When people talk about streamlining procurement, big industry words are thrown around often. Words like ‘oversupply‘ or ‘open communication’ leave beginners feeling confused and lost. It’s time we bust through the jargon and talk straight. No big words, no weird terms. I’ll be breaking down the top tips for making your procurement process quicker and cheaper, with less effort.
Inventory Management is Critical
Legendary war general Sun Tsu once said, “If you know neither the enemy nor yourself, you will succumb in every battle”. While he was speaking broadly about war, I’ve found that it applies to procurement just as aptly.
Knowing what’s in your inventory is important in two ways: it prevents you from buying too much or too little and prevents wastage as well. The biggest cost savings that can be found when streamlining procurement are here — inventory management.
For companies dealing with expensive materials (heavy machinery, electrical supplies etc), being crystal clear about your stock allows you to allocate and deploy your resources effectively to prevent overbuying from happening.
Companies dealing with perishables (wires, gas etc) would benefit from knowing with clarity their usage and how much they should buy the next time round.
While no one enjoys doing a stock-take, especially when the company’s inventory numbers contains thousands of products, there are substantial savings to be had.
Ensure that you have a good manager who is detailed and keeps an accurate picture of inventory, ideally with a robust inventory management software. That’s half the battle won, right where you are!
Decide on a Procurement Policy
Everything else in a business follows a specific plan of action and rarely deviates from it. From operating systems to business documents, there are always specific steps to take in achieving a business goal. Why should procurement be any different?
Formulate a Procurement Policy. This should cover the entire scope of your procurement process: sourcing quotes to purchase. For example, you may require your procurement officers to take 3-4 quotes from different suppliers, vet the best item and then send it to their superior for approval. Feel free to flesh it out with as much detail as you’d like!
With a policy in place, procurement officers and managers would be held with more accountability for their decisions but the key benefit is quality control. This strict vetting of purchases almost always guarantees that the quality of products will increase immediately. While these changes may seem overwhelming, you can always implement them in smaller steps. Maybe start with determining the criteria of suppliers you’re purchasing from: scrutinise things like operational history and track record. Do you really want to buy items from a no name shady businessmen?
Procure in Bulk
Part of streamlining procurement is being strategic when purchasing. The most straightforward manner in which this could be done is to buy in bulk. Seems pretty straightforward, doesn’t it? You’ll be surprised how often this is overlooked.
Be sure to communicate often with the other heads of departments in your company and ask them what they need in bulk. From consumables, machinery to even beverages – find out what you can purchase in large quantities at once before reaching out to suppliers. Sometimes you might even find that different departments may need to buy the same things!
Price is NOT Right
As we all know, in our capitalistic economy, we all want the lowest price for our goods. However, this is a rather short-sighted viewpoint. Instead of looking at suppliers from an outside perspective, we should view them as business partners. These are the companies that support yours and makes sure that your procurement efforts go smoothly. Look out for more than price: quality, maintenance and service levels are all important factors to consider when procuring. The relationship between suppliers and you should be one that is tight knit and mutually beneficial.
Taking the time to build up a good working relationship with your suppliers is very important and goes a long way in getting you a whole lot of benefits. Better prices and better quality goods are just the tip of the iceberg in terms of what a good supplier relationship can net you.
Procurement has been around since the beginnings of corporations, but there are still improvements to be made with the aid of technology. Interested in more procurement articles? Read our take on B2B e-commerce!