3 Areas Of Data Analytics You Can Use For Strategic Outsourcing

If you’re not at the stage of bringing in contractors, you better get used to the idea because there will be things that are better managed by other professionals, and there’s other things your business simply requires that you will not have the internal resources to manage in-house.

You need to work with partners.

If not now, then you soon will in the future. Your business will eventually be looking to outsource something or other. It could be as simple as a uniform cleaning service or it could be your entire janitorial services.

Whatever it is you need to bring in outside help for, the key ingredient you need to get your outsourcing right is analytics.

Now…the larger your company is, the more data you will have. When you’re working at enterprise level - managing multiple sites - you will essentially need big data analytics and staff on hand to manage your data, analyse it and scrutinise it for efficiencies across your entire operation.

If you don’t have the procurement specialists aboard your organisation, then an option open to you is to outsource your outsourcing for which you’ll need a procurement specialist to assist you with data optimisation for savings realisations.

What you’re looking for in your analytics to improve outsourcing efficiencies

Three things…

1)      Spend

2)      Contracts

3)      Suppliers

Those are the three areas of your company’s data that you need to have access to, to manage your outsourcing efficiently.

·         Spending

This will need periodically reviewed. Many firms have pricing policies in place for which annual price increases form part of the contractual process. Opposite from what you might expect, the longer you deal with the same supplier, the costs aren’t always the best you can get.

This is true for domestic contracts as much as it is for the commercial sector. It’s often better to switch suppliers but in doing so, you can’t neglect the quality of service being provided. Over time, depending on your in-house quality requirements, you may be better placed sticking with a premium service provider if it means you’re guaranteed consistent quality because your supplier will know your business better.

Take for example a five-star hotel or a Michelin starred restaurant. Getting the linen washed (be it bedding or gleaming white table covers) may be a basic service for some cleaning suppliers, but to maintain your standards, your current supplier may be investing in top of the range equipment to ensure your whites are whiter than white, enabling you to maintain the highest of quality standards for your end-users.

That being said, you still need to be reviewing contracts. That’s why that’s listed second on the list of areas to monitor.

Your contracts should always have a start and end date. As you approach your end date and your contract nears renewal, it’s not just a case of deciding whether to stay or switch. It’s a chance to get back to the table and renegotiate everything within the contract.

Without reviewing contracts periodically, any bottlenecks that your data show you to be happening, won’t be eliminated.

Use your contract renewals to ensure your suppliers are on the same page as you so they can provide you a top-notch level of service. They can’t do that if you don’t tell them what you need them to do to take care of your customers.

One idea you can and should be doing is surveying your customers to ensure that any problems are identified and brought to the attention of your suppliers so they can be rectified. Every supplier you bring aboard your operation will affect your customers at some point. That’s why these contract renegotiations are super important. It’s your chance to maintain and even enhance your customer’s user-experience.

The last piece of actionable advice for strategic outsourcing using your data analytics is to monitor your suppliers.

Where possible, consolidation is best.

The fewer suppliers you have, the less administration you have, and the more efficient your business will operate.

·         Minimise suppliers

·         Review contracts periodically

·         Monitor your expenditure

Those are the three areas to use your analytics for when you’re outsourcing. The more efficiently you can manage those three aspects of your outsourcing, the better quality of service your suppliers should be able to deliver to your business, with continually bettered contractual agreements, terms of service, service level agreements and sometimes pricing (but not always depending on what you need).

Using your data smartly is the best way to improve efficiencies and drive cost savings across your business. 

Image courtesy of data-analytics.github.io.

5 Risks Of Decentralisation In Supply Chain Management

To clarify, in business there are two types of supply chain management; the centralised approach and the decentralised approach.

Let’s first define each so you can understand the risks involved better.

The first is the centralised approach to sourcing and it’s the best way to manage SCM.

