simply filled up with achievement boasts and meaningless claims and as a result the focus ends up being on price only.

How Pricing Insight can help your business

Supply agreements under the Pricing Insight definition are redefined as "evidence of value documents". Using the Pricing Insight approach to CSA's and SLA's, your customer's procurement manager can easily identify value and make relative value trade off between your offer and a competitor's.

We use a structured framework of Value in Use (ViU) and Value at Risk (VaR).

ViU and VaR must be identified and built into your company's pricing architecture and trading agreements. It is critical in the development of the supply agreement to document the features to benefits to economic value in use and value at risk for the potential customer.

This identification process makes customer purchasing decisions easier and less risky. The clarity of what value is being acquired and what risks are being mitigated has an economic value that often removes direct price comparisons between competing offers.

By utilising the Pricing Insight Business Development program ( BDP)TM, the CSA / SLA can be written to obtain maximum share of the customer's wallet using sophisticated volume to value trade off analysis.

To find out more how we can help your CSA / SLA or Competitive Bid to be sucessful and deliver more value to customers, call Pricing Insight.

Contact Us

Email: action@pricinginsight.com.au
Phone: +61 2 9973 4099