How to Navigate Business Telecoms Like a Pro.

According to the OECD, Britain has one of the most expensive digital networks for businesses to use. We also have one of the most comprehensive, albeit with some black spots. So, what can you do about it?

1. Use a price comparison website.

Opera singers, pole dancing builders or meerkats… what a choice! These websites are great at comparing different deals from the main suppliers. But hang on… can you use these websites for your business? Well, no. No price comparison website we’ve seen does business telecoms. So, it’s a good job that we do! No opera, pole dancing or meerkats; just comparisons presented to you simply.

2. Check this map

Is your business operational in any of the weak signal areas? If so, it might be worth checking which suppliers offer the best service in that area. However, the maps might not tell the whole story and do you really want to find that your CEO lives in a black spot after the contract is signed? We have proven, tried and tested ways to ensure that you are 100% clear about coverage in key areas before signing your contract; it’s just another component of our Intelligent Cost Reduction plans.

3. Achieve Fair Market Value

You need to make sure that you are not sacrificing your business’ telecom’s customer service, voice/data quality and payment terms to get the cheapest deal. For business telecoms, alongside the price, we recommend listing the:

• billing cycle
• payment terms
• contract length
• call connection charges
• online billing access
• account management
• broadband upload/download speed
  

That way you can ensure your business achieves Fair Market Value. At The Procurement Group, our purpose is to help our customers achieve Fair Market Value. Our Intelligent Cost Control plans are not just about price; the plans are enshrined in a commitment not to  compromise service, product quality and payment terms.

That’s it! Simple, right? Now you can navigate business telecoms like a good ‘un. However, is that enough for your business? If you want to be a pro, why don’t you navigate your telecoms as a Procurement Group client? Call Simon Unger today on 0800 019 3244 to have your free 15-minute telecoms review. Or e-mail him now!

How To Maximise Your Buyer Power

The larger your business, the more leverage you have with suppliers. Instead of suppliers manipulating their pricing for maximum profits, you’re able to use your spend knowledge to leverage buyer power, bringing cost savings to your business, while still making it a valuable proposition for suppliers to favour working with you.

It all starts with categorisation.

Using categorisation of sales to leverage bulk price discounts

1) Item categorisation

It’s one thing to list an item but it’s quite the other to tag it to the right category. One way to categorise items being purchased is to use a hierarchy.

1.      Chief category

2.      Category

3.      Subcategory

Take for example replacement keyboards for computers. You could categorise that as office supplies. Using the hierarchy above though, that could be computing as the chief category, the main category, electronics, and the subcategory, replacement parts.

Costs could be cheaper by buying in from an electronics supplier offering bulk price discounts that aren’t on offer from a general supplier of office equipment.

The choice of categories gives your business more choice over suppliers rather than sticking to one general area. The reason being, suppliers in a specialised category will have a higher price per unit and therefore charge more for their expertise. It’s not to say you couldn’t get a better deal elsewhere on the same equipment.

Categorise what you buy so that you can accumulate the most units per supplier based on your category hierarchy to take advantage of bulk unit pricing.

2) Supplier categorisation

As the first step is about maximising the units you buy in at one single time to take advantage of bulk pricing, this part strengthens that to ensure that whatever you are buying, you’re only dealing with the minimum number of suppliers. That’s advantageous in itself, however what it’s also doing is putting buyer power in your favour because the more you order with one supplier, the better leverage you have to negotiate better pricing per unit.

3) Maximise category budgets

Whatever category’s your business spends on; you need to know them in order to maximise them. Ideally, what you want to do is lower the number of suppliers which reduces your administration costs, but more importantly it increases your spend per supplier. That again, puts buying power in your favour. The best scenario would be to find one supplier who can deal with your chief category, main category and sub-categories.

4) Leverage your buying power

The categorisation of items you buy will let you narrow your choice of suppliers but that’s useless if you don’t play it up. When you request a proposal for anything, stress that you’ve categorised expenditure and let suppliers know your overall budget at an organisational level and that you expect favourable pricing based on the volumes of transactions. This will also help you take out any supplier that isn’t large enough to cater to your needs.