A centralised and often strategic approach to sourcing business supplies and services requires your head office to have a procurement team in process. If you don’t have the capital to invest in developing your own in-house team of sourcing experts, outsourcing to specialist providers would be the next best thing and will still help you cut costs.

The second approach that many smaller sized businesses take to SCM is the decentralised approach. With this, when you’re only operating from one location, you may be able to keep on top of things but the risk is still there that certain aspects could be overlooked leading to higher operational costs than you need be paying.

The decentralised approach to sourcing anything transfers power throughout the company, meaning that many staff are able to order whatever supplies they feel they need and worse still is when there is no pre-approval required before ordering. That will lead to increased invoices, leaving upper management with little influence over expenses control.

Beyond that, here are…

The Top 5 Risks of Operating with a Decentralised Sourcing Process

1.      The risk of having too many suppliers

Even stationery can become cumbersome if it’s not managed. Can you imagine, or worse if you’re experiencing this already, getting your stationery from one supplier, your secretary ordering print paper and ink cartridges from another, letterheads from another supplier and business cards from somewhere else?

The costs will quickly spiral but the worst risk you’re putting your business through is the one of quality management. Everything you order needs to be consistent with your brand and that includes your printer ink, company letterheads and business cards, and all your stationery.

With too many suppliers in your business, you’ll have increased invoicing to deal with, which can lead to some being missed resulting in late payment fees and you’ll struggle to manage the quality of supplies across your firm.

Stay in control of quality and expenses by minimising your supplier base for each product or service category your business requires.

2.      Surplus expenses

The less “expenses” your company has, the better you’ll be able to manage your accounts. This isn’t only about managing your finances, because it’s more about the paperwork that comes along with increased operational expenses. The more invoices you have, the more payments you need to make or cheques need issued. It can become a time intensive process just dealing with the paperwork involved in having too many suppliers, creating far too many invoices for your accounting/finance team or your accountant to deal with in a timely manner.

Even if you’re using cloud accounting to manage your financial records, the input and reconciliation of each invoice will quickly become time intensive. 

3.      Brand quality sacrificed

Your suppliers are business partners and need to be treated as such. A lack of control over your suppliers and you’ll be doing wrong by your customers.

The best approach to strategic sourcing in supply chain management for any business is to remember these three rules…

It’s about…

1.      Process

2.      Personality

3.      Repertoire

 The first is to get a process in place for strategic sourcing, letting you manage the process efficiently. 

The second rule is to have a representative work closely with partners, which often means personality matches ensuring they can work together professionally for amicable business objectives. The third is repertoire between your sourcing expert and a supplier representative ensuring long-term partnership resulting in best practices for both businesses.

When you have all three, you have a process in place that can stand the test of time and could even give your firm a competitive advantage. That’s the entire reason for taking a strategic approach to sourcing business supplies and services.

4.      Too much data

Having too much data from a broad range of suppliers will make it difficult for your team to scour through it to make the best decisions moving forward.

By centralising your supplier base, your team will be better equipped to scrutinise the B2B contracts in place, and then work with suppliers to negotiate better terms, pricing or both; something that’s going to be too difficult when you lack the attention of one supplier.

Today’s supply chain management is not always about buying bulk for discount. It’s more about buying into value. The supplier to provide your business with the most value is the one that should win the contract. Suppliers know this and will work closely with you to ensure you are receiving value. Some will even go as far as investing to ensure their business is in the best position possible to streamline the supplies to your company and pretty much future-proof the contracts against potential competitors.

5.      The biggest risk factor is to your optimised spending

For purchasing to be efficient across a business, it requires spending to be optimised. You cannot do that without having a centralised purchasing process in place. There needs to be formal supply chain management policies in place, approval processes that all staff understand so they can divert their needs to the appropriate named contact in your business; even if that’s a named contact acting as a liaison officer between the firm and an outsourcing procurement specialist.

Only when you have standardised approval processes for purchasing in place, and professionals to oversee the procurement process of all supplies across the entire company will you be able to mitigate the risks of operating with a decentralised procurement process. 

