With the global economy steadily continuing positive growth trends, the world of procurement is also expanding to keep up with increasing demands worldwide. At the same time, however, the cut throat nature of business competition is marking the beginning of a new era of cost cutting, lean management, and operational efficiency – the likes of which has never been seen before. More and more businesses are now gearing towards implementing new and improved sourcing practices in order to drive down the bottom line and improve profitability. At the same time, corporations and suppliers are also looking for ways to streamline operations on a global level, and implement practices that offer the highest return on investment.
One of these new management methods is called Spend Management, and it allows managers to reassess the procurement process. Procurement is already recognized as a bottom line activity, and with spend management, companies can improve practices involved in the sourcing, purchasing, and transfer of goods; as well as payment processing and account management. The key principle behind spend management is within its name: controlling spending by reducing costs associated with procurement through advanced analytics.
5 Cost Saving Strategies You Can Use
If you work in the world of procurement, here are 5 strategies that may help you drastically reduce costs and improve your company’s profitability:
Strategy #1 – Create a Detailed Roadmap
This may seem like a no-brainer, but it is a critical step that can lead to major cost savings. Creating a detailed roadmap that outlines business functions, assigns responsibilities, and coordinates company-wide procurement based on item type or category. Having a clear roadmap is the first step in prioritizing sourcing practices and determining possible points for cost cutting measure implementation. It also ensures that managers across all departments are aware of the bigger picture and can combine efforts towards achieving their outlined targets.
Strategy #2 – Use Analytics to Your Advantage
One way you can harness the power of technology is by analyzing key metrics for all of your product categories and then using this information to make more informed decisions. This includes identifying historical purchasing patterns, demand information, and clear product requirements before negotiating supply. With rapid advances in information technology, there really is no reason not to adopt this practice. In addition to being highly efficient, and saving time and money, it also helps make your office more environmentally friendly.
Strategy #3 – Consolidate and Integrate
These words have been thrown around in procurement for decades now, but this is the right time to finally implement them. Supplier consolidation and centralized procurement systems ensure improved integration of your organization in the global supply chain network. Consequently, you won’t wind up with a supply chain disaster on your hands before a big event or major holiday. It also helps in ensuring product availability, customer satisfaction, and most importantly builds brand loyalty and trust.
Strategy #4 – Fact-Based Contract Negotiation
When you have access to volume per supplier and other relevant information, you are in a better position to negotiate a better deal. Knowledge of a supplier’s pricing policy is also essential. It may be more cost efficient to order a larger volume of a particular product, or place your order sufficiently in advance to get a schedule based discount. Furthermore, better payment terms based on cash availability can also be negotiated with suppliers.
Strategy #5 – Contract Compliance Tracking
Even the best of the best fall short when it comes to savings based on contract compliance alone. Any potential product or service issues that either need to be replaced by the supplier, or remedied through further staff training should be identified. Keeping up with these issues and ensuring contract compliance on both ends is one way to avoid costly public battles in the future, and pave the way towards achieving the maximum possible saving potential.
Keeping up with the latest
Assuring product delivery, consistent service quality, and improving profit margins is no easy task. One way of addressing these issues is by implementing cost saving strategies in your procurement practice. Efficient procurement is the key to achieving your company’s true savings potential and drive the bottom line right where you want it to be – smack dab in the middle of profitability avenue and growth drive.
5 Cost Saving Strategies You Can Use
If you work in the world of procurement, here are 5 strategies that may help you drastically reduce costs and improve your company’s profitability:
Strategy #1 – Create a Detailed Roadmap
This may seem like a no-brainer, but it is a critical step that can lead to major cost savings. Creating a detailed roadmap that outlines business functions, assigns responsibilities, and coordinates company-wide procurement based on item type or category. Having a clear roadmap is the first step in prioritizing sourcing practices and determining possible points for cost cutting measure implementation. It also ensures that managers across all departments are aware of the bigger picture and can combine efforts towards achieving their outlined targets.
Strategy #2 – Use Analytics to Your Advantage
One way you can harness the power of technology is by analyzing key metrics for all of your product categories and then using this information to make more informed decisions. This includes identifying historical purchasing patterns, demand information, and clear product requirements before negotiating supply. With rapid advances in information technology, there really is no reason not to adopt this practice. In addition to being highly efficient, and saving time and money, it also helps make your office more environmentally friendly.
Strategy #3 – Consolidate and Integrate
These words have been thrown around in procurement for decades now, but this is the right time to finally implement them. Supplier consolidation and centralized procurement systems ensure improved integration of your organization in the global supply chain network. Consequently, you won’t wind up with a supply chain disaster on your hands before a big event or major holiday. It also helps in ensuring product availability, customer satisfaction, and most importantly builds brand loyalty and trust.
Strategy #4 – Fact-Based Contract Negotiation
When you have access to volume per supplier and other relevant information, you are in a better position to negotiate a better deal. Knowledge of a supplier’s pricing policy is also essential. It may be more cost efficient to order a larger volume of a particular product, or place your order sufficiently in advance to get a schedule based discount. Furthermore, better payment terms based on cash availability can also be negotiated with suppliers.
Strategy #5 – Contract Compliance Tracking
Even the best of the best fall short when it comes to savings based on contract compliance alone. Any potential product or service issues that either need to be replaced by the supplier, or remedied through further staff training should be identified. Keeping up with these issues and ensuring contract compliance on both ends is one way to avoid costly public battles in the future, and pave the way towards achieving the maximum possible saving potential.
Keeping up with the latest
Assuring product delivery, consistent service quality, and improving profit margins is no easy task. One way of addressing these issues is by implementing cost saving strategies in your procurement practice. Efficient procurement is the key to achieving your company’s true savings potential and drive the bottom line right where you want it to be – smack dab in the middle of profitability avenue and growth drive.
