5 Ways To Improve Procurement Efficiency
5 Ways To Improve Procurement Efficiency
Employees are constantly worried about job security, mainly because when they hear financial troubles are brewing, the only way they know to be the fastest cost cutting exercise is to let staff go.
It’s a worrying concern for employers too because it leads to low staff morale. For that reason, when budgets are being tightened, it’s imperative to get staff aboard so they know there are steps being implemented to save jobs, which are often front line positions and imperative to business growth.
5 Things Businesses Can Do To Improve Procurement Efficiency
1. Have monthly board level involvement
MDs rely on their teams to be ensuring efficiencies are happening, however, at board level, procurement should always be visited. Best practice would be monthly because there’s always going to be somewhere with a high expense becoming worrisome.
For procurement teams and finance departments, some can feel as though they are on their own to deliver results.
When they can get board level involvement and support where applicable, they can then work with seniors and executives across all departments to ensure they are focused on priority issues. Priorities can change rapidly, which is why board level involvement on a monthly basis will help identify category risks, ensuring faster response times to addressing cost cutting opportunities.
2. Encourage staff to improve work efficiency
There’s been many a survey completed to establish how employees feel about job security and you’ll know from each of them, it’s not good. Many feel their jobs are at risk, even if the company is sailing along with plenty of capital.
Employees know that it takes money to keep your business operational. What they don’t know is everything they can be doing to make their work more cost efficient.
It could be as simple as turning off computers when at lunch and looking up telephone contact details online, rather than dialling a directory service at premium rate numbers.
Whatever employees can do to lower the cost to your business, the majority will be happy to oblige.
3. Put clear objectives in place for your procurement strategy
These days, procurement activities need to be strategised because of the expense involved. It’s not unusual for 50% of expenditure in procurement. You can be tactical about it but you’ll see better results with a clear strategy in place.
The best case scenario is when your finance team can obtain key finance information for transactions with only a few mouse clicks. Much of the buying process is now technology driven, with cloud services lending a major hand towards automation of frequent tasks.
If something can be automated, do that. If it can’t, improve efficiencies to ensure procedures aren’t too labour intensive, which become costly fast.
The best procurement strategies anticipate changes, and have adaptive supply chains so they can quickly react to circumstances that could disrupt logistics, putting merchandise and revenue at risk when supply can’t reach stores and offices.
4. Give sales reps on site time
Years ago it was common practice to employ sales reps, pay them a minimum salary with a commission per sale paid as a performance bonus. It’s still used, but these days those reps are not out consistently selling. They are in-house, viewing the product lines, reading over technical information and receiving training on the products they’re paid to promote.
You can’t expect your front line sales team to perform excellently when they aren’t familiar with what you do. A one-day training exercise doesn’t cut it. Every sector is far too competitive. This goes back around to #2 above – get your employees aboard.
5. Always be monitoring risks
Risks are everywhere. You never know when they’ll strike but when you do, you must be on top of it and fast.
Risks can come from manufacturers failing to meet production targets, disruptions to logistics operations, retailer disruptions if stores can’t be opened for whatever reason, and also from customers reflecting poor experiences of doing business with your company, for which there are some firms now employing reputation management teams to monitor social media and also extend their customer service to third party platforms to mitigate risks posed by customers. If your company is outsourcing to a reputation management service then you need to work that into your procurement strategy too, ensuring you get best value.
Every supplier has costs and those that must be managed.
No matter how efficient you feel your business or department is operating, chances are, when you look deeper, there’s going to be cost saving opportunities somewhere.
5 Ways To Improve Procurement Efficiency
5 Things Businesses Can Do To Improve Procurement Efficiency
How The UK PSC Register Affects Procurement
How The UK PSC Register Affects Procurement
The Register of People with Significant Control Register came into effect in April of this year. On the surface of things, the majority of businesses won’t be affected, other than the registration requirements. However, in the case of procurement, there is one thing every business owner absolutely must know.
That is…
How the Public Register of those with significant control will correlate to the Bribery Act 2010.
Back in 2011, Ruth McNaught, Solicitor of Harper Macleod LLP, wrote on the Govopps.co.uk website about the Bribery Act 2010 and its Effect on Procurement. In that article, Ruth wrote:
any other person who has powers of representation, decision or control
of the economic operator has been convicted of these offences.”
The contracting authority must have actual knowledge that the bidder, its directors or any other person who has powers of representation, decision or control of the economic operator has been convicted of these offences.”
As you can see from the information above, the persons with control in a business has been for a while now, a factor in the procurement process. What’s happening now though is with the register being publicly accessible, it will tighten the Bribery Act further by giving all commercial businesses access to information they’d previously only be able to acquire through some deep digging around and probing for information.
With the PSC register, anyone is able to get the names of each person with significant control of a business, making it much more accessible for commercial enterprises to know exactly who they are doing business with.
For the purposes of commercial contracts within procurement, where anyone named with control is known to have practiced unethical business in the past, it could rule your business out of the tendering process completely.