Image courtesy of coaconsult.com.

Dealing With Shadow IT In Your Business

There’s a reality that businesses of all sizes need to acknowledge. That’s the existence of Shadow IT. If you don’t know what it is, read on because it could be putting your corporate data at risk. Yet at the same time, it could be so disruptive to your sector, it could be the edge your business needs.

As you may well already know by now, the IT sector is fast-paced and the early adopters of new and often disrupting technologies are often the winners in the long-haul. That being said, they also know how to take back control of Shadow IT projects.

What is meant by Shadow IT?

Shadow IT is information technology that’s used in the background without the approval of IT or upper management. It’s either through software or a platform as-a-service; SaaS and Paas. To understand what’s happening from an IT perspective, it needs acknowledging of the BYOT (bring-your-own-device) trend.

For some employees, they know a little too much about the technology available that can help them be more productive in the workplace. Instead of going through dedicated channels within your company, which can be a lengthy process, they choose to invest their time into running specific software or using platforms that help them to be more productive in the allocated hours they have within your organisation.

Before too long, without careful control of the situation, you could have multiple departments implementing their own technology solutions without the approval or knowledge of the IT department.

It’s a bottleneck waiting to happen because when things go wrong your IT personnel are not going to be happy providing support for technology implemented without their approval. Instead, your staff will be passed over to third party providers for support and that is when projects get delayed.

IT divisions must always be in the know about any technology being used in any department. It’s easy to assign blame, however, what’s best is to ensure your IT people are aware of the Shadow IT problems and work with departments to ensure that they are always in the know about the right technology that could assist with productivity. It’s better to manage projects in-house than it is to outsource, provided you have the technical expertise on hand to provide the solutions.

If not, you’re next best solution is to use a dedicated provider to outsource your IT requirements to. Many projects and entire infrastructures can be managed through cloud applications, which can bring costs down, and even lower the periods of time you’re under contractual agreements.

What used to be five plus year contracts to outsource IT, is now closer to three years.

Should you terminate Shadow IT Projects when they’re discovered?

Probably not however it will depend on the individual situation.

One of the finest examples of a successful shadow IT project was right out of Harvard University and that was Mark Zuckerburg when he created what we now know to be Facebook.

Therefore, going by that example, you can see that it’s not necessarily a bad thing to have engaged employees working with technology to improve their efficiency in the office or even just tinker around to see what they can make reality. Just be careful you don’t have people working on projects they shouldn’t be on company time, as you could wind up with a scenario where your employees are pretty much beta testing different technology and not getting on with the work you’re paying them to get done. 

With that being said, it’s also never a good idea to let go of full control over technology. There are data protection laws and you must be providing security to your customers and clients’ data, no matter the cost.

So what do you do when you identify non-standard IT solutions in place?

Acknowledge it and discuss solutions with your IT division. They are the people there to help you manage all technological solutions either through platforms or systems developed in-house or by working with cloud partners to bring aboard the right systems for the right processes at the most cost-efficient pricing.

Involve your IT and ensure they are working with each department and aren’t oblivious to Shadow IT.

It is a good thing to embrace but only in the short term and when compliance staff and technology experts are on hand to oversee projects, ensuring things stay on track. Should third party developers have solutions available that are proving a hit for your company you can either partner with them or see if your IT people are able to develop a tailor made solution more appropriate and better placed to provide the best solution to end-users.

Should you choose to trial run any new technology, the safest way to embrace the innovation is to use dummy data. Never use your accurate data records to test run software developed in-house.

Budget for technology

The higher a budget you can assign to your IT division, the more they can work with Shadow IT projects on a small scale to find out if they are proving successful, and if so, they can work with teams to roll out longer term solutions within a budget you assign.

It’s the only way to regain complete control over the technology used in your business.