5) Review and negotiate if you need to

When you categorise your expenditure and assign budgets to categories and then further add to that multiple sites, there’s often times extremely large volume. Sufficient enough to leverage discounts provided you work with a supplier who can meet your demands.

Some will be too small to manage your demand. Larger suppliers are often more expensive until bulk price discounts are applied because that’s the business contracts they are focused on attracting. When you match your contract requirements to the specialities of suppliers who target your type of business with volume discounts, there’s huge cost savings to be had.

The fastest way to access the savings is by categorising what you buy, lowering the number of suppliers you have and increasing your spend budget per supplier in order to make it attractive for suppliers to propose discount pricing. 

Is Your Business Ready For The Retail Water Market?

Businesses across England are set to benefit in reduced water savings, and enhanced services when the new retail water market emerges.

There’s no fixed date as of yet for when England introduces the retail sector for water. It’s expected to be sometime around April of 2017. When that happens, you could see your bill drop and quite possibly by a considerable amount.

There may be some business owners dreading the change though, thinking that it’s going to be just another utility, invoice and more suppliers, adding up to increased administration costs.

When there are admin costs, there’s savings to be had.

What’s more is that commercial water and sewerage can be combined into the one supplier. Given that business customers will be dealing with retailers, along with the new supplier comes customer service.

As things stand just now, you can’t exactly call up the water board and have an advisor come to your site to provide you with a water efficiency report. You need to bring aboard a consultant for that service. Given it’s a new market opening, new retail water suppliers will be competing for your custom so there’s no telling what’s going to be on offer.

In addition to the water services, it’s expected that other utilities such as telecoms, gas and electricity may be offered under the one contract. That will be of benefit to multi-site operations, as it will drastically reduce the administration involved. On that note, so too will be how you manage your utilities.

With other utilities, such as gas, electricity and telecoms, you can manage your bills online, including settling invoices. That doesn’t currently exist in the water market. The current water market has been described as an “analogue service in a digital age” something that will be changing when the retail water market emerges. The entire industry will change for the better, making it easier for commercial contracts to be managed, and savings made by choosing your supplier carefully and managing the contracts efficiently.

The most savings will be made (and fastest) by larger firms with multiple sites. The reason being, those are the companies water retailers will be targeting in early 2017 in a bid to win competitive contracts. Right at the time when the majority of business owners who haven’t researched prior to the water retail sector emerging won’t know much about the changes therefore, won’t know of the true potential savings.

For efficiency, it’d be wise to keep an eye on the Ofwat regulated companies so you know the companies that can supply you with the water services you need.

Companies will be required to obtain a licence from Ofwat. Those who do meet the licencing criteria will be listed on the website here.

There are two licences:

1.      Water supply and/or sewerage licences (WSSL)

2.      Water supply licences (WSL)

Some water retailers will only be licenced to sell you a water delivery service, with others being licenced for both service delivery and managing the sewerage.

What to expect when the water market opens

When the market opens (expected April 2017) retailers won’t only be providing water. There will be smart meters and advisors. Real people to help you with monitoring your water usage, increasing water efficiency, thus reducing your wastage and the subsequent charges wastewater incurs. In other words, they’ll be able to help your business become greener and operate smarter.

While it is a new market for England, it’s not unique to the UK.

Scotland opened the water market in 2008. One supplier in Scotland was able to assist a caravan park to reduce the water consumption by 20% by harvesting rainwater. With water retailers acting as advisory services, partnering with the right supplier could become a pivotal part of your environmental or sustainability policy.

Another example to come from Scotland is in the public sector where bundled deals were tailored to five schools, reducing the cost of wastewater by £56,000 per annum. That was done by increasing efficiency by 44%.

Of course, in order for suppliers to measure the results, smart meters will need used and the retailers providing the service will need to include benchmarking as part of their service provision to guarantee you that they are actually offering you a service and not just selling you water.

As with everything that involves commercial purchasing and contracting issues - research the market before committing.

For multiple sites, there will be cost-savings to be had, and those smaller sized firms who don’t expect to save much, it’s likely to be another service that will benefit from collective purchasing so every size of business throughout England will be able to benefit from the open water market when it emerges. In particular, those who bundle together water, energy and telecoms as part of an energy management strategy. With that in mind, if your energy contracts are due to renew, it may be worth holding out for a few months before committing to a long term fixed rate, which will affect the amount you can save.

