How SMBs Can Control Costs With A Streamlined Buying Process
Buying items and services is a necessary evil of doing business, its operational costs. Smaller sized businesses tend not to pay too much attention to detail and it’s a costly mistake to make when it comes to growth.
The larger your company becomes, the more you need to buy in. That’s not just for raw materials for a production process either. Even hiring staff will eventually take a team of HR personnel to recruit the right talent to the right position. PR staff is needed to target media campaigns to get new customers through your doors and paying for your products and services.
The more your company grows, the more you’re going to need to spend.
For that reason, the best time to optimise your expenditure is before you expand. Having a clearly defined procurement procedure and policy in place is the ultimate way to gaining a huge competitive advantage.
Applying the two out of three process to procurement
When you’re at the beginning of a buying stage for any business supplies, there are only three words you need to remember.
1) Fast
2) Good
3) Cheap
In a perfect world, you’d have all three of the above from a supplier. Thing is though… it’s not an ideal world so you can only have two. Pick.
· Fast and good
· Good and cheap
· Cheap and fast
But never fast, good and cheap.
To strike the right combination, there are a couple of things you need to do. The first is to be exquisitely clear in your objectives.
If you’re renewing a print contract, why do you want to change supplier? Is it due to poor customer service? If that’s the scenario, then perhaps fast and good would be a good option to aim for. If on the other hand you were to be sourcing stationery for the office, cheap and good quality products may be a good combination.
The trick to effective sourcing is prioritising your needs. Basing it on the level of service you need. Do you need it fast? If so, expect it not to be cheap.
Time is money after all and if you’re in a rush to get supplies, suppliers will be in a rush to add a mark-up for the speed of delivery.
Even the Royal Mail won’t give you a next day delivery service without insisting on a premium. They’re in the fast and good category. Cheap, it’s not if you want it fast. If you want cheap, it’s second class postage which will be good and cheap, with the sacrifice of fast.
So ask yourself what you need. A fast service, good quality, or is price the deciding factor?
Once you can honestly answer that, then you move onto the next question of where do you get what you need? This is the investigative stage and it’s where you’re identifying potential suppliers.
What makes a supplier considerable?
You can break this down into a five step process…
1) Set a well-defined criteria that potential suppliers must meet
This could be things like the supplier must be:
a) Local
b) Have a stringent quality control process
c) Have a reasonable minimum order quantity
d) Reasonable payment terms and conditions of service
e) A clear returns or guarantee policy
f) Have verifiable references
What you’ll find at the early stage of buying any B2B service is there are a lot more suppliers than you initially thought.
2) Define the process you’ll use
When you have your potential suppliers lined up, you need a process and a time scale for assessing suppliers against your criteria. At this stage you should also be thinking about the method of outreach. Will a trade publication be sufficient in letting suppliers know what you need, or will you have someone appointed from within your company to put RFPs (requests for proposals) out to potential suppliers?
3) Ask for the bids to be submitted
The full details of the products you need or the services you need supplied to your business needs to be clearly stated in a written document so that suppliers can get a full understanding of what you require them to do. Clarity at this stage is crucial for getting a correct quotation and the negotiations set off on the right foot.
4) Evaluate each submission received to select a partner and negotiate terms
Evaluation can only be done when all the bids have been submitted. For this reason, in your briefing to suppliers, give them a reasonable deadline to have their proposals submitted for consideration. Once that deadline is reached, evaluate your responses to narrow the selection process and decide which supplier best meets the criteria you set at the beginning stage. Any supplier submitting a bid past the deadline should probably be dropped from the process as they’ll have missed a deadline before you start working together. Start the way you mean to go on.
5) Monitor the supplier continuously
Even the best suppliers will have a hiccup here and there when something goes wrong therefore plan for that to happen by assigning someone as a named contact to oversee the contract. They’ll be responsible for performance reviews ensuring the supply provision is overseen and also for managing the relationship with any key person involved in the service provision.
In our experience, rapport has been essential to long-lasting relationships with suppliers, making it easy to sustain a healthy working relationship that benefits both businesses while making the renegotiating stages flow much smoother and more beneficial.
Ultimately, the better the preparation is in the early stages of the buying process, the better clarity there is, resulting in clear communication with much less misunderstandings.
Image courtesy of krostewitz.com.
