Every business needs goods and services in order to function. While procuring raw materials is an indispensable process of business operations, mitigating procurement costs is still possible if done right. Even though procurement cost is treated as an expense, it can be utilized to determine the overall cost effectiveness and efficiency of the procurement function which is a key-indication factor of the business performance.
Here are five strategies you can master in order to save more by spending on procurement:
1. Consolidating vendors and deliveries by ordering in bulk
One of the reasons why procurement cost skyrockets is the individual deliveries of the materials by different vendors. You can reduce procurements cost by expanding your relationship with certain vendors and ordering in bulk. You can negotiate for a discount and decrease cost of deliveries.
2. Checking and evaluating the quality of inventory
Although delivery in bulk reduces delivery cost, you must also take note of the quantity and quality of your inventory. Warehouse storage might cost you more than you save in deliveries and the raw materials may decrease in quality or be damaged the longer it is stored.
3. Testing new supplier and establish procurement policies
Since a lack of spending transparency makes the business difficult to manage in terms of establishing standards, you should test pricing with new suppliers. With this research, you will learn the average cost and expenses the business incurs and develop clear parameters that the company should follow in order to stay within the procurement cost.
4. Bolster Procurement Management procedures
While the goal is to minimize procurement costs, the business must also invest in evaluating the company procurement management practices and ensure that they are aligned with the budget and business strategy in order to avoid overspending.
5. Streamlining data insights and building a centralized procurement data system
By having a centralized procurement data system, you will be able to see the trends in the business’ procurement and predict what happens next. With the data insight readily available, changes can be made depending on the current trend of the business such as avoiding overspending on materials that are not in demand.
Pro-actively managing your company’s procurement services and supply chains can help you improve business operations by avoiding making mistakes, finding more cost-effective solutions, and having backup systems to avoid supply chain disruptions.
With a broad inventory of supplies and direct shipping from factories, Excel Logistics & Management Services has built a reliable and sustainable supply chain solution to keep industries productive and proﬁtable. Excel’s clients can look forward to bringing down acquisition costs with a professional end-to-end supply chain management and streamlined customs brokerage service.