Embrace what your employees do when you’re not looking because the IT projects taking place in the shadows may be the innovative solutions that could prove disruptive to your sector and give you a leading edge over any competitor.       

Image courtesy of Navvia.com.

4 Ways You Can Approach Procurement For Best Value From Suppliers

For any business transaction, you need to scour the market for the best possible outcome. You need to know the pricing options available and then be able to get competitive quotes so you get a great service at an affordable price.

There are different ways to approach any market, but you’ll find that in general, the more time you allow for the procurement process to roll out over, the better you’ll be able to scrutinise the bids put to you and assess them for overall value.

The four ways to procure services within budget

1.      Competitive Dialogue

The public sector is always a good place to turn for advice and learn about how large government contracting authorities go about procuring services for maximum benefits.

Within the EU public sector, there are regulations for using the Competitive Dialogue approach for procurement. This guide here gives some solid information on how it’s achieved and why it’s done.

 

The best way to use this approach is to have a good understanding of what you need from your supplier, but are open to suggestions on how the offering could be improved upon. When you want the input from other experts in a field you’re ready to outsource to, this approach will allow the tendering process to develop a two-way dialogue where suppliers are able to put competitive bids in and include suggestions on how they could be serving you better.

This approach is the only one that will work when you don’t know what’s available in an industry, or you don’t have the time to devote into research. Instead, have the experts in the sector come to you with their input.

The simplest way to describe the best use of this approach is when you really need expert input from suppliers. Print fleet management would be a good example as you could invite experts in the field to pitch you possible solutions at competitive pricing.

The most appropriate responses with suitable pricing would be the ideal candidates to engage directly with in a final stage of negotiations before deciding on a preferred partner.

As you can imagine, this is going to take you the longest time to get your services put in place. The advantage though is that through the dialogue with your supplier, you’ll be able to have worked out all the kinks needed to get a contract for service underway including everything you need taken care of at a price within your budget.

Expect this to take at least a couple of months and plenty of dialogue between your business and potential suppliers. Even those you aren’t considering to include in the final stages, you still need to acknowledge their input, respond to them and keep them updated as any one of the potential bidders could come back with a more appropriate solution for your needs.

If you are going to use this approach, you’re best to appoint a project manager to oversee the tendering process and engage with interested suppliers to find out what each can offer.

2.      An Open Approach to Invite Tenders

Taking an open approach to tendering invites is a two-part (minimum) process. The first stage is advertising your need to the market, and the second is assessing the proposals you receive.

To put this method to work, you need to know how to prepare and evaluate tenders. The Chartered Institute of Procurement and Supply has a guide here outlining what’s involved.

This approach works best to get competitive quotations, however, you can expect it to cost you in time and project management as all participants involved in the tendering process will need to be responded to.

However, there won’t be as much dialogue involved as you’re not asking for expert input. For this approach, you need to state your exact requirements, inviting those who feel they can deliver what you need to put their quotations to you. You aren’t asking for input, just the price and terms of engagement.

3.      A direct approach to inviting proposals

This method involves you identifying suitable candidates and directly approaching them to invite them to submit their interest in your business and put their proposals to you.

To get this method working in your favour, you are best to have a list of suitable suppliers you’d like to partner with because you are going to lose some competitive advantage as your invitation will not be in the public domain, but instead will only be open to those you identify and approach. Aim for at least a half dozen suppliers.

With an open approach, you can expect to get a lot of responses, each needing replies, whereas the direct approach, only those you invite to submit their interest will be the parties you deal with. The more you have the more quotes you get to pick from but it will take longer to identify candidates to invite directly.

4.      The least competitive approach and likely your most expensive

There’s what’s known as a non-competitive approach to procurement and it is likely only best used for emergency use and is not advised for long-term contractual arrangements. The reason being, your supplier is in the driving seat. When you go direct and don’t have others involved in the tendering process, there is no competition for potential suppliers. Never let any company know they are the only firm you’re in discussions with as you will not get competitive pricing.

