Nowadays, lots of businesses are moving some of their responsibilities, in-house functions, activities and processes to other service providers. This technique is called outsourcing and it has gained so much popularity due to the many benefits it can provide to business organizations. Outsourcing takes place when contract agreements are made and sealed with another party who assumes the other responsibilities of the company. These responsibilities and processes include human resources, customer service, production processes, key asset management, quality control and other functions.
This arrangement can be temporary or permanent depending on the needs of the company. This can be done to bridge some gaps, to improve production and to get better systems at a more affordable cost. Usually, business aspects or functions that are outsourced include information technology, marketing research, legal services, facility management, human resources, accounting & payroll, manufacturing and customer call centers. Why do businessmen and entrepreneurs outsource?
Reducing the company’s overhead costs is the most common reason why businesses are after low-cost sourcing. The transfer of non-core jobs also allows companies to focus on their more important tasks. Another factor that encourages organizations to outsource is the cost savings. Usually, employers spend large amounts of money on providing work spaces, compensation for employees and other technology and human-related purposes.
Outsourcing also provides a way for businesses to accomplish efficient operations. This strategy is particularly beneficial if it is provided by parties with specific specialties. This will result to faster and higher quality turnaround time to produce services and products. However, outsourcing also has some downsides that business owners need to know. This technique could mean employee layoffs and job losses. It can also cause negative customer service issues if the services are outsourced to an unreliable or incompetent provider.
If you are a purchasing manager and you are aware of the benefits and downsides of this technique, would you still pursue it? Nowadays, sourcing decisions are increasingly being influenced by ethical, labor, environment and even political considerations. This is clearly shown in the US presidential election where procurement strategies have been strangely caught up. But while politicians focus on employment issues, companies are more concerned over the fact that the suppliers or manufacturers’ location is an intricate evaluation of risk, lead-time and cost. Procurement strategies are becoming more refined and are often differentiated or divided based on the complexity and product.
Although outsourcing has some downsides that one needs to carefully weigh before actually venturing into this kind of industry, it cannot be avoided that low labor costs is the most common driving cause behind this strategy. If a purchasing manager thinks that low-cost sourcing is the best way to ensure the growth of the business, then he should pursue it. But if he thinks that this will not give positive results to the company, it is better to carefully think about it again.
To guarantee long-term economic success, companies should properly serve their clients, irrespective of whether or not they need to outsource the tasks. By focusing on emphasizing a balance between providing quality services and products to the clients and saving money, a company will have a better chance to grow and serve many faithful customers in the future.
As discussed in Tuesday’s post, the purchasing manager position has changed and evolved over the last couple of decades from one of primarily clerical function to that of a strategic thinker. The extensive use of international markets led to creation of situations in which various companies are closely competing from a broader geographic footprint. Prices of the commodities have skyrocketed and many companies decided to outsource some of their tasks that were once done within their jurisdictions. These changes made the purchasing performance even more critical to the success of the company. That is why your company also needs to update the kind of individuals that they are hiring in order to better position themselves for the future.
The Significance of Updating Purchasing Job Descriptions
Purchasing job descriptions play a very significant role in the company regardless of the pursued management option. Hence, an outdated job description may have undesired effects on the management strategy of the company. It can set a very low standard in terms of skill levels that the company is looking for in its employees. In addition, utilizing outdated job description may result to hiring new members of the team who appear to have the necessary skills to succeed in purchasing. These skills however are only applicable for the past years and not the skills needed to succeed today. That is why, in today’s challenging field of business, it is vital to have an updated purchasing job description.
When evaluating the job description you will need to consider the 2 major parts of the purchasing job; one section is the description of responsibilities and the other one is the qualifications for the said position. The qualifications section will include experience, education and certification. Among the qualifications, the certification is the part wherein most companies unknowingly sabotage their efforts in recruitment. Even during the past 5 years, certifications and education has changed. Unless your company is closely monitoring these changes, your job descriptions might be suffering from it.
