Procurement Management Tips

Strategies for Procurement Professionals

Nowadays, their list of responsibilities is extensive. It includes the brand’s reputation, corporate social responsibility, and much more. But, in spite of those added duties, preventing costs from spiraling out of control will always be a procurement manager’s bread and butter.

According to Business Queensland, rising costs are a particularly important issue for companies which are growing at a rapid pace. As a business expands, it requires larger investments in virtually all areas. As a result, procurement professionals need to manage relationships with a growing number of suppliers. It is of paramount importance for them to keep those costs as low as possible. Otherwise, expansion can have undesirable effects.

The issue of company growth and its relationship with procurement is an interesting one. Wax Digital, a company specializing in procurement software, carried out a study which looked at it in greater detail.

After interviewing 200 people who worked in procurement, Wax Digital made a significant discovery. 83% of those procurement professionals failed to challenge the suppliers they worked with in terms of cost or performance.

It’s clear how this leads to rising costs. The reality is, the relationship between a company and a supplier will evolve with time. This is particularly notable for companies which have increased their demands due to growth. If procurement managers do not challenge the suppliers and re-examine the relationship under such circumstances, your company may end up paying more than it should.

Marketing can be another source of rising costs. As new marketing strategies become available, marketers will be eager to take advantage of them. It’s important to stay up-to-date with these trends, but it’s the job of the procurement managers to ensure the marketing team doesn’t go too far.

Here are some ways to help you cultivate meaningful relationships with your suppliers and cut costs in today’s fast evolving market.

Be bold, don’t be afraid to negotiate

Negotiating with a supplier might not be something you look forward to but if you want to use your business budget wisely, discussing the prices will ensure maximum transparency and cost-efficiency.  It will even pave the way to business savings and to maximising your profit. Depending on your supplier, negotiations can be pleasant, smooth and mutually beneficial.

When negotiating, consider how essential a specific supplier is to your operations cycle. Does a particular supplier provide you with attractive work uniforms that boost employee morale, for instance, or would you be able to find the customised clothing elsewhere for a lesser price?

If the supplier is the only provider in your area, tread carefully when approaching the negotiation table. However, don’t assume you need them more than they need you as you’re also a source of their income. In this case, it’s an advantage for both parties to find a comfortable middle ground. When both parties have reached this middle ground and the supplier meets your needs to your satisfaction, you forge a valuable client-supplier business relationship.

Question value vs brand names

As a procurement manager, it’s sometimes easy to go for established brands since you feel safer buying into the name. However, even if the supplier has millions of sales under their belt and decades of experience, it doesn’t mean they’re automatically the best provider.

Weigh all your options based on cost and quality. For instance, simply saying ‘We need BRAND X’ instead of ‘we need equipment that has these features and benefits’ can be a costly mistake as the lesser known brand could offer  better results at lower costs.

Buy only what you need

It may be tempting to buy goods in bulk with the assumption that customers will buy by the dozen until your stock sells out and you’ll make a clean profit.

It’s a nice idea but sadly, it doesn’t always turn out this way. Overstocking on products, be they for promotional or operational purposes, prevents you from investing in other goods (perhaps more in-demand ones) and earning more money. It’s best to buy products in a practical quantity rather than purchasing the maximum that you can afford, unless your research and data show that there’s a constant demand.

Procurement has radically changed in the past decade and managers’ pursuit for bottom-line improvement impacts the way they conduct their business, deliver efficiency in the supply chain and generate ROI. To learn more procurement strategies and marketing solutions for your business, visit Promotional Centre today or call us on 1300 887 960.