When you’re in a rut and need supplies fast, this approach can work but never for the long term. 

You’re always best to use this approach to get suppliers in place fast, but always take the time to consider longer-term prospects and ensure that any supplier you engage with directly without a competitive advantage, that you do not enter into a long term contract. Let them know it will be for temporary supplies or services and the contract will be going out to tender and invite them to participate in the tendering process.

The more competition there is, the better your options, quotations and value for money you will get. If you don’t even know what your options are then use the Competitive Dialogue approach to engage with suppliers and have them put their proposals to you. Then you can evaluate them and identify the best ones that will fit in with what your business requires.

The more time you have, the better a deal you’ll get. If you’re short on time, your best option is to engage directly with a procurement specialist firm that will have a list of pre-approved suppliers of vetted companies who are already known to be efficient suppliers with value for money built-in. It’s often the fastest way to procure professional services with cost-efficiency built-in. 

Image courtesy of dkfreight.co.uk.

Why The Lowest Tender Never Wins!

It seems in every sector there’s always someone or some company looking to take the shortcut in bidding wars and enter into the tendering process competing on price alone.

Newsflash!

You can’t and nor should you.

Legislation’s been in place since ’06 and it’s further reinforced in the updated 2015 Public Contract Regulations.

There’s an issue with it though…

It’s for public contracts.

Don’t you think this should apply equally to the private sector?

In a nutshell, yes it should.

Tell you why…

When you bid on a public sector contract during the tendering stage, every company is considered. 

Not just on price, but you’ll certainly make your proposal stand out if it’s considered abnormally low.

What’s abnormally low?

Hard to define but the decision makers can spot it a mile out. If all bids are in the tens of thousands and there’s you with a proposal of a few grand, it’ll stick out like a sore thumb.

When it’s spotted, the bidder is contacted to explain themselves. What the Contracting Authorities are looking for during an explanation stage of a bid that’s lowballed is satisfactory evidence that you’re complying with environmental, social and labour laws.

This brings into question supply chain management.

Will you be able to provide evidence that you’re sourcing products in a sustainable way?

If you’re using overseas suppliers for your materials, do you have audits to prove there’s no slave wages being paid to employees; that the working conditions are in line with health and safety standards, and that there are no children in the workforce?

Supply chain management is a tough battlefield. It’s easy to source cheap materials from around the world, but the bottom line is you just can’t do that.

Your suppliers are your responsibility. Funding unethical businesses overseas won’t get you any public contracts.

This is why the private sector should be adopting the same principles. There’s many a thing the government do that only bring red tape and more administration, but in the case of the updated Public Procurement Policy, they’ve took a step in the right direction.

It makes sense that to eradicate the poverty in third world countries, we source while supporting developing.

The Best Procurement Policy Should Outline Supporting The Supply Chain Long-Term

When you’re sourcing products, think about how long your supplies can realistically last. That’ll give you a good idea if you’re doing it right.

Say for example you’re in the clothing sector, bulk shipping garments from overseas and selling them wholesale or even job lots on eBay.

·         The staff need sufficient wages to live on

·         The factory requires sufficient profit margins to source materials

·         The materials providers need sufficient margins to continue their operations

There’s a further profit margin for the shipping of goods, and you’ve packaging to consider too.

It adds up to a lot of expense, but if you get it wrong, it’ll be even heftier. 

This is why it’s fundamental to get your pricing right. Sell at too low a price and you can’t support the supply chain longevity.

Business sales contribute to quite a few businesses. Often worldwide too given the nature of how the digitised businesses operate today. 

Do you think your suppliers really value your trade? 

Image courtesy of masterstv.com.

Leveraging Your Suppliers As A Business Asset

Do you consider your suppliers to be an asset to your business? You should, because they really are.

All too many SMBs get this entirely wrong. They put so much focus, and rightly so, on their customers ensuring customer service is top-notch and every customer gets value for money.

