What exactly is a procurement process? That’s probably the first question on your mind as you click on this article, and that’s understandable.
A procurement process is something a company does to acquire new stock. It can consist of several steps, such as:
- Defining criteria for potential vendors
- Researching and identifying customer needs
- Effectively communicating with suppliers
- Drafting proposals and quotes
Another important element of the process is the consideration of your company’s ethics and how your procurement process will reflect that. For example, if your business is all about sustainability, you’ll need to find sustainable ways to source your stock; otherwise, it’ll look hypocritical and your reputation can be badly damaged.
Ultimately, a procurement process is simply the steps your business takes to get hold of, or “procure”, new stock. It often becomes a low-priority issue, when in fact it’s one of the most important components in business.
Think about it. You probably spend a lot of your business’s income on new stock. So why are you not taking the time to really strategize it? You could be losing money without even realizing it, and this will take a huge toll on your profits in the long run. This is especially damaging for small businesses who can’t bounce back as quickly as large corporations, and can often be the cause of a low retail gross profit margin.
Luckily, help is at hand. This article will give you eight tips for optimizing your procurement process to keep your small business afloat. Read on for all the info.
1. Do Internal Analysis
This is a crucial first step, the step you must take before you can even begin to plan out the rest of your procurement process.
Internal analysis means looking within your business to find out what needs to be done and where you can improve. This can take many forms, but in terms of procurement here are a few things you’ll need to consider:
- Cost reduction
- Risk management
- Supplier optimization
Ultimately, you need to answer two questions. How can you better understand your business’s operational efficiency? How will your procurement process add value to this efficiency? Once you have answers to these, you can start to improve your process.
External analysis also has its place in the procurement process. Saas or software-as-a-service businesses can be extremely competitive. It’s important, then, to carry out saas competitor analysis so you can see which market gaps your company could fill.
2. Don’t Fall for a Good Deal
This is one of the most important pitfalls to avoid in terms of your procurement process – especially if you’re a small business. Unfortunately, there are a lot of suppliers out there that take advantage of smaller companies; either promising stock at a good price and not delivering, or binding contract traps that allow them to overcharge.
The only advice we can give here is to do your research. Here are some tips:
- Read everything the supplier sends you, particularly the fine print.
- Does it seem too good to be true? It probably is.
- Read reviews of that supplier from other businesses.
- Try to meet with a representative rather than conducting everything online. People find it easier to lie when it’s on the internet.
Of course, not every supplier out there is a scammer. That would be unfair to say, and also untrue. The vast majority are honest and will be a great asset to your business. However, that doesn’t mean you can let your guard down.
3. Give Suppliers Incentives
Once you’ve chosen a good supplier, there’s another problem. What’s in it for them?
Suppliers want assurance that it’s a good deal for them as well, so there are a few things you need to do.
Many businesses choose to pay their invoices at the last minute, especially if they’re on a shoestring budget. However, this isn’t ideal for the supplier, so if possible you should pay any outstanding invoices well ahead of time. Vendors will usually give a discount for early payments, so you both benefit from a timely transaction. There’s even the opportunity for buyer incentives from your supplier if you play your cards right.
Keeping records of paid invoices can demonstrate to a potential supplier that your business is trustworthy. Just as many vendors get scammed by businesses as businesses do by vendors, so there must be trust on both sides.
4. Build Long-Term Relationships
Once you’ve got a reliable supplier, you won’t want to let them go. But how do you keep them?
- Fair and straightforward negotiation.
- Constant communication.
- Regular in-person meetings.
- Consistent payments.
- Regular discussion about goals and mutual benefits.
5. Hire a Professional
If you have the means, you might want to hire a procurement professional as part of improving your process. This is a good idea for several reasons.
If you run a small business, procurement is paramount. Having a solid procurement process can take your company to the next level, and hiring a professional can be a fantastic step towards achieving this.
A procurement manager will know everything there is to know about how to make your process smooth and hassle-free, which is great news if you’re just starting out. Even if you’re a seasoned company with tons of experience, having a fresh pair of eyes to look at the situation can make all the difference.
Someone with new ideas can completely revolutionize how your procurement process works – and in the world of business, one must adapt to survive.
6. Streamline the Process
Having a good procurement process is one thing, but that’s no use if it takes forever to get through. You’ve got to slim it down and make it as efficient as possible if you really want to get ahead.
There are several ways you can do this, but one of the best ways is to see what can be automated. This saves time and money, not to mention labor costs. Contact center automation, for example, is a great way to save resources.
If your suppliers need to contact you, automating the process with, say, a phone tree, can reduce the amount of time they need to be on the phone with a real person. They’ll instead get directed to the correct department straight away, saving time for everyone.
7. Digitize Everything
In the same vein, digitizing as much as you can will not only make the process more efficient, but also safer.
This is part of what’s known as the ‘embed process’ method; the practice of integrating processes into the very foundations of your business. This is a useful method for several reasons, not least of which is that it makes things like procurement processes far more streamlined.
A lot of companies sort out their process once at the outset and then leave it, which only works if you’re not interested in constantly growing and developing your company. Digitizing procurement process documents and embedding the steps into the core functions of your business can make all the difference.
8. Expand Your Network
This one might sound pretty obvious, but you’d be surprised at how many businesses gloss over this important point.
It’s great if you can find a long-term vendor with whom you can form a solid working relationship, but even so, you should always be on the lookout for new contacts. Expanding your B2B marketing influence can mean new deals, new partnerships, new stock – and most importantly, new sources of income.
Processing the Conclusion
There you have it: eight key tips for improving your small business’s procurement process. We hope this advice has given you a bit more of an idea of how to take these steps. ultimately, it’s all about networking and streamlining your process as much as possible, as well as integrating it into the very fabric of your company. If you can do that, it’s plain procurement sailing.