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Efficient Procurement Process and Economies of Scale

What are Economies of Scale?

An example of economies of scale is when you buy an item in bulk because buying more ultimately means that you’re getting each unit at a lower price. For businesses, cost savings occur as a result of making more products. What this means for companies is that a business can increase its profits by making their production processes more efficient, rather than increasing the price of a product. 

Economies of scale can be achieved in various parts of the business: 

  • Centralized facilities
  • Staffing
  • Policies
  • Purchasing

The Procurement Process and Economies of Scale

An efficient procurement process is just one way in which businesses can achieve economies of scale. An efficient procurement function can provide many financial benefits to an organization, helping them further achieve economies of scale. 

Shared Business Functions: A purchasing system can help businesses share information and duties across all departments. If a business has an accounting department in another location, they can easily collaborate with other departments using one platform. 

Staff Efficiencies: The automation that can be achieved with a procurement process will require fewer employees, or can make employee’s tasks simpler so that they can get more done. 

Purchasing: When it comes to purchasing, buying in bulk can cut costs. Larger spend and greater purchasing leverage can result in reduced prices and costs. 

Data: Procurement software offers greater and more efficient data for financial and inventory records, making it easier for business owners to make decisions and save on costs. 

Further Cost Savings: With lower supply and service costs, there is potential for higher bottom-line profitability. Cost reductions can be quantified, projected, reported, and audited. 

Centralizing Purchase Function of a Business 

Economies of scale are all about the cost-savings that allow businesses to make more of a product for less. Centralization of the purchasing process can offer real-time analytics about the financial benefits that come from this type of scale and growth. An effective procurement function allows for:

Organized Planning: With an effective procurement process, your department will be able to develop a plan to address expense categories over a certain period of time. 

Specialization: Your purchase department will be able to organize staff around products, supplies, and services to improve results and boost sales. 

Supplier Relationships: Purchasing teams will be able to more easily determine the interest, capabilities, competitiveness, and financial strength of suppliers. This process will eliminate suppliers that may not be ideal to work with. 

By vetting suppliers, you will have a list of fewer supplies which helps keep costs to a minimum as only this small amount of “verified” suppliers is paid regularly. 

Profitability and Growth: Cost reductions from an efficient purchasing department will reduce overall costs and increase profits. 

Purchase Order Software

Businesses are finding out that a simple, manual spreadsheet is not enough to create an efficient purchasing team. Instead, robust purchase order software can help keep costs down and improve profitability, helping businesses achieve economies of scale. Effective procurement software should feature:

Integrations

Whether you’re an e-commerce business or a brick and mortar store, odds are most of your products are featured on a website where customers can make buying decisions from the comfort of their own home. What you may not know is that selling products online can dramatically improve your PO process. 

By synchronizing actions from different platforms, such as your website, you can put your data in one spot. Instead of using dashboards from the various marketplaces in which you sell your products, you can integrate your software to show all business information in one platform. 

The best procurement software will also be able to integrate with programs you are already using, like QuickBooks. While these business accounting programs are great, they don’t provide the best data when it comes to purchasing. By integrating your new PO software with QuickBooks, you can more easily make business decisions based on real data. 

Increased Automation

To keep costs down, it’s important to automate any functions within your business that you can. Automation can streamline the procurement process while reducing errors and the cost of the process, making your employees more efficient. With procurement software, you should be able to approve requisitions quickly and easily, instead of waiting for another person to sign off on any sales related inquisitions. Automation can also allow you to quickly turn a purchase order into an invoice, documents crucial for business management and budgeting. 

Improved Communication 

Purchasing is all about effective communication. The entire process relies on communication, and without it, you may face delays and disruptions that can damage your existing customer/supplier relationships and cost you money in the long run. Purchase orders need to be transferred to departments in order to improve workflows. You’ll also need to be able to easily pass along PO’s and create invoices for the accounting department. 

Internal communication is also essential to the efficiency of your entire business. Information on customers and suppliers needs to be accessible across departments. Purchase order software allows for seamlessly transferable information. Databases can often be difficult to use across departments and may require additional training that will take time. This can cause a breakdown in the procurement process, ultimately negatively impacting the customer experience. Purchase order software allows data and information to be shared across departments for a quick and thorough sales process. 

Product Inventory Control

Your business relies on your inventory. If a customer purchases something from your business, they’ll want to know that they can rely on you to deliver. If you are out of stock and didn’t know until you received that order, your customer probably won’t be coming back. 