Tips on How to Re-Evaluate Job Descriptions
Here are the guidelines on how you can re-evaluate your job descriptions.
- Certifications should match the job responsibility - preferably, the responsibilities written in the job description should perfectly match with the curriculum content of the certification required. Take note that certification programs are not all uniform so you should take into consideration the specific skills your company utilizes such strategic sourcing, spend analysis, and eProcurement.
- Confirm the specified certifications availability - due to the rise of SPSM certification, it is also connected to the changes in outdated certification programs. In 2007 as well as in 2008, there were important deadlines for 2 older certifications wherein the capability of the aspirants to register or apply in certification were shortened. The decision on whether to retain these certifications to the purchasing job description will depend on you.
- Other factors - if you wish to utilize the most recent practices consider the level of education (associate degree vs bachelor degree), the date the degree was achieved, and then account for changes over time with additional certifications. With the continued change over time, the further back the degree the less practical and helpful that is to today’s purchasing environment. Current work and certifications can show that the individual has taken steps to improve and maintain skills necessary for today.
Remember that it is essential to include qualification stability in the purchasing job description for recruitment of new employees and motivating the present ones.
For the past 1-2 decades, there has been a dramatic change in the procurement profession and it is continuously changing. These changes required the procurement professional or purchase manager to enhance his or her skills and become proficient on the topics not dealt with before.
More than one decade ago the procurement profession was purely seen as a clerical function wherein they do little more than enter and track purchase orders without any critical or analytical thinking. It simply wasn’t in the job description at that time. However, over time, many companies began to realize that if a procurement department performs better, it can have a huge impact on their income especially for small organizations. Timely performance and modernization can have an incredible effect in the competitive advantage and boost their income as well. Therefore, the change in the role of procurement or purchasing manager was partly driven by the senior executives who discover that a procurement department has a big potential to become even more productive.
Certainly, more skills are required to reduce and contain the costs compared to changing requisitions. Purchasing managers need more skills and these skills can be obtained through various trainings provided by his company. The trend for higher skills is shown by the continuous increase in the trainings that a procurement professional may obtain. Having more complicated responsibilities means more skills are being required. The individuals who pursue the ever-changing world of procurement and have a desire for additional education are those who acquire personal and professional success.
The procurement professional or purchasing manager understands that extensive skills are needed in order to become successful in today’s job market. These skills include mastering the process of negotiation and procurement. A procurement professional is also required to be excellent in other things such as managing risks, utilizing innovative tools available, conducting various sophisticated analyses, using the best practices for project management, working together with the suppliers, searching for supply sources worldwide and many more.
A purchasing manager is also aware that he needs other skills that will allow him to integrate better his procurement function in the business. For instance, he or she is expected to understand the finances and how his work contributes to the entire performance of the organization. Because of these added knowledge and skills, the role of the purchase manager as a clerical function has transitioned into one of a strategic thinker.
As a strategic thinker, the manager’s mindset is expected to be focusing on the organization or business. They try to find ways on how to make the vision of the business come into reality by developing the team-work abilities, critical thinking and problem solving. A strategic thinker carefully examines the repercussion of every decision or choice and cautiously analyzes the available options before making a final decision. They provide emphasis on the objectives and vision of the company for the future and then move backwards to work on the current situation. The role of a strategic thinker in the company is extremely important as without this forward-thinking position, the organization risks making decisions which are lacking in insights and creativity developed from the process of strategic thinking. Purchasing managers as strategic thinkers should be an essential part of your business.
Tuesday we looked at 5 Best Practices for purchasing professionals. Today we will look at 5 more and conclude this topic.
- Make Use of the Available Technologies
Several businesses are already using various types of technologies to effectively manage their operations. From computers to smartphones and software, companies are utilizing every form of technology to have effective business communication, improve productivity, efficient supply management, and better customer service.