Getting Ahead With Procurement Processes
It doesn’t matter what size of company you have, you will have suppliers, overheads and bills coming in that need paying. You’re also going to have contractual obligations, whether or not you have an internal legal team and/or procurement team at your disposal.
No matter the size of your operation, you must control your overheads otherwise they’ll rip your organisation apart.
Late payments, supplier difficulties, delayed deliveries, expired contracts, rates increases etc. The list goes on.
What tends to happen in business though is the early stage start-ups focus on strategic growth without concern for the consequences.
Growth will happen when you put the efforts in and focus on strategic growth tactics, but when you do find your organisation growing, so too will your obligations, probably your staff and most certainly your overheads.
The more obligations your business has, the more reliant you will become on your suppliers. Without careful management, you risk your business being placed in a vulnerable position should your supplier find themselves with a competitive advantage because of your inability to control your procurement processes.
You absolutely must have processes in place, policies to control them and strategic systems to manage them both. Without those in place, your overheads will increase – substantially if you’re not careful.
Why be bothered with all the hassle?
If you’re focusing on growth right now, get yourself ahead by preparing for when you reach that stage. Visualise your business a year from now, two years from now, five years from now and you’ll likely see yourself going places.
Perhaps you’ll have a team of 50 employees or you could expand your operations by opening on more sites, hiring more people to aid in your expansion, in which case, prepare for that time.
What procurement specialists can do to help you prepare
If you don’t have the capital to invest in your own procurement staff to get things under control, outsource your outsourcing. The reason being that whilst the cost-savings will take longer to experience, you won’t be wasting cash flow in the short-term by spending on growth strategies to see the fruits of your labour wasted. You will retain more of your profits by having proficient supplier management processes in place, preventing things getting out of control.
All too often, what happens is companies experience expansion, then realise too late that they’re spending way more than they’re comfortable with and then have to bring in experts in procurement to clear up the mess made by inefficient sourcing and supplier management.
It prevents the battle of all battles…
When companies look to bring about cost efficiency, procurement experts are trusted to deliver on savings. To do that, it takes strategic sourcing, contract reviews, a huge advisory role and often a complete transformation of sourcing due to non-existent procurement policies.
As such, the savings commitment you will be looking for, will take longer to deliver because more tactical groundwork will need to be done before savings can be realised.
For any business focusing on growth strategies right now, get prepared for the increased obligations that accompany that by putting in place efficient procurement policies, and processes to manage the increase of suppliers and the relationships that come with them.
The more proactive you are with your procurement; the more savings you’ll lock-in before you start wasting it on inefficient sourcing methods.
Image courtesy of norcazacademy.co.za.
Why is ‘big data’ a big deal?
It is common knowledge that the world has become more digitally complex over the recent years. The advanced nature of digitalisation has increased interconnectivity between people and businesses alike. Defined networks now make up the infrastructure of our technical, social and working environments. As technology grows more and more powerful, its partnership with mathematics has opened the door for ‘big data’.
Big data has been defined as “extremely large data sets that may be analysed computationally to reveal patterns, trends, and associations, especially relating to human behaviour and interactions.” Big data can become a popular and seductive concept for procurement leaders, providing them with beneficial analysis and the answers to many burning questions. Queries around to how to reduce costs, increase competitiveness and heighten profits can all be answered with the help of big data. However, leaders are still apprehensive that a computer can present such answers to crucial decisions. Therefore, in order to get the most out of big data, the users need to be educated and confident about how complex and accurate this data can be.
The ability to apply tailored tools and options allows us to create a much more complex purchasing environment and therefore aiding better outcomes. The collaboration with globalisation and technology also provides businesses with information on specialists markets and cultural differences, aiding supply chain relations. This complex marketplace analysis does not only outline purchasing behaviours but also anticipates the future strategic challenges and potential new opportunities.
In order to successfully evaluate business scenarios, it is recommended that you should focus on planning on how to execute your new procurement strategy. Having the ability to effectively comprehend and focus on complexity has provided procurement with the opportunity to enable cost-effective growth for many businesses. This successful understanding has had outstanding results for many procurement departments, making them able to quickly move into expanding markets, reduce cultural barriers and allowing for a greater overall competitive advantage.
Gaining data surrounding global market intelligence also allows leaders to identify potential procurement hot-spots and enables better decision-making to be carried out. This in-depth thinking can dramatically affect procurement, putting it at the top of its game. The results should show a positive and genuine ROI. In contemporary procurement departments, having the ability to read and analyse these complex data sets is a highly sort after skill. Partner this with the ability to visualise and outline the road ahead will be the biggest advantage for successful future procurement.
