Procuring business supplies could probably be done more cost efficiently than it already is. It’s the fastest way to increase profits – by reducing your expenses. Even what’s considered low value contracts; can over time, add up to a wholesome amount.
To really take control of your costs, a strong focus on your procurement process is vital.
5 Ways to Enhance Your Procurement Process
1) Work with the Total Cost of Ownership
One of a few factors considered by anything for your business is cost. Typically, you can expect cheap to last a lot less time than more expensive products. When you buy something, you want it to last. It’s why there is such a thing as depreciation accounting.
Invest in the best and you won’t need to spend more capital on replacements. This applies equally to supplies that affect what your customers receive, which extends to every area of your business including your telecoms, as you need the service to continue working for customers to reach your support team.
Every operational expense you have requires a focus on the total cost of ownership at the initial discussions before contracting, rather than agreeing to the cheapest proposal put forward.
2) Use demand planning for inventory management
The cost of over stocking can be exponential. In particular if you’re paying for square metres in storage costs using warehouses. Those costs can become extremely pricey if you’re ordering too much and holding.
This is particularly problematic when your supplier agreement is based on a minimum order quantity. That can see you get a good unit price but on bulk order pricing only, which results in you carrying an over-stock and therefore the savings are rendered useless as they’re just diverted elsewhere.
To manage your supplies and suppliers more efficiently, plan your orders according to what your customer demand is.
3) Incorporate TBL into your business
John Elkington coined the phrase ‘Triple Bottom Line’ back in 1994. It’s an accounting framework referred to as TBL or 3BL. The framework has three parts to it.
In other words, green procurement/sustainable procurement are nothing new. It’s been around for decades but essentially it’s the same as the TBL approach which has helped many a business prosper.
These days, it’s not really an option whether you go green or not. Consumers are looking to buy green products and suppliers are building in green initiatives into their operations. In some cases of RFPs, it’s stated outright that all proposals are to include a copy of the green initiative the company uses.
4) Use strategic sourcing as a pillar for growth
When you source strategically, you aren’t focusing on any one area, such as price alone. The needs of the customer, your employees, your business, and anyone that can be affected by quality or even by a social impact such as higher waste due to poor quality is considered. It can cost more upfront using strategic sourcing, but in the long-term, there’s extreme value to be had, including increased customer longevity due to the higher customer satisfaction, which will eventually bring your cost per customer acquisition down.
5) Manage Your Alliances
Every supplier you work with brings a new business relationship with it. You need to manage that, but what some companies get wrong is assuming that supplier management is about taking control over the service being delivered.
It’s about two-way communication being used to align the supplier and buyer together so that they work collaboratively to bring better value, which eventually trickles down the supply chain to benefit your customers, again, lowering your cost of customer acquisition.
The more you focus on bringing costs down in-house, improve your working relationships with suppliers and focus on value acquisition, the more profits can be reaped, whilst simultaneously increasing customer satisfaction.