The purchasing operations of companies can be improved using purchasing software. This type of software is beneficial in the inventory management as it helps monitor the existing inventory of the company and automatically generates the orders when the stock has reached a certain inventory level. A purchasing software also helps expedite the purchasing process of the company. Overall, this software is beneficial in handling and tracking purchases.
- Create and Maintain a Preferred Vendor List
A preferred vendor list is commonly used by large companies to assist them in choosing the right suppliers that meet their requirements and have completed a comprehensive review process. Ideally, a preferred vendor should have a good reputation and is fully licensed. By using a preferred vendor list, companies can maximize the best overall value offered by preferred vendors. It also helps in reducing company costs as some vendors tend to offer big discounts and deals to their loyal customers. In some cases, preferred vendors honor the special requests of their clients and customize certain products or service based on the budgetary requirement of a company.
- Conceptualize and Implement Incentive Programs The Are Beneficial to the Company and its Employees
Incentive programs are one way the companies can motivate their employees to work harder and improve their job performance. As a result, companies are able to reduce their cost, improve their profits, and increase their sales without the need to hire more employees. A good incentive program should be realistic, time-oriented, and simple.
- Develop a Good Negotiation Technique
Negotiating successfully with the suppliers takes some practice and strong negotiation skills. Good negotiators clearly understand the company’s goals and objectives. They also exert some time and effort to determine the strategy and goals of the suppliers for the negotiation. A good negotiator also knows when to negotiate.
When negotiating, it is important that the negotiator only relay reliable figures and facts. It would be helpful if the negotiating team prepares an agenda and discusses it among themselves ahead of time. A good negotiating team only negotiates with suppliers that are willing to make concessions.
- Organize a Centrally-Led Purchasing Model
A centrally-led purchasing model will allow companies to develop a flexible supply chain management process that can be customized at the local level if needed. This type of procurement model also helps companies reduce their operational expenses while increasing their operational efficiencies. Overall, this model is helpful in the company’s purchasing management strategy.
The effectiveness of these 10 purchasing best practices depends on their proper implementation. Moreover, the success of the purchasing strategies does not solely depend on the purchasing departments but on other members of the company as well. Working as a team will make it easier for companies to attain business success.
The success of a company or organization depends on several aspects such as marketing, planning, and purchasing. These aspects are as important as the managerial and leadership skills needed by businesspeople to run their companies smoothly. Understanding these aspects will enable businesspeople to deal with various challenges and risks associated with business.
Strategic purchasing allows certain companies or organizations to openly communicate with their suppliers, improve their relationship with them, and develop a strategic plan to maintain a long-term relationship with the suppliers and attain mutual goals. Most business executives believe that good purchasing management plays a significant role in attaining business success. A good purchasing strategy can withstand the negative effects that are associated with unhealthy economic condition.
Over the years, purchasing consultants and experts have developed several purchasing best practices that can be used by companies to create a solid foundation for their supply chain. These practices are designed to guide companies when making purchasing decisions. Some of these purchasing best practices are:
- Improve the Company’s Relationship With its Suppliers
Most successful companies have a good working relationship with their suppliers. This will allow them to have quality supplies at reasonable prices and better deals. An effective relationship with suppliers will also give companies the chance to develop a strategy that would be beneficial for both parties. Companies that have an open communication with its suppliers can freely discuss the things that might affect or improve their relationship. Companies should make sure that their suppliers enjoy doing business with them.
- Attain the Information Needed for Developing a Good Purchasing Strategy
It is important that the finance and purchasing departments in your company develop a team that would determine the company’s current spending as well as any areas that have opportunity for improvement. When brainstorming ideas for the improvement of the company’s product or service, certain factors should be considered such as manufacturing, sales, and engineering.
- Keep a Record About the Supplier’s Performance
Companies need to monitor the performance of the suppliers in terms of their product quality, service, pricing, and delivery. It would be helpful if the chosen suppliers have a big picture of how the supplies they provide fit into the overall scope of your business. This way, the suppliers can determine the appropriate options and may make suggestion or seek out options that would be better for you down the road. It is also important that the company and the suppliers understand the needs and requirements of one another.
