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.
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