It is unwise to pay too much, but it is worse to pay too little?

Riyadh -

Even with the increased information available, rarely do we ever end up paying the perfect amount for a given product because the cost of delay will usually exceed the incremental savings of going from "good price" to "great price".

Purchasing is an exercise in risk management - you can almost always find a cheaper supplier, but how much solution or reputational risk are you willing to accept?

Kiron

The trick is finding what you need and paying the right amount. We too often think of cost being equal to quality. We justify paying more this way. In some situations that may be true, you get better quality if you spend more.
In other cases, you are overpaying for a brand-name product when the same manufacturer bottles the same stuff up as a generic product. You are paying for a name on a container. The name doesn't really add value outside of a psychological one. Your end result isn't going to care what the box says on it. Well-known companies have taken advantage of their name recognition and charged more for it - despite there not being a difference in many possible product options.
Then there are those times when you pay too little. Sometimes that can be a low-quality item that doesn't meet the needed life expectancy. Other times that can be getting a great product at a bargain price.
The trick is figuring it all out. If I had to choose to overpay or underpay - it would depend on the scenario. Sometimes a cheap failed option may not cause a huge problem and it can be switched out quickly. In those cases, underpaying is probably better. If the cost to replace it includes a high cost outside of the product itself, overpaying for the product would probably be better.

I agree with Farid and Kiron it is a matter of paying the right amount. It is integral to risk and vendor management. You can always have a vendor under bid to get their foot in the door and then pepper you with issues and additional funding needs that will outpace the higher vendor estimate you passed up. The hardest part is knowing what you are signing off on and that it will meet the needs of project scope related to time, cost and quality.

I definitely agree with Kiron but as Farid said, it is not a rule of thumb. Sometimes you pay little for some products and they perform as expected. You need to do proper risk assessment X Item for X Amount vs Y Item for Y Amount.

I agree with Farid and Kiron it is a matter of paying the right amount. It is integral to risk and vendor management. You can always have a vendor under bid to get their foot in the door and then pepper you with issues and additional funding needs that will outpace the higher vendor estimate you passed up. The hardest part is knowing what you are signing off on and that it will meet the needs of project scope related to time, cost and quality.

The trick is finding what you need and paying the right amount. We too often think of cost being equal to quality. We justify paying more this way. In some situations that may be true, you get better quality if you spend more.
In other cases, you are overpaying for a brand-name product when the same manufacturer bottles the same stuff up as a generic product. You are paying for a name on a container. The name doesn't really add value outside of a psychological one. Your end result isn't going to care what the box says on it. Well-known companies have taken advantage of their name recognition and charged more for it - despite there not being a difference in many possible product options.
Then there are those times when you pay too little. Sometimes that can be a low-quality item that doesn't meet the needed life expectancy. Other times that can be getting a great product at a bargain price.
The trick is figuring it all out. If I had to choose to overpay or underpay - it would depend on the scenario. Sometimes a cheap failed option may not cause a huge problem and it can be switched out quickly. In those cases, underpaying is probably better. If the cost to replace it includes a high cost outside of the product itself, overpaying for the product would probably be better.

Farid, yes we need to look at the big picture and weigh every thing. Thanks for your participation

Very interesting view. It is human nature for us to expect to pay a market related price for something. I've stopped counting how many times I have tried giving away stuff and nobody would touch it because 'it's too good to be true'. Too much the it is considered a rip off, too little is considered too cheap. While both might be true it is not always the case. Instead of looking at what we pay we should be looking at what we get. Lower prices should never come at the expense of lower quality, except if that is a risk you are willing to accept. There could be a zillion reasons (other than poor quality) why you can get something cheaper. I think as part of good vendor management and product/material selection we will always have pricing as a parameter but it should probably not carry the highest weighting. If you do end up procuring the cheaper options and finds that it cannot do the job you probably have some holes in your selection process.