Business owners like you are always trying to find ways to save money while still effectively and efficiently managing their business. What many business owners don’t know is that savings can be found in the procurement process. By refining your procurement strategies, you can boost company productivity and save money.
Here are some practices to help you increase your procurement savings.
Consolidate Vendors
Where possible, you should start consolidating your vendors. Supplier management will help you maximize your savings. Take the time to identify strategic vendors and consolidating the total number of vendors you work with.
Consolidation will also allow you to get volume discounts and a higher quality of goods. Because there are fewer suppliers to manage, the process will become much more efficient. You may also want to keep a couple of backup vendors in the event that the main vendors cannot fulfill your orders due to an emergency.
Make sure to let your vendors know that you are consolidating and you may receive lower bids from them for products that you are regularly purchasing. By allowing them to compete with one another, you could end up saving your business money.
Reduce Maverick Spend
Rogue spending can account for up to 80% of purchases in a company that lacks efficient procurement software. Conduct a spend analysis by looking through spend records to find any uncontrolled spending. Once you’ve seen any, assign it to your preferred suppliers. Next, go over your process with your team so that they know when they are spending in excess.
Improve Risk Management
You can improve your risk management by making sure that your procurement process doesn’t rely on just one major supplier. Pay attention to your contracts and follow up with suppliers. Take action to avoid logistical issues, like planning for a back-p supplier. All of this will help your business run more smoothly, especially if any of your vendors have hiccups of their own.
You can also renegotiate your contracts with value-added services that will help save you money, such as extended warranties or free shipping.
Reduce Internal Costs
Streamline your processes to reduce internal operational costs. Take a look at your current PO system and find out which processes can be automated. The more automation your procurement process has, the more work your employees can get done in one day. This efficiency will help your business accomplish more tasks in the same amount of time.
Utilize Category Management
Category management will help you find opportunities to save money and cut down on your internal costs. By creating exclusivity agreements, you can boost your profits.
Avoid Leakage
Spend leakage will happen when spending occurs outside of the terms of the contract. Your procurement process should monitor everything for compliance, including payment terms. If any non-compliant purchases are made, which caused leakage, procurement can help prevent it from happening again.
Bid and Quote Management
Compare prices by allowing companies the opportunity to bid for their work. Their bids should include how their company will solve your business problems and provide an estimate for their work. This process will help you receive high-quality goods and services at competitive prices.
If you notice that a company you’d like to work with if giving you a higher bid than you’d like, contact them. You can ask if there is any way you can work together for a lower amount. You may also give them the average bid amount and tell them you would like to stay in that range.
Up-Skill Employees
Many businesses don’t want to spend money into training their employees. However, by doing this, you can improve your bottom line in the long run and keep your business running smoothly. Investing in training to develop certain skills, such as negotiation skills, or training them how to use a procurement system, will improve the whole procurement process.
Remember that your employees are your most significant asset, so investing in them is like investing in your own business. If you have someone in the company who would be a good teacher, schedule them for some time to train other employees how to do their job. While you may lose money for just that day, you will earn it back and then some as your employees learn new skills.
Review Terms
Review your suppliers’ terms and discounts and make a master agreement. Talk with your suppliers to find savings by changing your purchasing patterns. Buying in bulk may save you money from one supplier but can cost you from another.
You will want to make suppliers compete with one another so that you can get the best terms. You can do this by telling them another supplier has agreed to certain terms in your favor and that you will only be able to work with suppliers who can meet those terms.
While some suppliers won’t allow you to change your terms, they do want your business. It’s in your best interest to try to find ways to work together and come up with a solution that benefits both parties.
Use Technology
Technology can improve efficiency and keep costs down. E-procurement software, for example, can help your team communicate faster and get more work done. Utilizing technology is one of the most effective ways to increase the procurement process cost savings.
Work Together
Communicate with your employees and stakeholders so that you can work together to come up with a plan. Your goal should always be efficiency and effectiveness. If you are finding that too many mistakes are being made in the procurement process and notice that it costs too much money to keep fixing these issues, brainstorm how the company can better work together.
Make sure to include employees across apartments since finance, human resources, and even your assistant may all have ideas that can improve the process.
