When used effectively, a Dynamic Purchasing System (DPS) can lead to dramatic savings in the prices paid for routinely purchased goods and services. That's been the experience of some of our customers.
Cynics might suggest that a DPS is merely another way to drive down costs in a race to the bottom. But that's not the reality. There are genuine advantages for suppliers – of all sizes. And it's actually these benefits that enable suppliers to willingly offer lower prices.
Here are five facts about a DPS that explain the bigger picture.
Fact #1: A DPS can reflect the current, faster-changing world
In a more volatile economy, companies can disappear. This can be a problem if one particular supplier turns out to be the mainstay of a particular framework agreement - and they go bust. New companies are being launched at record-breaking levels but they're unable to join framework agreements part way through. However, a DPS allows suppliers to come and go at any time – if they meet certain standards – so you can maintain a fresh supply of willing providers.
Fact #2: Small companies can get involved
Few small suppliers are able or willing to commit themselves to vast framework agreements. But with a DPS, their risks are reduced dramatically. There's an easy exit strategy - they can remove themselves at any time. They can alter their prices too, protecting their margins. They can also bid for digestible amounts of work – because the purchasing organisation can divide huge contracts into small, multiple lots very easily.
Fact #3: Fewer hoops to jump through
The EU Public Contracts Directive (2014) reformed the DPS to remove the previously burdensome need for OJEU advertising of “call off” contracts to be awarded using the system. Under the new rules, only the DPS itself needs to be OJEU advertised, with call off contracts being subject to much more straightforward procedures.
Fact #4: Everyone saves on admin time
Once set up, the automated nature of a DPS means that suppliers can bid for lots without having to invest hours of valuable time in form-filling each time. The DPS does much of it for them. Companies are no longer exposed to the costs and risk of investing days in putting together a proposal - only to keep losing out. With a DPS, it's cheaper for them to bid – and this saving can translate into lower prices. This also attracts more suppliers to bid for lots.
Fact #5: Faster outcomes
Contracts can be added, issued and awarded faster. This is good for the purchasing organisation, saving hours for Procurement teams. But it's also great for suppliers of all sizes. The open, transparent nature of a DPS can build trust and certainty. Crucially, the streamlined system also means that contracts can begin sooner – and be paid for faster...ideal when cash flow is so important to companies.
Ultimately, a DPS can create a virtuous circle that benefits everyone.
For this to happen, the core system and procedures must be reliable and flexible. Dynamic systems are exciting but there's always the risk of unexpected – unless you have a deep understanding of the principles, players and processes involved. When these are in place, everything can work well – with the potential for outstanding results, sustainable year on year.
Read more about Proactis Dynamic Purchasing Systems.