Guess what?

That’s what your suppliers are doing for you. You’re their customer and they want to be doing right by you and ensuring you get value for money.

Or at least they should be. If they’re not, it’s perhaps not all on them. Some suppliers are a nightmare to work with and if you find that to be the case, it’s likely because you don’t have a good solid working relationship with at least one key decision maker in your suppliers business.

When you’re dealing with suppliers, they’re an extension of your network.

You have a network right?

We’ll assume you do because not many businesses prosper without developing a network of professionals. Some are in the same industry; some are in the finance sector, others in the fundraising, some in marketing etc.

Your business will have connections. It’s key to business growth. Without connections, you’re a standstill and not experiencing growth.

In the supply chain sector, the managerial positions go to those with experience because with the experience they’re networked.

They know the suppliers, they know the industry, and they know the value for money they can get.

The best in the game drive cost savings because they’re able to strike a balance that serves the needs of both businesses - your business and that of the supplier.

Every business needs a profit margin.

The worst customers for suppliers to deal with are the barking mad ones that want stuff at knockdown prices. Always trying to strip the fat away from the bone and eat into the profit margins of their suppliers.

Big companies might be able to get away with this strategy because they have huge volume, but you can guarantee, if the supplier isn’t getting a healthy profit margin, the customer service will be next to none.

You get what you pay for.

So the lesson is this… when negotiating with suppliers, consider the value you can bring to the table. Yes, by all means be a strong negotiator but go to the table with realistic expectations.

Everyone wants profit.

The best deals are met in the middle. Where you get a good deal and value for money and your supplier gets a healthy profit margin. Both businesses keep profits.

To get negotiations off to a good start, you need a good working relationship. It’s the same with your customers as it is with suppliers. Treat them well and they’ll reward you with loyalty.

Loyalty is what you need from your suppliers because without them, you’ll be without supplies and constantly at the RFQ (request for quotation) stage to get supplies and services for your business.

If you consider your business small to medium sized, and lacking the professional networks to get to the negotiating table, partner with someone who is.

At The Procurement Group, our specialists are well connected in a variety of verticals with years of experience networking with those in the know.

If you’re adamant on taking care of procurement yourself, we’ll give you some tips to steer you in the right direction.

1)      Before approaching, send a LinkedIn request

LinkedIn is the social network of the established experts. If you’re not known to someone through LinkedIn, you’re at a huge disadvantage.

The first stage of negotiating is not about figures. It’s about getting to know who you’ll be speaking with and the best way to do that is to enter their professional world.

Get to know them through LinkedIn first, follow them elsewhere and find out what they share online. 

That’ll give you some insights into who you’ll be speaking with and help you to find some common ground.

2)      Extend your network with multiple suppliers

Don’t just target one supplier when you’re researching. Establish who the right people are that you’ll be dealing with. Once you have a few people, you’ll get a feel for who the right person is for you to speak with.

It’ll be the person you feel more confident to pick up the phone and speak to, or to meet up with at a networking event. Even if they’re not the right fit, you can keep the meetings and conversations friendly because each person in your network has an extended network that could help you.

3)      Get your pricing right

You can’t go into talks looking to get a rock bottom price. It’s not going to happen. You need to have your maximum and minimum pricing in mind. Minimum pricing for supplies because you need to be supporting your supplier’s margins to ensure continuity of service.

Drive too hard a bargain and you’ll fall flat. The only time hard bargain deals are successful is when there’s multiple thousands in profits at stake.

4)      Find the middle ground

Find a good profit margin for you and your supplier and then work out the kinks in any service level agreements. What you don’t want to do is get a lower price because the level of service is reduced so your client can retain as much profit as possible.

Both sides need to be able to consider cuts in the margins. If any party is hesitant, it’s going to be a difficult working relationship when only one side is making changes, and the other making swaps.