Be ready to save. 

Managing Tail-End Spend Efficiently

The Pareto Principle applies to business expenditure as much as it does to many other aspects of a company. With a well-managed procurement process, strategic spending will account for 80% of a business’s total expenditure. The other 20% is where it becomes problematic because the purchases are:

·         Erratic

·         Of low value

·         Bought by people outside the procurement area without buying knowledge

What we mean by buying knowledge is that not all members of a workforce know about service level agreements, are concerned with contractual obligations, or know the specifics of buying on a commercial capacity.

That last part of staff is a critical aspect to address when you’re looking for a tail-end spend solution to bring your complete procurement process up to 100% managed level, rather than 80% managed well and 20% running amok.

4 Steps to Retake control of your expenditure

1)      Identify the low value purchases

This is one that’s pretty easy to do yet it remains undone in many a business. It can be done with just an Excel spreadsheet, but you’ll likely find whatever accounting solutions you have in place will also be capable of sorting your expenses by value.

Take a list of your expenses and arrange them from high to low. At the top will be your most used supplier. You’re likely to find that the Pareto Principle of 80/20 can be applied to your expenses. If you work with five suppliers, the bulk of your purchases will be with around four suppliers. Yet you’re likely to have many more suppliers invoicing - and often regular.

The reason being that at the bottom of your list will be numerous spontaneous purchases, occurring with multiple suppliers and be of such a low value amount that the accounts department has paid the invoices and never really investigated it.

When you delve into your smaller purchases, you can find that the total amount of them is substantial. Substantial enough for you to want to invest in making changes to minimise the leakage this problem’s causing.

Identify where the leak is by finding out the suppliers and categorising purchases.

2)      Get staff buy-in

Whatever solution you implement, staff must be on-board. Give them the information they need to know about how buying will work. Whatever they need to buy-in, have procedures in place for them to follow.

Hint: A list of preferred suppliers or one preferred supplier per category will greatly increase the volume spend and minimise incoming invoices.

3)      Implement categorical purchasing

With the buy-in of all your staff, it’s helpful to let them know about the buying process applied to procurement for strategic sourcing; the hierarchy of the chief category, main category, and the sub-category.

When staff can do this that have the authority to make buying decisions, they can then allocate a category to their purchase and divert more to the same supplier, reducing the amount of fragmented purchases. This happens much more than you think when you take into account the amount of people with buying power for low-value purchases across multiple departments requiring the same stock.

4)      Have credit agreements with preferred suppliers

Instead of being invoiced per order, have your preferred suppliers invoice periodically, such as monthly or fortnightly for high value accounts.

The reason you want to have a credit account is because you’ll have less invoices and it’ll make it plain-to-see to suppliers how much your regular spend is. This is helpful when you go into negotiations as it gives you buyer power, helping your business case for a discounted transactional unit cost.

In Conclusion

Strategic buying is difficult to roll out for every single purchase a business will make. There’s far too much involved. Things like stationery that doesn’t require office personnel to have to run through the accounts department for approval prior to purchase.  There are a lot of those purchases adding up and approval isn’t the solution. That’d slow the process down, making it detrimental to operations.

A successful buying program will have staff on-board with a policy and procedures in place so that everyone knows your policy on what can be spent and how they should go about buying what they need and will be in the best interest of the business.

Strategic buying can account for 80% of your total expenditure but if you leave it at that, you’re leaving money on the table. Combine category purchases to increase your buyer power and minimise the administrative burden that out-of-control tail-end spend brings. 

Beware Of The Air Conditioning Systems Con

The increasing use of IT equipment, the employees to operate them and the office spaces to house them has led to a surge in demand for energy efficient air conditioning installations.

Office complexes and retail outlets account for the vast majority of installations and for good reason too. Businesses need their staff to be comfortable for maximum productivity. In retail stores and outlets, temperatures are controlled for staff and customers’ benefit. The cost of maintaining optimum temperatures… well, that can get out of control and fast.

Do you know much about your air conditioning units?

Not many do. The bill comes in and it’s accounted for as energy, alongside the heating, and other utility bills. Most go about their business completely oblivious to the amount of money being thrown at energy suppliers that could be kept in the business bank account, just by having an economical air conditioning system running.