- Create an Effective Team of Purchasing Executives
Purchasing executives are some of the key people who play a fundamental role in the success of a business. These executives should have a fine-tuned knowledge and understanding regarding the effect of price increases on core business supplies will have on the overall business. Purchasing executives should be able to make wise decisions as to how they would offset this potential price increase to provide everything the business needs without sacrificing quality or negatively effecting the cash flow of the business.
- Form an Experienced and Knowledgeable Purchasing Staff
Effective members of a purchasing team have good analytical and negotiation skills. Suppliers will better understand the need of a company through better negotiation. Purchasing personnel should understand the importance of achieving the company’s goals and complying with the agreements, policies, and terms set in the company-supplier contact. An effective purchasing team can work in other areas of the company such as sales and finance departments.
(Part 2 on Thursday will cover 5 additional best practices)
Often, SMB (Small to Medium Businesses) do not consider operating at the same level as large businesses with divisions such as human resources, operations and accounting. This is because most small to medium businesses consider these ideas and departments unnecessary without having enough personnel to fill these departments. However, one thing that should be kept in mind is that if large businesses are rethinking their strategies, then SMB’s should also do the same. While they may not have millions of dollars at risk like large corporations, it is still a good idea to think about using new strategies that will produce real results for them. Purchasing strategy is one area for businesses of any size who are thinking about changing their old strategies and switching into a more effective one.
A research made by CPO Exchange revealed that 83% of senior professionals agreed that they have to “rethink their procurement strategies” to put their business into a better position in the present market. The research also found that senior purchasers are finding areas such as stakeholder management and risk management more important in today’s economy. Aside from this, 69% of respondents recognized supplier risk management and procurement risk management as the main priorities. Surprisingly, reducing risk has become a higher priority than cutting expenses with only 57% of the respondents prioritizing cost reduction. The research also revealed that 39% of purchasers want to restructure various processes by employing procurement technologies that streamline processes while 45% aim to enhance stakeholder management.
As a small business owner, it’s important to take note of what large businesses are doing so you can benefit from their large R&D budgets. If they are making changes and rethinking strategy, without costly research, these are queues you can follow in your business. Whatever your business size, you can definitely benefit from employing risk management in your business. This will help you reduce any types of business threats and take advantage of the opportunities that come your way. This strategy will also help you deliver projects on time as well as keep it within your budget. If you own a small or medium-sized business and you think that your current strategy does not work, it is the right time to rethink about your strategy to make sure that your business will continue to operate.
Since the operating environment is always bound to changes, it is also important to look for new ways on how you can keep up with these developments. Large businesses are always after the newest trends in the market so that they can cater to the needs of their clients. Social media sites and other forms of marketing are commonly used by businesses. Big corporations are also taking advantage of the popularity of these strategies, but they keep on thinking of new ways to make their products or services always look fresh to their customers. SMB’s should do the same and make sure that their offers will be remembered by their target audience. If a business owner thinks that his current strategy lost its charm and is no longer producing an acceptable ROI, then he or she should move on and find another one that can bring back the interest of his clients. By taking queues from large corporations, SMB’s can definitely make some changes and improvements to help grow and expand in a tough economy.
Most organizations, especially small to medium businesses, should have a system got purchasing. This is to prevent them from encountering problems that are related to control, issuing as well as monitoring associated documentation and purchase orders. Many of them still use the traditional method or the manual formation and approval method which can lead to incorrect ordering, delays and in several instances, incorrect payments. For instance, a purchase order system which is a paper-based can generate all types of concerns within a business especially if you have no control on the involved processes. Incomplete information can result in interruption of services and the department of finance has restricted visibility in terms of the business’s financial accountability.
By using purchasing software, it offers numerous advantages to the organizations that use this software rather than the manual systems. This works by assisting the companies to manage their exposure to cash flow and forecasting of supplier payments. Purchasing software is available in the market in wide varieties. This purchase order software also comes in software packages which are intended for a particular purpose. Although the options are plenty, choosing the best software is quite a tedious task because you are not certain on what you need in certain package.
