Procurement involves managing all aspects of buying goods, services, and equipment for a company or organization. There are many barriers to procurement success. A simple lack of budget may be one obstacle, but a thornier problem could be poor procurement performance. Procurement managers have to worry about understanding cost-saving opportunities, meeting fixed budgets, and staying within scope. Almost every company has an acquisition function, which is the key factor in delivering value for money. Now, read this article to get some thoughts for improving your procurement performance:
- Receive competitive market research before making your next purchase:
Receiving competitive market research is crucial in any market. For example, if your company needs to purchase a new computer, you must find out what your competitors pay for the same item.
- Prioritize initiatives and stay focused on one goal:
Prioritizing initiatives will help ensure that you concentrate on the most important things. For example, if your company wants to make savings by reducing costs per unit of production, rather than looking at all the costs in isolation, a better option would be to reduce costs overall by changing products or sourcing materials more cheaply from another supplier.
- Use an online sourcing tool to help you source the right products:
It is important to source the right products. If a supplier cannot provide you with the product you need or wants to charge too much, it can be time-consuming and expensive to find another supplier who will. An online sourcing tool can help you find the best price available at any one time. This can save you a lot of time and money by helping you avoid paying too much. However, there are some risks in using such tools, so check them out carefully before making purchases.
- Don’t neglect the basics:
Effective budgeting is essential to good procurement performance. It is important to sort out your budget about the actual performance and identify where savings can be made. One way of doing this is by looking at costs per unit rather than total cost. For example, if your company buys 3,000 toner cartridges a year and can buy them for $25 each or $20 each, it is much more important to cut costs per unit than save on the overall amount spent.
- Keep up-to-date with new legislation:
New legislation may have an impact on your ability to make purchases. You will need to keep up-to-date with new legislation to make informed decisions regarding your company’s purchase orders. For example, the post-2008 general information directive makes it mandatory for companies to have a supplier code of ethics. This prevents fraudulent trading practices, including the sending of false invoices. It has become an important instrument in helping companies cut costs and stay within their budget.
- Get your managers involved in making decisions:
Managers should be involved in deciding where savings can be made, such as where products can be sourced from at a lower cost or where suppliers can provide better prices on products. For example, if your company has two competitors that both buy specific types of printer cartridges, you may wish to negotiate with each supplier individually and try to get a better price. This could save a lot of money.
- Use technology to improve procurement:
New technology can make processes in the procurement of goods and services more efficient, such as through e-procurement systems. There are many benefits in using such systems, including getting multiple suppliers to bid on your business, automating purchasing processes, and a reduced lag between receiving an order and delivering materials or products to your customers. This is relevant for many businesses because delivery time is often a factor determining who your customers will choose for purchases or services.
- Learn from previous mistakes:
You can avoid wasting time and money on future purchasing scenarios that involve bad choices or poor outcomes by learning from mistakes. One common mistake is underestimating the time and money needed to manage your purchases. This can lead to wasted time, money, or unnecessary products.
- Make sure you understand your company’s core objectives:
When setting long-term goals for procurement, you should make sure you have a clear understanding of your company’s core objectives within each sector to better manage and plan for spending. For example, if your company’s core objective is customer satisfaction, then you must focus on keeping customer service up to scratch at all times, with new technology coming into play constantly.
- Consider all the costs involved:
Often Procurement Managers overlook one important cost when purchasing goods and services: manpower. There are many costs related to the labor needed to change a product, cut a product price, or modify an order. This can include the cost of training employees, meetings, and more. Also, consider the extra costs involved with office space, equipment, and other overhead costs.
By following these ten tips, you should improve your procurement performance, saving your company time and money.