As your business grows, it can be difficult to keep track of all of your inventory. You should always know how many of each product you have in stock so that you can avoid problems with customers in the future. An effective procurement process will be able to keep track of all incoming and outgoing orders and track your inventory to make sure you have enough when you need it.

July 12, 2019
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BY Bellwether
The 3 Cornerstones of Effective Purchasing

As the role of purchasing continues to expand and grow, it’s easy to get caught up in all of the latest trends. While there is definitely value in knowing what’s new, it’s now more important than ever to have a really strong grasp on the fundamentals of effective purchasing.

The reason that fundamentals are so important is because many organizations are looking to enhance their purchasing through efforts like automation with purchasing software. Since automating different tasks can provide a major boost to what’s currently being done, it makes sense for companies to explore the different options that are available.

However, the key thing to remember is if there are currently processes in place that aren’t optimal, automation isn’t going to magically solve them. So before a company can reap the benefits of things like automation, they need to ensure that purchasing is being done in the best way possible. That’s where the three cornerstones of effective purchasing come into play:

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August 21, 2015
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BY Bellwether
Modern Purchasing Opportunities and Challenges

Whether it’s energy or any other industry, executives who have made their way up the ranks over the past three decades know from personal experience just how far purchase management has come. It wasn’t that long ago when procurement was often more of an afterthought for companies than anything that would be viewed as a core competency. However, as global markets have changed and technology has increased competition, more businesses of all sizes are taking a more in-depth look at their purchasing processes.

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July 31, 2015
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BY Bellwether
Should Your Purchasing Department Automate Its Invoice Processing?

While there’s no denying the fact that technology is now everywhere, that doesn’t mean it always lives up to its promises. Most businesses have gone through the process of getting excited about a specific piece of technology, only to have it fall short of the claims it makes. Because this can cause a business to invest time and resources into a solution that ultimately ends up not working out, plenty of businesses have a healthy dose of skepticism about adopting any new types of technology.

Although this outlook on things is completely understandable, it’s important for businesses to maintain the right perspective about technology. Despite some bumps along the way, that simple reality is that modern business is driven by advances in technology. Since technology is the best way for businesses to save time and money, businesses that constantly adopt the right solutions are able to gain a significant advantage over their competitors.

If you want to ensure that your business stays at the forefront of its industry instead of being at risk of falling behind, it’s important to be open to utilizing technology solutions with a track record of saving time and money. One solution that falls squarely into this category is to have your purchasing department automate. Even though it wasn’t that long ago when businesses had no choice but to manually process purchasing orders, that’s no longer the case.

And given the fact that manual processing has significant costs and resource requirements associated with it, this is something that businesses should automate as soon as possible. If your business understands the savings benefits associated with this form of processing but is concerned that implementing this type of system is going to be a major undertaking, you’ll be happy to know that Bellwether Purchasing Software offers a simple but powerful solution.

The Ideal Automation Solution for Small Business and Mid Market Purchasing Managers

The reason that Bellwether Purchasing Software has such a good track record is because it was specifically designed with small business and mid market purchasing managers in mind. Since it was built to make it possible to easily automate purchasing processes and eliminate paper, it has all the necessary features without any unneeded bloat.

Because our software was built with user friendliness in mind, it shouldn’t come as a surprise that it is incredibly easy to get up and running. Thanks to its availability as a secure SaaS solution, purchasing managers can fully use Bellwether Purchasing Software without needing to pull IT away from their other responsibilities.

Requisitioning, approval processes, PO generation, receiving, inventory, invoice matching and reporting are all features of our purchasing software. So if you’re ready to enjoy all the benefits of upgrading purchase order processing from a manual process to an automated one, contact us today.

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May 11, 2015
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BY Bellwether
Here’s What Purchasing Managers Need to Know to Negotiate with Suppliers

As anyone with any amount of purchasing negotiation experience will tell you, this practice is part art and part science. While purchasing negotiation may seem a little intimidating at first, the most important thing to remember is it’s something that anyone can learn. Although there are people who make this process seem like magic, the only reason they’re able to do that is because they have so much experience with it. So as long as you’re willing to practice how to negotiate with suppliers on a regular basis by actively engaging in the process, it will likely take less time than you expect to get very skilled at it.

