Why avoiding equipment over-quality can optimise your procurement strategy?

In the corporate world, quality is one of the key procurement criteria, along with price and delivery times, for example. By focusing too much on the quality when purchasing products and/or services, there is a risk of slipping into over-quality. The line between these two concepts is thin, but the consequences are significant. This is why procurement departments must be vigilant to avoid this pitfall so they can support their organisation’s financial and operational performance.

Quality vs over-quality, how to define them?

The international ISO 90001 standard for Quality Management defines quality as “the degree to which a set of inherent characteristics of an object fulfils requirements“. For a company, this refers to the match between the needs of a customer and a product/service in terms of costs, performance and delivery times.

An imbalance between these elements is either called “under-quality” or “over-quality”, depending on the situation. Each of these phenomena carries its own set of challenges. Under-quality is associated with increased risks, while over-quality raises major financial issues.

Over-quality occurs when the quality of a piece of equipment, product and/or service exceeds the expected requirements for its specific use. More precisely, this phenomenon is observed when the indicator used to determine the expected quality exceeds the financial profitability indicator. In other words, uncontrolled over-quality generates unnecessary expenses, without always offering real functional or operational benefits.

For procurement departments, the whole challenge lies in choosing the right level of quality to meet the needs of internal customers, without exceeding them. To achieve this, they must keep this old saying in mind, as it is still relevant now: It is better to leave well enough alone.

How to avoid over-quality in procurement?

The over-quality phenomenon is particularly prevalent in long tail spend. Internal customers often choose fairly freely the products they need from a defined range. With no guidance, they then rely on their own shopping habits and personal desires. And in over a third of cases, this results in the purchase of premium products. It is up to procurement departments to adopt a methodical approach to avoid over-quality, based on data analysis and the involvement of all stakeholders.

Analysing user needs

First of all, thorough analysis of real needs must be conducted with internal customers. This work makes it possible to define the essential specifications for the pieces of equipment, products and services concerned, without compromising their operational effectiveness. The aim is to establish clear criteria for the required quality, through precise standards. This means the appropriate range level can be adapted to the functional need for the products and the right quality choice can be made.

There are commonly three main range levels, which differ in terms of both their quality and price:

• Premium: These are high-quality, expensive products. In most cases, these are exclusive brand products or products with additional features.
• Mid-range: These items offer good value for money and are sold 10% cheaper than their premium counterparts.
• Entry level: These products meet basic needs but are sold 20% cheaper than premium items.

In addition, there are also own brands. These often provide quality equivalent to premium ranges but are on average 15% cheaper. This is the case for Manutan EXPERT whose products offer excellent value for money and come with an up-to-10-year warranty[1]. This makes them interesting alternatives to other brands on the market.

Analysing costs

It is also important to analyse the total cost of ownership (TCO). This involves examining not only the purchase price, but also all associated costs (maintenance, usage, non-quality, disposal costs, etc.).

Procurement departments are now going even further by considering the life cycle cost. This approach also takes into account environmental externalities, such as greenhouse gas emissions, energy consumption, etc.

Collaborating with suppliers

Collaboration with suppliers is just as essential. Procurement departments have every interest in relying on their suppliers’ product expertise, market knowledge and all the data they hold. Together, they can imagine customised solutions with the optimal quality level to meet the company’s needs as closely as possible.

Ultimately, this approach is based on Lean philosophy. Over-quality is identified as a type of “waste” since it consumes resources but provides no added value to the end customer. This approach aims to get rid of everything that is unnecessary in order to improve company performance and profitability.

The benefits of quality equipment and products

By choosing the right quality level for equipment, products and services that are purchased within their company, procurement departments stand to gain a great deal.

Improving profitability

The very first advantage is, of course, economic. Through equipment, products and services with the right quality, companies minimise unnecessary expenses, preserve their financial resources and improve long-term profitability.

Boosting competitiveness

Thanks to the savings made, companies can also reallocate these resources to research and development, new projects or structural improvements. This is how they strengthen their competitiveness and differentiate themselves in the market.

Gaining efficiency

By choosing suitable equipment, companies also gain operational efficiency. They get rid of those notorious resource, time and energy wastes. Processes are optimised and operations run smoothly, thus enhancing overall productivity within the organisation.

Promoting agility

Appropriate equipment provides the foundation for an agile company. By opting for solutions that align precisely with their needs, companies give themselves greater flexibility. This enables them to adapt more quickly to market fluctuations or changing customer needs. This is a major asset for seizing new opportunities, while reducing risks associated with disproportionate investments.

As you can see, the pursuit of quality does not have to automatically lead to over-quality. By opting for equipment, products and services that correspond exactly to operational needs, procurement departments can make substantial savings while guaranteeing optimal performance.

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[1] PPE (Personal Protective Equipment) and electrical products come with a 3-year warranty. Consumables and perishable products are not guaranteed.