What is Cloud-Based Purchase Order Software and it’s Benefits?
Among the many purchasing software available, probably the best choice is the cloud-based purchase software. This cloud system is considered a better system compared to the conventional software options because it makes the procedures simple, eradicate unnecessary components and is very cost-effective. You can also set-up the software for different departments and multiple websites in a quick manner without requiring the service of the Information Technology department. Cloud systems are also reasonably priced as it allows customization based on your needs and eliminates other aspects that your company does not need.
Small to medium businesses such small hospitals, doctor offices, governments, hotels find a cloud-based purchasing system to be the perfect fit. It only requires a bit of training and you can easily obtain control of your purchasing process in no time. With cloud-based purchase order software, you can set your budgets limits, force numerous approvals and provide real-time expenditures reports. In addition, cloud-based purchase software also saves all history in a single place without requiring you to install something in the computer. This means that small businesses facing aging technology that may fail have one less thing to worry about with regard to records for business supplies; you are assured that all important pieces of information are in a secure place on a remote server that is also backed up. Unlike the traditional software installed in the office, it is also perfect for various locations as it can be remotely accessed through any Smartphone, tablet or other popular internet-ready device.
Cloud-based purchasing software, often referred to as SAAS (Software as a Service), is considered as one of the fastest emerging features of cloud computing. It is a delivering the software your business needs through remote access of a web-based service. It allows different businesses particularly the smaller ones to obtain the rights in using specific software. With SAAS (Software as a Service), the businesses pay an affordable fee (monthly, quarterly or annually) instead of buying a software system that requires hardware upgrades, an IT department, in-house servers and backups among other things. For the small to medium business utilizing Software as a Service in the cloud is the right solution.
When it comes to business, changes will take place from time to time and staying updated is a necessity. Common sense? For some, but surprisingly enough there are still certain things that every business owner finds a comfortable zone and stays there. The ability to be flexible and adapt to these changes in order to sustain the normal operation of your business is key. One of those common sense areas that is often very comfortable not to change is the management of purchase orders. Many companies around the country still use a paper-based system. Today’s businesses, even small and medium size business will be able to achieve an improved operation process by upgrading to purchasing software. This tool will let you analyze the data in a more practical way that can help your business attain more developed business practices while allowing you to save time.
The e-procurement software your business invests in would be a good investment for your business with the time saved managing purchasing orders. These time-saving features will let you have more time to spend on other essential business dealings. This then paves way for you to have a successful expansion and development of your business.
The ability to analyze and compare multiple vendors for sourcing various business supplies will help in multiple ways. You will have greater access to more information that will help you make better decisions. Through the help of purchasing software, you could learn more about the products that you will order and you have more time to spend analyzing every one of them, resulting to a smoother business operation.
Another common problem with paper systems is duplicate orders. Multiple requests could come in for the same item and ordered by different people or simply on different days and then you end up with too much of one item. Compared to the traditional paper-based purchasing order, chances to have duplicate entries are reduced when purchase order software is used. This software is sensitive and it can remove the duplicate entries while maintaining constant update of the system. The business procedures will be controlled by one system and it will be easier for you to access the data and manage them.
Another benefit that the purchasing software offers is that it provides more information about the entire process and all items orders with the click of a button. The viewing and accessing of every financial transaction will be easier as well since each one of them is automatically recorded and kept by the system. The software will also let you run reports to see where money is being spent, where it can be saved, and what is doing well.
Using purchasing software will help your business to become more competitive. You are able to monitor and evaluate all processes of your business using a central system through which all purchases are made. Any inconsistent data will be noticed and all issues will be resolved quickly and efficiently as the business processes are all improved.