What’s the Key to Successful Purchasing Negotiation?

As mentioned above, a big part of purchasing negotiation success is practice. Since there are a wide range of scenarios that can come up during this process, it takes a little time to become fully familiar with everything you may encounter. In addition to practice, there’s one other component that can take you a very long way.

That component is preparation. The reason this component can have such a big impact on the outcome of purchasing negotiations is because knowledge really is power. By entering a negotiation with as much information as possible, a purchasing manager can put themselves in the driver’s seat of the negotiations.

Setting the Right Expectations for Different Suppliers

One of the most common mistakes that people make with purchasing negotiations is taking the exact same approach with every supplier. The simple reason a blanket approach doesn’t work is because your business doesn’t have the same relationship with all of its suppliers. That’s why it’s important to classify suppliers into A, B and C categories. By understanding the dynamics of a supplier relationship, you’ll be able to craft the right approach to negotiations with them.

Lose-Lose vs Win-Win

While entire books have been written on how to negotiate with suppliers, the most common approaches can be boiled down into two basic categories. With lose-lose negotiating, all someone cares about is bringing the price down as much as possible. Although saving money may sound like a win, the reason that’s not necessarily the case is because it comes at the expense of things like delivery times or quality.

Even though win-win is the less common form of negotiating, it’s the one that purchasing managers should strive for. While this approach still makes it possible to save money, negotiations are handled in a way that also ensures other aspects like quality and delivery are done in the best way possible.

Since getting really good at purchasing negotiations takes practice and time, you may be looking for a way to free up more of your time to focus on this very valuable activity. If that accurately describes your current situation, find out how Bellwether’s Purchasing Software can give you the additional time you need to hone your negotiation skills. Contact us to learn more today.

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May 11, 2015
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BY Bellwether
Procurement Best Practices in 2015

One of the big advantages of Bellwether Purchasing Software is that all vendor, price, procedural and other updates are automatic. That means these changes are seamlessly implemented without any need for technical support. The problem with many other types of purchasing software is automatic updates aren’t possible. Instead, all updates have to be pushed out in a manual and time-consuming manner.

With other forms of software that don’t support automatic updates, developers have a reason to avoid improving their software on a regular basis. But as anyone who works as a purchasing manager knows, this field continues to expand and evolve. As a result, many types of software quickly become outdated and end up making life harder for purchasing managers instead of helping them save time.

Since Bellwether Purchasing Software isn’t constrained by those types of limitations, we spend a lot of time speaking with purchasing managers about their workflow. By making these conversations a priority, we’re able to come up with new ideas that we can implement to make Bellwether Purchasing Manager Software even more useful. And because talking to purchasing managers allows us to stay on top of what’s happening in this line of work, we thought it would be helpful to spotlight a few of the best procurement practices for the current calendar year:

The Current State of Procurement

If you’ve been in this field for awhile, you probably remember a time when your primary mandate was to keep costs low. And your secondary mandate was likely along the lines of ensuring that supply is available at all times.

While we can all agree that thinking along those lines is outdated, the reason it’s worth bringing up is to show how far this field has come. In its current state, there are over a dozen responsibilities that professionals like purchasing managers must consistently deliver.

Identifying opportunities for savings, prioritizing improvement initiatives, delivering applicable quick win savings, improving spend visibility, ensuring proper integration and improving performance management are just a few examples of what’s required of modern purchasing managers.

How Procurement Best Practices Have Evolved

Since this field has seen such significant expansion, it’s not surprising that current best practices have evolved as well. While you could fill an entire book with the procurement best practices for 2015, the key takeaway is that this department needs to function in a way that’s active instead of reactive.

For example, procurement professionals now need to have a detailed understanding of their suppliers’ business practices. Although that’s a task that can take some time to accomplish, it’s the perfect example of the type of practice that needs to be in place so that a procurement department can run at optimal efficiency.

If you want to ensure you’re following best practices because you want to maximize your productivity, be sure to take a minute to contact us at Bellwether Purchasing Software to look at all the different ways we can help you achieve that goal.

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April 23, 2015
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BY Bellwether
How to Decide on Purchasing Software for Your Business

When it comes to selecting a purchasing software program to help improve purchasing in your company there are several things to consider in your decision-making process. Purchasing software is one of the best investments you make in managing your business, cash flow, and purchasing activities. However, how much benefit you will receive and the ease of attaining those benefits depends on the type of software program that you have chosen. To ensure you don’t end up making the wrong choices, put the following factors into consideration and you will decide on the right software. You must always have the right picture of why you want to have such a software program in place for your business. You should not make the purchase and installation without a clear mind on what you expect at the end of the day.

