Cost reduction in procurement has become a priority. But CPOs do not want to compromise the quality in trying to achieve cost reduction. Considering that supply chains are complex, there are several ways to reduce procurement costs.
Data is the key to gain an upper hand when negotiating with suppliers. You must analyse data and get an all-round view, not just of the suppliers, but also the spend. It will enable you to dig out the hidden expenses that can add to procurement costs. Once you reveal the hidden costs, it gives you the control to negotiate with vendors.
Streamline vendor management
If you can organise the suppliers’ lifecycle, you can remove the overheads needed to manage them. Some of the things you can look at are hastening the onboarding process of suppliers and automating supplier relationship management. Then, procurement can focus on strengthening relationships with strategic vendors and suppliers rather than on mundane tasks.
Take stock of inventory
You should know the inventory in the warehouse, and remember that surplus inventory costs money to store and maintain. If you cannot do this, the quality will deteriorate, leading to money being lost. Only order necessary and important stock that you can store without losing money.
Take another look at suppliers
Often, experienced suppliers may offer you quality products but charge high. If you can get another supplier, with less experience and brand value at a lower cost and without loss of quality, it may be prudent to switch suppliers.
To achieve cost reduction in procurement, you need to take several steps, together with the automation of the procurement process. It will enable your organisation to cut costs and get value from the procurement process.