Back in 2011 when the Bribery Act came into effect, it set the UK as a global leader of anti-corruption, setting the bar for the highest of ethical standards. This new PSC register takes things a step further to champion the UKs strong ethical standards.
In order to comply with the Bribery Act 2010, the government issued guidance for businesses. You can find those guidance notes here. Section seven is important as it puts responsibility on business owners, requiring organisations to take active measures on preventing bribery from happening in commercial organisations.
The guidance notes don’t go further to give measures that business owners can take to prevent it however we did find a good resource at theQCA.com website, which you can view here.
All government publications regarding the People with Significant Control Register can be found here.
With the strengthening of anti-corruption legislations, and tougher sentencing, with the potential for disbarment as a company director, it’s putting a lot of pressure on SMBs to carefully consider who they have aboard their organisations and to ensure they are compliant with all relevant legislations, which is now not only relevant to business owners but also extending to those they trust with control over how business is conducted.
Anyone with significant control in any business must be trustworthy and most certainly not convicted of any offences relating to unethical trading, in particular in relation to the Bribery Act 2010.
As a member of the Chartered Institute of Procurement and Supply, we ensure that every supplier we deal with upholds the same high ethical standards as our firm, for which the PSC register will be able to help us trust who we partner with. There will be other businesses using the register too. It’s for this reason we advise business owners to carefully check who they are associated with as it could impact on tendering processes.
How The UK PSC Register Affects Procurement
The Real Teamwork Required For Cost Efficient Buying Processes
The Real Teamwork Required For Cost Efficient Buying Processes
Business transactions are far more complex than most staff members give the finance team credit for. It seems to be only the professionals in organisations that really get just how complex purchasing can be.
Then there’s the purchasing word itself. There are some professionals with a heavy dislike for the term purchasing; taking the view, rightly so that it is a transactional based buying process, when in reality, procuring products and services takes a whole spectrum of issues into consideration.
Purchasing departments often have buyers appointed to deal with commercial contracts and make all the buying decisions. There comes a point in larger enterprises though when buyers just can’t keep up.
When that time comes, procurement departments are put in place and those staff in there must be team players, because there’s a list of other team members they will need to work well with alongside, with everyone acting in the best interest of the business.
6 Teams involved in the buying process
1. End users
Every team member must have tools to get their job done, but rarely do they get to buy the tools they need. They need approval from the finance department and then the finance team pass the information to the procurement team to get started with the purchasing.
End users should always be involved in purchasing decisions because they know the tools they need to get the job done.
2. Finance department
This is the department that the majority of staff thinks has money to throw around. In reality they’re working to tight budgets and juggling figures left, right and centre to stay within the assigned budgets.
To get budgets going further, procurement teams are often in place to ensure they get the best value and services they can for the money going out.
3. The procurement team
In large organisations, there are buyers appointed. These are people who many think have a whale of a time doing their job because all they do is buy stuff.
Sounds fun!
That’s far from the truth as you may well know, because business transactions require contracts to be put out to tender, procurement compliance, knowledge of commercial contract law and many other factors.
4. Legal teams
It’s rare for in-house legal teams to be involved in buying processes but it has been known to happen with large contracts.
The public sector especially given the huge amount of sums involved in many projects.
Housing development, and commercial developments where there’s significant oversight of legal compliance required often need the input of either an in-house legal team or a legal advisor on retainer to oversee projects ensuring everything is done above board.
5. HR departments
In case you’re a student, we’re talking about Human Resources here. This is the team that does the hiring and firing, ensuring that when the firing stage comes, the employer isn’t going to lose a legal battle if an employee takes them to a tribunal for unfair dismissal.
Where HR comes into the procurement process is with regards to uniforms, and perhaps PPE equipment, for which staff will raise concerns with HR who then liaise with other teams to get whatever equipment is required. This department will also be responsible for attracting and retaining top talent within the company.
6. Marketing teams
When there’s corporate branding required, the marketing team will have input into the buying or hiring process of equipment when it’s going to strengthen and/or promote the brand.
When anything affects a brands image or reputation, the marking team is there to capitalise on opportunities to ensure the business interests are maximised for growth.
In conclusion
With all the teams and members involved in them, it’s easy to see how things become far more complex than they need to be. Buying decisions are not made instantaneously and there are some contracts that can be put out to tender, taking months to go through terms and conditions, whilst always ensuring legal compliance throughout.
That’s the process of the larger corporations, so as you’ll imagine, without the right teams in place, small businesses will have a hard time getting the best value on services bought because they don’t have all those people in-house to work through everything.
If your company is one or more team members short, or lack the specialist knowledge you need to procure the best services at the most cost efficient price – outsource it, because it’s far more cost efficient.
For small to medium sized businesses, it’s rare that you’ll be able to get the best value without input from different teams with collective knowledge and negotiation skills.
Does your company need a specialised cost cutting exercise done?
Call the Procurement Group on 0800 0193 244 or click the link below to contact us.
https://procurementgroup.co.uk/contact/