Given the climate of the UK, there’s really no need for all that much of a sophisticated system. We have cool temperatures most of the year, which allows for HVAC systems to make use of “free cooling coils”. With these, the air is drawn from outside, and then circulated to cool the indoors. The systems that waste energy don’t pull air from outdoors, but instead draw the heated air from indoors, only to cool it with a “fan” coil unit, thus wasting electricity.

There’s no point having your heating running to heat the air up, only to have your air conditioning system kick in to cool it back down again. That’s what causes energy bills to double. Yes, operating an air conditioning system can see your energy bill rise by 100%. Often is the case, it’s because of heating and air con competing to maintain temperatures.

It’s not always the system that’s at fault as it can be the installation. Energy efficiency with heating, ventilation, and air conditioning (HVAC) systems is best done with a dead band. That means that the heating and the air conditioning co-operate on the same network with a temperature differential between them for when they’re programmed to start and stop. They’re programmed to operate automatically to maintain a consistent temperature. They do need to work together, on the same network to prevent two systems competing, one heating, and the other cooling at the same time.

As a rule, air conditioning systems should not be operating in temperatures under 24^o C. Where the dead band comes in is when the heating is set to maintain that same temperature or very close to it. The Energy Saving Trust recommends a temperature gap (dead band) of 4 ^OC. This will prevent the two systems operating simultaneously.

For that reason, every air conditioning system must have variable operating temperature controls, otherwise, it would need manual oversight to operate, which would never be efficient for any business.

The Importance of System Zoning

Premises operating super old air conditioning systems are likely to lack this feature. System zoning is the most precise way to control temperatures indoors. And it’s pretty simple too.

The construction of air conditioning systems uses dampers. They open to allow air in to circulate it, and close when the room is warm enough.  It doesn’t matter whether it’s using free coil or fan coils to cool the air, when the temperature heats above the pre-set level, the dampers open and the system kicks in to reduce the temperature.

With zone controls, there’s multiple thermostats installed throughout the building, which are all connected to the systems control panel, operating the dampers. The thermostats monitor the temperature of different zones, allowing one area that’s heated to be cooled down, but not in other areas of the building where it’s not needed. For example, in the canteen, where everyone is congregating for lunch, hot cuppas, microwave dinners etc. 

For that reason, cost-efficient air conditioning systems will have system zoning unless you’re installing it in a factory or warehouse where zoning is going to make little difference.

That said though…

The Added Incentive

The government is adding incentive's to businesses to have co-efficient air conditioning units installed through the use of your “Enhanced Capital Allowance”.

Here’s the thing though…

You can’t just take the word of any supplier, or independent contractor who comes along to offer you a system with claims of 20% reduced energy consumption. There are fraudulent claims being made on some systems, and the simplest way to avoid them is to check the official “Energy Technology List” (ETL) which lists all the tested and proven energy efficient systems. You can even search on there to find systems, manufacturers, and if you get a quote on a system you’re interested in having installed, you can verify the model number is listed to back up the claims being made.

If a product isn’t on that list, the ECA claim is void. Air conditioning systems that are proven to reduce your energy costs will be listed. If it’s not listed, it’s likely it’s not as efficient as the manufacturers marketing materials are claiming.

Now, discussions for these purchases can be long, so before ordering any, be sure to re-check the Energy Technology List to ensure it is still listed as it does get updated periodically.

For those looking for a cost-efficient air conditioning system, by using the ECA, the entire cost of the installation can be written off through the allowance in the year of purchase. That can provide a positive boost to cash flow right away, and then cost savings throughout the life of the system. 

Facts That Finance Officers Ought To Know About Outsourcing Procurement

The outsourcing of procurement can be viewed by some in finance as handing over some or all of the control over the buying processes. The opposite couldn’t be further from the truth.

The truth is that outsourcing any of your procurement functions isn’t about passing over control. It’s about bringing aboard advisors, sometimes specialist advisors whose aim is to save in the short term and the long term simultaneously.

There’s many a way a procurement specialist could advise and bring expenditure down to increase net profits, but there’s also more benefits to be realised than the initial cost savings.