In general, purchasing software is one of the most efficient methods that can be used by businesses in terms of cost. This will allow you to reduce the need for manpower, enhance the speed of the transactions and reduce the possibilities of error. If you want your business to be competitive in today’s quickly changing environment, using purchasing software will be an essential piece of that puzzle.
Buying procurement software can be a tricky exercise. The investments that go into hardware and software, either associated with each other or for other independent activities is hefty and it is imperative for any business to try and keep costs low while not compromising on the quality of the procurement software. There are many things to consider while purchasing any hardware or software. Here are the top 10 things to consider before buying procurement software.
What Is The Price For?
Procurement software price can be either for a number of seats or for a set of users at any point of time. You may opt for 20 users and use the procurement software on all 20 users at any point in time. Alternatively, you may not have such a requisite and have the procurement software installed for 20 users but use it on only 5 users at one time. Choose as it suits your business.
Does The Price Include Onsite Services?
Remote service and solutions have become the trend today but there could be several reasons why you may need onsite services. You get what you pay for so consider the importance of onsite services and if it is worth paying extra.
Is There A Satisfaction Guarantee?
Seeking refund for any procurement software that you are not happy with can be an arduous task. Check out the return policy and refund policy before buying it.
Turnaround Time To Fix Bugs
It is unrealistic to expect the software to not have any problems. There will be errors and bugs. What’s important is the time a company would take to get their bugs fixed. Ask this question while buying and it is one of the most important things to consider.
You would not wish to miss out on program updates hence check out if the procurement software sends you notifications, if there are automated updates or you would have to do it manually or request for it.
As your business grows your procurement software might have to be redesigned or scaled up. It should be doable.
You may not need a few features of the procurement software and may need some customized features. The company should be capable of delivering on such aspects.
Installation & Operational Hurdles
Every procurement software application would have a set of challenges and you should be briefed on the possible hurdles at various stages. A software company that is aware of the problems and know the solutions would be your ideal choice.
The procurement software company must have a customer support policy and you should settle for nothing but the seamless and the best.
Procurement software that is set to bring in positive developments and new features in the future is better than ones that do not have any such propositions.
Purchasing software is mandatory, and knowing what you need to before you go into the deal is essential. Everything that sounds good isn’t necessarily so. The thing that you need to know about procurement software is that it is not straight forward. There are different companies, different options, and different levels of service. So wise spending for SMBs is important. Here is where you decide whether or not you will buy or build. It is going to function how you want it to. Still, having all of the details that need to be involved is important too. There are definitely a few rules that you need to keep in mind.
#1 Rather than focusing solely on the initial price look at the price for ownership in general. There are integration fees, maintenance fees and variety of potential costs to evaulate. These long term sums have to be considered. Your immediate needs seem more important now, but not focusing on the big picture can really cost your company down the road. This is definitely one of those “you get what you pay for” scenarios. You could end up with a lot of unexpected cost as well as awful integration.
#2 Buy what you need now, but make sure it will evolve with you as your business grows. If you are not focusing on the future of your business, then you are throwing away money. Do not use the software as a temporary fix. It can work for you for the long haul. Think of it as an investment. No matter what your budget, it only makes sense to get something to last. Once your customer base has expanded your needs will still be there. The last thing that you need is to be running multiple systems or to have no system at all.
#3 Many times you hear that first impressions are everything. Well in this case don’t count on it! A lot of things can be dressed up in a fancy box and be very disappointing once the full realization of what it contains is revealed. Your purchasing manager or other staff that will be using the software may not have an IT background so the appeal of simple, user-friendly software may weigh heavily in your mind. You have to know the software is going to work for you both now as well as later, even if it means going to the more expensive options. You can have a balance between user-friendly and complex expansion capabilities.
#4 What about training and tech support? That is as essential as the software itself. That is one downfall of software you buy off the shelf. You are not getting this essential support. You will end up spending more than you wanted through having to outsource training to another provider. The long term results are not good. Organization suffers and eventually you are back to square one. It is always the best choice to deal with a professional who can support all of your needs both now and in the future.