People purchase software for different reasons, but it is important to take this decision seriously and give it the consideration necessary. Ideally, it must help address some of the recurring issues you are facing with purchasing and other supply or inventory related functions. List some of the main challenges that you expect the purchasing software to address in your company and that will be the starting point for your search, providing the necessary guidelines. After that, it will be good to come up with a workable budget as per the amount of money you have available to invest in new software. Look at the actual cost of the software and any subsequent costs related to installation or purchase of accompanying hardware. Getting rough estimates of that will give you an idea of the type of budget to draw up.

In the market, you will come across different companies selling different software programs. Consider several different ones and then narrow down to one that you will purchase. Look at the features of each software, its pros and cons to make sure your final choice is an informed one. Don’t fall for the first software that you come across without exploring several options across the market. Features of specific software will be the key to helping you decide on the best one. Make sure you put more emphasis on that whenever you are looking for the best purchasing software in the market.
Always ensure you have factored in the input of employees who will be using the software on a daily basis. They are the ones who understand the exact needs of the company and bypassing them would be a bad choice to make. They must be part of the software purchasing process and their input must be treated with importance. It will not be a bad idea to seek referrals from close friends or business associates you can trust on the best service provider to offer you a quality, effective and reliable software. This will be well complemented by making a detailed market research of the many purchasing software programs available.

You should buy purchasing software only after you are well aware of what you are embarking on and the reasons for doing that. Consider aspects like available budget, where to buy and who to involve in the whole process. That is the only sure way of buying purchasing software that best suits your company or business needs.

March 25, 2015
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BY Bellwether
Advantages of Cloud Based Purchase Order Software

Most of the small and medium enterprises are now turning their attention to cloud based purchase order software programs. This is one of the ways to maintain a growing business, especially now that modern technology has become an essential part of nearly every business worldwide. You don’t want to be left behind and converting to this type of software will be a big step in the right direction. But you don’t want to jump on board just because everyone is doing it. What are the benefits of this software program to your business? The main concept of cloud computing is to allow a company to gain access to any software or server from any internet connected device – your office computer, laptop, tablet or even your phone. That is generally a key motivation for businesses to utilize cloud based software programs.

Services available over the internet are typically sold on a subscription basis so it will be upon you to choose the best one. Reduced upfront cost is a great reason why cloud based software is such an affordable option for smaller businesses. The subscription fee typically covers all ongoing costs including software updates and happen in the background on the server without having to involve your business or interrupt your operations.

Cloud based purchase order software allows you to track your cash flow effectively so that you don’t end up paying your suppliers more than you owe them. Businesses that do this manually get tripped up with errors and losses through irregular payments, but that is no longer a concern with such a software program. It will let you know if there are any fiscal commitments that are pending thus making accountability easy. Cases of the company losing cash through procurement will be effectively dealt with once you have installed cloud based purchase order software to your company.

The fact that your suppliers will be paid on time without any delays is an added advantage coming with this software. It is possible to set reminders which ensure you don’t miss due dates on any outstanding debts. Having a reputation for on time payment can make negotiations easier. There is enhanced accuracy and lowered errors when making purchase orders with a cloud based software program. The software makes any updates to invoices and purchase orders automatically which eliminates chances of errors occurring. You will find this software very useful in case your employees frequently make such mistakes either deliberately or not. Whether its supplier details, inventory records or accounting details; all that will be updated in an accurate manner using this software program.

The speed at which purchase orders are done increases once your company is using a cloud based software program. The system has the ability of integrating all processes involved in making a purchase order saving you sizeable amount of time that could be consumed when doing it physically. You just require a single click and the purchase order will be sent to the supplier. With the internet, you can send the order through an e-mail and the feedback is always prompt. You have a reason and half to get cloud based purchase order software for your business.

Cloud based purchase order software programs have numerous benefits that will push you into having one for your business. They improve speed for sending purchase orders, improve accuracy and offer cash flow control among other benefits. Consider Bellwether Purchasing Software: for all your purchasing needs.