5 Ways Procurement Expertise Enhance Business Functions

1)      It adds a broader skill set to your organisation

When you outsource any or all of your procurement, you aren’t necessarily outsourcing every aspect of your procurement. If you have the resources internally, outsourcing adds more expertise to your existing department and also gives your staff access to other in-field experts. That can also lead to business efficiencies being enhanced, which is the sole purpose of procurement. Outsourcing can add to that, rather than replace it.

2)      Bottom-Line is Improved

All your expenditure throughout your organisation is net profit. If left unmanaged or even poorly managed, stakeholders will suffer. The objective of smarter procurement exercises is to reduce the overall cost of purchasing.

3)      Improved Risk Management

When done properly, after thoroughly investigating your options, you should be partnered with a professional organisation with a thorough understanding of commercial trading agreements, litigation matters and contractual expertise. They aren’t lawyers by right but they should possess a great deal of knowledge surrounding commercial contract laws, which will be able to serve you well on a professional services advisory capacity, which you may already be outsourcing anyway.

4)      Add appeal to your business

Clients are known to take businesses more seriously when they have a Corporate Responsibility Policy. They make it known that they are careful where they spend, making their businesses attractive to clients and investors alike. There’s a lot to be said for how you operate your business, and structure your processes to show you are operating ethically across your supply chain. That’s difficult to do without procurement expertise to assist.

5)      Frameworks can lay the foundations to your policies

Operating without a procurement framework isn’t a good idea. With one, everyone knows your policies, where they stand and the processes/channels to go through when buying anything of substance.

You don’t have to specifically bring aboard a procurement officer to implement a procurement framework, as you could approach it through outsourcing to harness the existing frameworks already used by established firms specialising in procurement.

In conclusion

Outsourcing some or all of your procurement functions isn’t just about realising cost reductions. That it will do, but it also brings about some expertise that many businesses don’t have access to and the ones that do, the additional expertise adds to it.

All of the processes work to enhance your businesses reputation, while minimising risk to your business through effective contract management and where possible, change management too, but at the heart of the process is always cost reductions. Sometimes that’s in the short-term, other times it’s the long game that’s played with a lot of strategy for huge savings across the board.

In some cases, when businesses are struggling financially, it’s a revision of the procurement functions that could essentially turn the entire businesses finances around by realising savings already missed through poor contract management or even a lack of market knowledge.

It pays to collaborate. 

England And Wales Rates Revaluation Analysis

It’s the review that’s supposed to happen every five years, but this time around, it’s took seven years as it was postponed until 2017.

The time has arrived for the Valuation Office Agency (VOA) to reassess the 1.96 million non-domestic premises around England and Wales to produce the latest draft Rating List, determining the business liabilities of every business across England and Wales.

…For the next five years!

For those who have only been in business since after 2008, your business rates are based on the 2010 valuation by the VOA. They review the Ratings list of all non-domestic premises every five years.

The business rates you pay are based on:

·         Your industry

·         The cost of plant machinery and necessary operational equipment

·         Your property price

·         Lease cost

Problem is…

The current business liabilities are based on post-recession property rates that have fluctuated massively between 2008 and 2015. The rates are valued two years predated; therefore the rates coming into effect on 1^st April 2017 will be based on the valuations from 2015.

Confused?

Here’s what happens….

The business rates payable are based on the properties Rateable Value two years prior to the Rates Revaluation that the VOA is supposed to conduct every five years.  

This time around, it’s far more significant than usual because this Rates Revaluation has taken seven years and come post-recession and post-Brexit. Businesses are looking for clarity while the government is looking for money.

Businesses Fund Communities

The rates paid through business liabilities are split 50/50. 50% go to central government, the other 50% to the Billing Authority (local council) which it retains for funding community projects.

The system has been described as being broken because it results in rich areas keeping more money, with the poorer getting worse because of a lack of investment. Many areas have witnessed the effects of this scheme when high street stores collapsed, causing a ripple effect across communities when local authorities faced financial strain and severe budget cuts.

