Running a business doesn’t only mean maximizing the profit. A successful businessman and entrepreneur also proactively focus on the column of savings. They know that both profits and savings are essential to improve their enterprises’ bottom line. There are many areas where decision-makers can reduce outlays and save costs. For a manufacturing and product-oriented organization, the procurement division offers a lot of room for cost-saving. They can succeed in registering a good amount of savings by using the right professionals and procurement software.
On the other hand, the same organization can incur significant losses and hurt its bottom line if procurement costs and spendings are not fully accounted for. This article will discuss how companies can improve their financial outlook by focusing on procurement savings. We will also shed light on how procurement software plays its part in streamlining the procurement department’s different activities.
Without more ado, let’s see the areas you need to focus on to establish efficient and cost-saving procurement activities.
Avoid Rogue Spending and Leakage Using Procurement Software
Rogue spending and leakage are some of the recurring problems in enterprises that operate without procurement software. This term essentially defines the procurement that happens outside pre-negotiated contracts. When companies work with suppliers without a contract, it becomes almost impossible to keep the dealings in compliance.
It also gets difficult to run successful procurement division audits when rogue spending and leakages exist there. The non-transparency associated with rogue spending and leakages also suggests that you can’t control and save the relevant costs.
By centralizing your procurement activity on a software platform that stores all PO and vendor information, you can easily identify rogue spending and leakages. Curbing these uncontrolled and unmonitored spendings will eventually help you save overall procurement costs as well.
Cut Down Internal Costs with Procurement Software
Internal costs linked to the procurement department also increase its operational costs. So, cutting down those costs is also important to establish an efficient procurement desk. First of all, you need to ensure that employees handling procurement can work more efficiently.
In other words, you need to run your procurement department without more hirings. This will save you a high operating cost. Procurement software can help you run the department with lesser human resources.
The centralized data depository, automation, and accessibility of a procurement application make it possible for an organization to take care of the procurement process through the existing staff and without welcoming any new recurring internal cost.
Consolidate Your Pool of Vendor
This is one of the most important things to do for registering substantial procurement savings. In simple terms, vendor consolidation means shortlisting the number of your suppliers and then improving your relationship with them. Vendor consolidation is not a simple, linear process. You may have to work on various fronts at once to consolidate your pool of vendors.
First, you need to identify the “strategic vendors” among all the suppliers you work with. Strategic vendors are those that supply you with something essential or in a quantity that’s critical to run your core operations. Then you need to get backup vendors that can supply you when strategic suppliers can’t fulfill the required demand.
Moreover, you need to communicate to the chosen suppliers that they are your strategic vendors. When a supplier is aware of their unique/exclusive position and preferential treatment, they lower their bids for the given organization compared to their regular rates.
Apart from saving costs, consolidating vendors also makes it easy for your team to maintain good supplier management practices. Employees can establish more meaningful and long-lasting connections with suppliers when they don’t have to deal with an entire crowd of vendors.
If you manage your procurement affairs on some procurement software, it will be easier to start the consolidation process. For instance, you can easily identify the strategic vendors by tracking their supplying history on the software database.
Leverage Category Management
Category management is a cornerstone of the retailing and purchasing world. In the procurement context, category management entails the classification of items to be procured in groups to streamline the purchase. Category management can save you costs because it lets you identify the items that can be ordered from the same supplier. This collective buying means discounts and savings.
Category management also helps you get a better grip on the demand and supply equation of the organization. This is another way to keep the costs in check and optimize the savings.
Streamline Bid and Quote Practices
Receiving, accepting, and negotiating individual bids don’t create a competitive environment where suppliers lower their prices to win the bid. In other words, you need to establish a streamlined bid and quote system to save you procurement costs. If you have a centralized portal to compare all the received bids and quotes, it gets easier to pick the best available options. Again, you need to work with a robust procurement platform where you can easily manage the bid/quotation activity.
Last but not least, extensive utilization of technology is a must to get any success with procurement savings. It won’t be wrong to say that it is almost impossible to materialize those savings if your procurement department works in a traditional setting with nonexistent technology use.
Procurement software is one of the leading technological resources you need to use for procurement savings. It has been frequently mentioned in almost all the cost-saving measures we have discussed above. As a Canadian entrepreneur looking to improve procurement savings, you should consider SimplyPurchasing from Microsys for your organization.
It is a custom-made procurement software option for small to medium-scale enterprises. Reducing rogue spending to consolidate suppliers can help a business in various cost-saving aspects of procurement management.
The great bit about SimplyPurchasing is that your team won’t need extensive training sessions to understand its functions and operations. After a couple of iterations, they will be able to leverage all the features of this cloud-based procurement software.