March 17, 2015
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BY Bellwether
Pro and Cons of Using E-procurement Software

E-procurement has become very effective following the advent of modern technology. It connects businesses directly to suppliers making procurement one of the easiest things to do. There is the e-procurement software which was designed to satisfy that and it is a good choice to go for. This article will take a look at the main pros and cons of using it for your company’s procurement.

On the downside, most of the challenges experienced with e-procurement emanate mostly from the supplier and not the company but can have an effect on the procurement process. Training cost may be high. Any time technology is involved there is some level of risk to compromised data. What of a supplier who has for all the years been handling clients on a face-to-face basis? E-procurement will definitely become a challenge but it should not be an excuse to ignore e-procurement software.

Starting with the positives, this software comes with a low cost for both technology and information thanks to the internet. You will find out that using the program will have be cost-effective for your buying as well as selling costs. If there were any barriers you were facing in penetrating the market they will be done away by this software.

The prices are more transparent so you shouldn’t expect to suffer from hidden charges while individual purchasing is completely avoided. Simply put; the power balance between sellers and buyers is improved. Integration between procurement chains is at its best when e-procurement software is used. The company will be in a position of managing transactions effectively and in an organized manner. If there are any delays in any procurement dealing it will be noted as early as possible while standardizing transactions are easy. As a business operator, this will give you the leeway to obtaining better price offers for the procured goods. For the long-term basis, that translates to cost saving. E-procurement facilitates for a shorter product development sequence.

This is attributed to the fact that information is exchanged at a high rate while delivery of products does not take long. Another benefit of e-procurement that may entice you is improved productivity which can be achieved even in a short-term, more immediate time frame. All the approved items are listed down on a catalogue making it easier for internal customers to pick what they want without much struggle. That relieves procurement staffers who can concentrate on more valued supplies which in-turn helps to enhance customer relations and strategic sourcing. Generally, e-procurement software improves controls within a company making sure compliance to policies and regulations is of the highest level and the approval process is standardized.

You will have no excuse not to embrace e-procurement because modern technology has become part of our lives. Unless you want to lag behind, you must have e-procurement software for your company’s procurement and stay afloat in the market. Always make sure you have chosen the right e-purchasing software program. Bellwether Purchasing Software is a flexible choice in purchasing software to fill the needs of your company. Contact us today to learn more.

March 12, 2015
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BY Bellwether
Considerations when Choosing Procurement Management Software

Procurement management software will help a business take care of any risks associated with purchase as well as suppliers. The procurement chain is usually subjected to many dangers that can result in heavy losses but you will be well protected with a software program. Since there are many programs in the market today, you should be extra careful on how you make your choices not to end up frustrated. The following tips will be helpful once considered. You must first have a good understanding of the diverse procurement management tools existing in the market. These will be helpful in collecting data about certain procurements, manage the workflow, manage the performance of suppliers as well as take care of the risks that might come up.

For the procurement software that you are considering make sure to look at the version that is currently in the market and when it was released. You should go for the latest release because it has all the advanced features and its effectiveness will be unmatched. You will only have yourself to blame in case the version you have selected has expired features and cannot help in streamlining your company procurement. Even though it’s impossible to have any software that is entirely free from viral attacks; that should be a key consideration when making purchases. It should have high resistance to such attacks through active scanning and elimination of detected bugs.

You must consider the analytical prowess of the procurement management software you buy because you are well aware that procurement responsibilities are many at your company. The software should be in a position of handling all the information collected from the supplier and that will help in making good decisions for the sake of the company. Don’t just choose a program because you have come across it or your competitor has one. There are several other tools and hardware that your software program will require in working effectively. You have to ensure the software you have purchased for your procurement management is compatible with all your other systems. It should never work as a lone-ranger but in tandem with other related tools.

The software program should also not experience problems working with your computer system. The reputation of your procurement management software program matters a lot and must be among the considerations you make during purchase. Is it suitable for performing as you expect? Is it reliable enough? Those are the queries you must seek answers to in determining its reputation. The company that manufactures the software must as well have the best reputation including good market presence and enough experience. Never gamble around with such a vital decision that will have great impact to your company’s procurement process. Contact us at Bellwether Purchasing Software today for your free live demo.

The procurement management software program you end up choosing for your business should be the right one and not one that which will give you problems. It should be reliable, effective and of good market reputation for a guarantee that it is well suited. Don’t just choose any PO software you come across without proper considerations.

February 27, 2015
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BY Bellwether
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