The other 50% of revenue though is pooled by the Central Government and then used to fund poorer communities through Government Grant Schemes. In former Chancellor’s George Osborne’s last budget announcement, when he described the “biggest transfer of power to our local government in living memory", he was talking about changing the 50% split to allow for local authorities to retain all revenue collected. That would result in even more mayhem to an already chaotic system, so how the funds are to be split are still in discussion, but what’s not is that there are…

Huge Changes Ahead (and not many signposts)

Every business in England and Wales is going to be affected. It’s estimated that the majority of smaller businesses will see a slight fall in their liabilities, but on the other hand, there will be a 9% increase to the business rates on a national scale.

How does that work?

London Foots the Bill!

That’s right…

The vast majority of communities are going to see slight falls to business rates; however, because London has significantly higher rental charges due to higher property prices, the operational costs for retailers are going to be substantial, as high as a 415% of an increase for stores operating on Dover Street, Central London. 

The vast majority of stores in that area are multi-channel retailers and also regional with some operating globally. The increases will put financial strain on profit margins, and given some are chains, it will in all likelihood take a ripple effect. Retailers will need to protect their margins, which could see the less cost-efficient stores in other local areas either close or relocate.

The retail sector has changed substantially over the past seven years. The postponement wasn’t welcomed in 2010, and the repercussions to the business community certainly won’t be welcomed this time around.

British Telecom has already announced they will be challenging the Rates Revaluation by the VOA, as the firm will be hit with a 350% business liability increase, up from £165M per year to £743M from April of next year. An increase that BT says has forced them into threatening to increase consumer broadband prices around the London area and cut investment in telecoms technology.

Available Relief for SMBs

·         Business properties with a Rateable Value of £12,000+ have to pay the rates. Under that Rateable Value, the rates won’t apply.

·         Tapered relief will be available for properties valued between £12,000 and £15,000 so smaller sized firms will be able to get some relief from the rates.

·         Between 50% and 100% relief is available to local business owners operating in a local community with a population of <3,000.

·         Up to 80% relief is available to charities and sports clubs

·         Businesses operating within Enterprise Zones, are empty or newly occupied can apply for relief, although that’s not to say the application will be approved. It will only be considered.

The only exception to the Business Rates is religious properties, and agricultural land.

Priorities Now!

The priority for every business owner between now and April of 2017 should be on risk assessment because there is a huge risk of financial interruption when the new rates come into effect on April 1^st 2017.

As there are going to be winners and substantial losers, with the cost of doing business based on the new rates remaining in place for the next five years, there will be a transitional period for businesses to benefit from staged rate increases. It’s not going to make it any less of a financial burden because the bill will still need paid, but there will be assistance available for those with higher than anticipated increases to their business rates.

As all business owners will be affected either positively or negatively, it’d be beneficial to open discussions between tenants and landlords to begin negotiations of property lease prices in light of the business liability rate changes due to come into effect in the next six months. 

3 Tips For Devising An Effective Procurement Strategy

B2B sales are extremely competitive, however, for early stage and growing businesses, the buying of such services can be complex, or more so than you may have imagined anyway.

The truth is that no matter what you’re buying, you’re always going to have to haggle a bit. Bartering isn’t always about cost either. It’s about getting the most value from suppliers, while paying a reasonable amount for the value you’re offered as part of whatever service you’re buying.

To ensure you get the deserved and required value, make sure you have the following three essentials worked into your procurement strategy.

1)      Use contract aggregation

When there’s a significant need in your business and you assess the market to discover there’s few suppliers large enough to accommodate what you need, it may be more effective to split your contracts into smaller lots. One of the main advantages you get with contract aggregation is you open the bidding process up to smaller sized business. This is particularly useful for working with local suppliers instead of large nationals.

It doesn’t always work out cheaper, and there will be more administration involved to oversee the contracts, however from a local economy standpoint, partnering with local suppliers can be highly advantageous.

2)      Open pre-procurement discussions with suppliers

This one should be obvious but unfortunately it isn’t always done. Before approaching the market for any supplies you need, research should be done. This isn’t just a case of researching online. Get on the telephone with representatives, go out and meet some suppliers and discuss what you need, find out what’s available and gain first-hand insight into what the market has to offer.

Efficiently researching the market by opening pre-procurement discussions will let you find out a lot more about what’s available and then use factual information to put together your written brief for inviting proposals from potential suppliers.

