Procurement is an essential task for most companies. Procurement is all about finding the suppliers and vendors you need to provide the products and/or services your company offers. The quality of your procurement strategy directly impacts your company’s bottom line and the success of your business ventures.
The following are 10 things you need to know when it comes to optimizing your procurement strategy.
Communication is key.
Many companies make mistakes regarding procurement when they aren’t staying constantly in touch with all of their suppliers. You need to let your supply chain know immediately if there are changes in your procurement needs.
The better you communicate with your supply chain, the easier it will be for your suppliers to meet your needs. In turn, this will make it easier for you to meet the needs of your customers. Communicate effectively with your vendors. At the same time, make sure that communication regarding procurement needs is effective within your own company.
Procurement strategy shouldn’t favor third-party suppliers over in-house teams when both are in use or vice versa.
Consider what channels you are using to meet your procurement needs. When you use third-party suppliers, you purchase items from other companies. When you produce items in-house, you rely on your own staff to meet your supply needs. For many larger companies, both third-party suppliers and in-house teams are relied upon when it comes to procurement. This can at times complicate a company’s procurement strategy.
If you’re relying on both third-party suppliers and in-house teams, it’s important that you don’t prioritize one over the other. Make sure that both procurement sources are getting the attention they warrant when you’re devising your procurement strategy. Otherwise, you might overlook key details and neglect some of your most important procurement responsibilities.
Working with vendors and suppliers who do things digitally maximizes efficiency.
Even nowadays, there are still suppliers out there who are doing things manually with paper orders. This is a huge drawback of working with a particular vendor. The way to maximize efficiency in regards to procurement is by working with vendors and suppliers who have switched over to digital technology. With digital order management, it’s easier to keep track of orders and find a particular purchase order when you need to look into its details.
Not only should you work with suppliers who have gone digital, but you should also make sure you’re dealing with order management electronically at your own company. If you’re still relying on paper-based processing, it’s high time to switch to digital before you get left behind.
You should always be on the lookout for vendors and suppliers.
Don’t ever start thinking that you’ve got all the vendors and suppliers your company needs. Your procurement needs are going to evolve over time. You also might have new vendors come into your network that you weren’t aware of before. Optimizing your procurement strategy is all about keeping your eyes open for potential improvements you can make. This means always being open to the possibility of partnering with a new vendor or supplier.
Analyzing all available data is essential.
The more data you have available to analyze when devising your procurement strategy, the more effective your procurement strategy is likely to be. It’s easy to feel overwhelmed when you’re trying to make improvements to procurement at your company because there are so many variable and pertinent factors to analyze. The solution is always to look at your data.
Data analysis is an essential aspect of procurement strategy. You need to know how to work with the data and identify pertinent data if you want your procurement strategy to be as good as it can be.
It’s important to hire staff members with procurement expertise.
One of the best ways to improve procurement at your company is to hire staff with procurement expertise. As your company grows, it becomes increasingly important to have a specialized workforce with clearly delineated functions at your company. At some point, you might want to hire a procurement manager or specialist whose main work focus is building your supply chain and taking care of vendor management tasks.
Staff members trained as data scientists or financial analysts often handle procurement management roles most effectively. If you have a staff member who has been multi-tasking, you might want to narrow down their job role as your company grows so that their main focus is procurement. This could be a good way to optimize procurement strategy for your company with a staff member who already has the necessary training and expertise.
Ongoing training keeps procurement staff at the cutting edge.
Once your company has grown enough to have specialized procurement staff, make sure you’re investing in ongoing training for these staff members. Your industry can change over time so that your procurement strategies need to change. Ongoing training for procurement staff helps these staff members to keep up with changes in technology and the industry that are going to impact procurement for your company.
If your procurement staff isn’t taking part in ongoing training, you may begin to struggle with competitors who are making investments in ongoing training over time. Give procurement staff incentives for building on their existing qualifications. Also, provide them with the resources and tools they need to grow their knowledge regarding procurement as time goes on.
You need to know when to let a vendor go.
It’s important that you don’t let your emotions get in the way when it comes to procurement. Even if you’ve worked with a particular vendor for a long time and have developed a strong relationship, you need to be ready to let that vendor go when necessary. Unless you have a contractual obligation, you always have the option to switch vendors if a better proposition comes along.
Switching to a vendor offering you more competitive prices could drastically increase the profitability of your operation. That’s why it’s so important for you to be constantly on the lookout for new opportunities with vendors and suppliers.
If you find a better option for a vendor, give your existing vendor the opportunity to improve their offer. If your existing vendor can’t compete, it’s time to let this vendor go.
Risk management is an important aspect of procurement.
Some companies overlook the importance of risk management when it comes to procurement. However, risk management is a key part of choosing your vendors. With each of your vendors, you need to analyze the possibilities that certain failures will come up such as security breaches and supply shortages.
Even if a vendor offers you a competitive price, it might not be a good idea to partner with that vendor if their supply is not reliable. Analyze the risks of working with particular vendors and suppliers as well as the benefits.
Your company doesn’t have to do it all alone.
A lot of business owners assume that they should be solely responsible for all their procurement tasks. However, this isn’t true. In fact, there are many opportunities for outsourcing tasks that are part of procurement. You should take advantage of any outsourcing opportunities that present themselves and that could potentially benefit your company. You can work with a consultant who can help you to improve the ROI you’re getting on procurement expenses.
Outsourcing some procurement tasks is a great way to take advantage of the expertise of procurement specialists. When you outsource, you don’t have to hire full-time procurement staff. Instead, you can enjoy the benefits of procurement expertise for less than it would cost to hire on a new specialist full-time to work in-house.
Developing the best possible procurement strategy for your company is an ongoing task. Do your research and tweak your strategy when necessary. You should be always on the lookout for procurement resources that can improve the prospects and performance of your company.
Author | Emily Forbes
An Entrepreneur, Mother & A passionate tech writer in the technology industry!