Streamlining procurement strategies enhances cost reduction

Procurement teams are under pressure to deliver cost reductions for their organisations but purchasing performance…...

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Procurement teams are under pressure to deliver cost reductions for their organisations but purchasing performance can be improved by strategies that go beyond getting more for less, according to the US manufacturing and industrial news outlet, Thomas Insights.

These include:

  1. Building Enhanced Supplier Relationships

This is a form of refined supply relationship management based on developing a strategic relationship with suppliers to get deeper insights into the furthermost recesses of the supply chain. Having greater awareness enables procurement pros to make swifter decisions, minimise risks, and prepare for worst-case scenarios in the global supply chain.

  • Ask prospective suppliers the right questions

Purchasing pros need to be aware of any extra charges that might be applied separately, e.g., transportation costs. In other words, be savvy about hidden nondisclosure costs, such as packaging, financing costs, training, and associated supplies. These costs need to be negotiated and kept under review.

  • Keep an eye on unresponsive local buyers

Procurement pros at HQ must be vigilant about unresponsive attitudes among local purchasers, who sometimes prioritise pleasing local managers rather than headquarters, and address them quickly. Examples include slowing the process down, getting mired in needless bureaucratic processes, making poor decisions on the back of subjective opinions, and resisting necessary change.

  • Embrace new technology

New digital technologies are being taken up at an accelerating pace in today’s procurement landscape, from cutting-edge spend analytics solutions to cloud computing, machine learning and the internet of things. They improve communication and deliver actionable information in real time.

  • Practice introspection

Remember, a good place to start for achieving cost reduction is in your own businesses before you start scouring the planet for uber-low-cost suppliers. Make sure that company-wide efforts to standardise processes and spending aren’t poorly aligned because if they are, they will present huge obstacles to success.

Purchasing efficiency, in other words, enhances cost reduction efforts at every turn.

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