The more information you have and therefore can give, the more detailed an offering you can put out for tendering, leading to more informative bids from suppliers.

3)      Award contracts based on quality of proposals and cost

One of the worst things you can do for your business and customers is to accept the lowest bid from any service provider or supplier. There are some companies that will deliberately low-ball during the bidding process in an effort to seem competitive. Realistically though, the offer isn’t competitive at all. What it often can be is risky. If you contract with a supplier who provides a service at cost to them, meaning there’s no profit in it, they are likely to deliver a substandard service. That’s something you could definitely do without. The more obvious risk is that it won’t be sustainable therefore you’d need to find a new supplier eventually. And probably do some grovelling with disgruntled customers due to your suppliers’ impact on your service.

In conclusion

To drive the most value from any supplier, always engage in pre-procurement discussions as part of your market research. If you feel there’s a lack of sizeable firms able to accommodate your business needs, break things down to encourage smaller or local suppliers to put their proposals forward.

Always award your contracts based on the value you can get, with a realistic figure attached to the offer. Never award to the cheapest contractor, unless you’re confident and they are too that they can deliver the service with quality and make it monetarily worthwhile to partner with your business.

The suppliers you choose to award your contracts to will be a stakeholder in your business so make sure they are a company you’re comfortable working with before you engage them for the long-term duration of the contract. 

5 Questions To Answer When Developing Your Procurement Policy

Not every business has a procurement policy and in some cases it’s actually damaging not to have this document as public funding can stipulate that the requirements for funding requires you to have one. The reason being that it ensures transparency and that when you buy goods and services, you have a policy to follow ensuring you get consistent value for money.

Even if you aren’t applying for public funding, it’s still a good idea to have a procurement policy in place for you and your staff to follow. It sets the guidelines in clear terms for everyone to follow and consistently obtain value from selected partners.

Work your answers to these 5 questions into your procurement policy

1.      Will bulk purchasing discounts really reduce costs or add to storage costs?

The majority of B2B suppliers will look to get a favourable order on a regular basis. To do so, you’ll find bulk or combined services are offered in order to maximise billings for the supplier. This doesn’t always equate to value to you though as you could agree to bulk price discounts only to find you aren’t using what you pay for, which can increase your holding/storage costs.

2.      Will you need to engage knowledge partners to speed up the time it takes to obtain a specialist service?

For technical services for your IT department, or tech equipment you’re buying or leasing, do you have enough knowledge to know what you’re agreeing to?

For more expensive and what could be considered specialist services, you don’t really want to be relying on a supplier you haven’t done business with before. You’d be going on the recommendations of others at best.

A more informative approach would be to hire a knowledge partner or outsource to a specialist partner with the knowledge to listen to what you need, provide you with an assessment and engage with suppliers on your behalf. If you’re not confident in approaching certain sectors, it may be worth including in your policy what you’ll do in the event you need a specialist service.

3.      How many of your employees will have the authority to buy goods and services and to what amount?

As this will be a procurement policy for the long term, you want to make it as evergreen as possible. Plan it with growth in mind by including members of your staff who will be authorised to engage with suppliers for any goods and services their department requires.

It may also be worth having someone senior in your company named as a procurement officer who signs off on purchases before any other member of staff can proceed with ordering goods and services, or at least allocate budget amounts per department with anything exceeding the department budget requiring authorisation.

4.      What will be your selection criteria for awarding contracts?

It’s much easier to award contracts to the right supplier when you set out clear terms of what you’re looking for from them. As an example, you could choose to look for the following criteria for suppliers to meet:

·         Quality

·         Cost

·         Use of resources / green initiatives

·         Reputation

·         Guarantees

·         Service consistency

·         Customer service

In cases when there’s high competition, using a selection criteria as a checklist will help you narrow down your potential pool of candidates to progress into discussion with.

5.      How much information needs to be revealed while maintaining commercial confidentiality? 

      There are going to be some contracts requiring you to grant informational access to third party organisations. This is increasingly happening with e-services, operating via the cloud. You must be in complete control of confidential data within your organisation and should consider how much you really need to disclose to third party suppliers.

5 Ways To Ramp Up Profits With An Effective Procurement Strategy

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.

·         Social

·         Environmental

·         Financial

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 not.

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.  

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.