5)      Keep in contact throughout your agreement

You’re your suppliers’ customer and whilst it doesn’t constitute constant communication, at least keep in contact in some form such as an occasional email to find out how they’re getting on.

The best time to contact a supplier is when you have to buy anything. Even if they don’t supply it, they may know someone who does and give you advice on dealing with them.

Your supplier becomes a part of your network. Nurture them as such and your long-term contracts will see you get better value from them. 

Image courtesy of poacpa.com.

The Business Case Triage Of Good Procurement In Action

Efficient purchasing in any business is essential to stay within budget and ensure that only necessary materials and supplies are being purchased.

To do that, there’s a minimum trio involved in putting together a business case for purchasing.

1.      Staff

All purchases begin with the user. Employees in any department will first identify what they need. In most cases, the suggestions are directed to supervisors, team leaders or line managers. These people represent the end user and direct the suggestions to upper management.

2.      Finance

Finance departments can’t just approve any purchase. In many situations, it’s a completely new purchase being introduced to the business, in which case, the business case must be made to justify the expense.

Finance departments are very prudent with funds available, ensuring they are only spent on necessary materials, or tools that will benefit business objectives.

When it’s something entirely new, funds should first be directed towards market research and this is where things can go wrong - when this stage is skipped.

Approaching any market blindly without sufficient knowledge of typical costs will result in paying a higher price, and often negligible contracts with minimum value due to a lack of market knowledge.

It happens in the copier industry, telecoms sector, and many other services where finance departments skip the most prudent part of a buying process. Assessing the market to find out what’s available, at what price, what contract options are available, and service level agreements. SLAs and contract finalisations is when negotiations should always be happening. Everything’s negotiable!

When approaching any unfamiliar sector, it’s best to assign a buyer to research the market and then compile a report detailing viable options before proceeding beyond this stage.

The core responsibilities on all finance departments are always to:

Assess the proposals from end users. It’s the responsibility of users to present the business case explaining the benefits of whatever’s to be bought, and explain the benefits of the purchase ensuring it supports business objectives.

Once users have made their case and sold it’s up to finance to assess budget implications and the financial impact of any purchase to ensure it’s viable.

Funding sources will be identified and a budget assigned to a buyer.

3.      Buyers

With the budget assigned, it’s then the buyer who has the final responsibility of ensuring they can source services or products within budget, and agree to contractual terms with suppliers.

Negotiation in the final buying stage is prudent.

Before final purchasing decisions are made, especially when the contract terms are long and expensive, input should be sought from end users prior to any agreements being formalised and finalised.

That’s the trio that should always be involved in a buying process and never solely left to one person in a finance team. Chances are that they will have no idea what the end user requires.

Every employee is a key stakeholder in all businesses and should be given the opportunity to provide input into what they feel would help them work more efficiently. It’s then up to your line managers to present viable solutions to finance. Finance should then review the business case put forward by line managers, sign off on it, identify funding sources and assign a budget to a buyer.

If your business does not have the finance teams or buyers in place, there’s a high chance you’re overspending due to the lack of resources put into purchasing.

Should that be the case, there are likely to be areas where you could significantly reduce your operational costs, by putting value adding contracts in place, sometimes cheaper than existing providers have you on, while maintaining quality and without disruption to service.

Should you find your expenses getting out of hand, our savings audit will highlight where your business is over spending.

For businesses with fewer employees, lacking the resources from those in finance and buyers who know their way around contractual law, it’s often best to bring in outside help from a professional procurement service. 

Image courtesy of supplychainstation.com. 

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. 

Image courtesy of trekglobal.com.

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:

“Regulation 23⁽¹⁾ sets out the mandatory disqualification criteria: a contracting authority must treat a prospective bidder as ineligible and not select that bidder if it, or its directors, has been convicted of (among other things) conspiracy; corruption; bribery; fraud; or money laundering.

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.

Image courtesy of theqca.com.

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.

http://www.procurementgroup.co.uk/contact/

Image courtesy of emaze.com.