Top 5 biggest threats to the world right now
Everyday we are faced with headlines containing the word ‘threat’ or ‘crisis’, but what actually are the biggest threats that today’s world is facing?
Prior to the World Economic Forum next week, results have been released following a review of the biggest issues that could affect the world over the next 10 years. The same analysis from last year’s survey listed state conflict and water security high up the list of global issues. However this year’s report, carried out by over 750 experts, identified all the significant environmental, geographical, political and economic threats that may worsen in the next decade.
Here is a list of the greatest risks found following the World Economic Forums research:
1. Unemployment
Although economic issues feature far less prominently, unemployment still remains an important issue. A slow but steady economic growth reduces the likelihood of another financial crisis happening any time soon, but the likelihood of unemployment still remains high. Consistent joblessness keeps inequality within society and causes a lot of social tension. Yet again, the opportunity for global prosperity remains out of reach. Vast technological advancements and a slow economic growth also mean that unemployment is set to be a long term issue.
2. Migration
Headlines of the large scale migration crisis reach us on a daily basis, but this issue will expand further over the next 18 months. This involuntary but necessary mass movement of people in the past year is set to continue, overtaking other potential global risks. Records show that over 60 million refugees fled from their homes in the previous 12 months. The government and policy makers have to prioritise this crisis and support those in need.
3. Climate change
Even though migration has the greatest likelihood of persisting, climate change looks to have the greatest overall impact on the world. The inability to confront the issue of the temperature rising means that climate change has now been classified as a Global Risk. This was outlined before the 2015 Climate Change conference in Paris. However, dealing with the effects of climate change can prove a much more complex task when compared to other issues,
4. State Conflict
The results from the survey also revealed that one of the biggest threats to affect the world in the next 10 years will be from political tensions. Such crises including that in Ukraine, Middle-East, Russia, China are all suffering from strained relations and strategic power struggles. Although these struggles are not directly violence related, these issues can cause global instability in both the present and the future.
5. Oil Prices
Oil prices have dropped to the lowest prices since 2004. This reduction in price has come as a positive shock for the global economy and has helped from consumer spending. The recent results shown that petrol may even become cheaper than bottled water in the UK. However, experts say that the quicker the price reduces the faster it will rebound. These potential higher prices could squeeze consumers and increase global inflation.
The Hidden Law That Could Be Undermining Your Business
Do you walk the walk, or talk the talk? You can’t do both, so which is the most effective for your business?
An interesting perspective from ‘Yes, Minister’ helps us to open our eyes to a hidden corporate culture. In the initial chapter, we are introduced to the Open Government white paper. This document provides proof that they intend to help the minister implement his stated policy goals. However, as times goes on it is revealed that this document is actually a prime example of the Law of Inverse Relevance.
“The less you intend to do about something,
the more you have to keep talking about it.”
Understanding the Law of Inverse Relevance, might seem far away from what you considered the business environment to be like. However, once you surpass the confusion, it all become clears.
For example, you are scouring through a global conglomerates website and come across their well scripted mission statement. In relation to the Law of Inverse Relevance, this statement is merely a piece of text that they want people to believe that represents their company and what they do. However this representation isn’t what they’re actually doing. Simply writing a good quality mission statement isn’t enough – don’t just talk the talk.
This law provides explanation of why you are more likely to get ripped off at “Honest Harry’s Hardware Store” than a basic hardware shop. Another good example is an MD stating that his workforce is “one big happy family” when the reality is it is a group of dissatisfied, unhappy workers. The Law of Inverse Relevance also explain why companies employ Ethics Officers, Diversity Policies, CSR and Environmental Standards departments. It is a purely for perception.
But don’t panic, all this talk is actually saving you money! Because it’s keeping you from getting things done.
This law has brought to light some interesting revelations, including:
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Some of the most successful businesses don’t have mission statements, because they know what they are aiming for.
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The top innovative businesses rely on their customers to decide whether their new products are good.
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Socially responsible businesses act responsibly from personal interest rather than for a good perceived reputation.
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The best leaders portray great leadership rather than spending time and effort claiming to be excellent leaders.
The principle is simple you either “talk the talk” or you “walk the walk.”
