Business owners like you are always trying to find ways to save money while still effectively and efficiently managing their business. What many business owners don’t know is that savings can be found in the procurement process. By refining your procurement strategies, you can boost company productivity and save money.
Here are some practices to help you increase your procurement savings.
Where possible, you should start consolidating your vendors. Supplier management will help you maximize your savings. Take the time to identify strategic vendors and consolidating the total number of vendors you work with.
Consolidation will also allow you to get volume discounts and a higher quality of goods. Because there are fewer suppliers to manage, the process will become much more efficient. You may also want to keep a couple of backup vendors in the event that the main vendors cannot fulfill your orders due to an emergency.
Make sure to let your vendors know that you are consolidating and you may receive lower bids from them for products that you are regularly purchasing. By allowing them to compete with one another, you could end up saving your business money.
Rogue spending can account for up to 80% of purchases in a company that lacks efficient procurement software. Conduct a spend analysis by looking through spend records to find any uncontrolled spending. Once you’ve seen any, assign it to your preferred suppliers. Next, go over your process with your team so that they know when they are spending in excess.
You can improve your risk management by making sure that your procurement process doesn’t rely on just one major supplier. Pay attention to your contracts and follow up with suppliers. Take action to avoid logistical issues, like planning for a back-p supplier. All of this will help your business run more smoothly, especially if any of your vendors have hiccups of their own.
You can also renegotiate your contracts with value-added services that will help save you money, such as extended warranties or free shipping.
Streamline your processes to reduce internal operational costs. Take a look at your current PO system and find out which processes can be automated. The more automation your procurement process has, the more work your employees can get done in one day. This efficiency will help your business accomplish more tasks in the same amount of time.
Category management will help you find opportunities to save money and cut down on your internal costs. By creating exclusivity agreements, you can boost your profits.
Spend leakage will happen when spending occurs outside of the terms of the contract. Your procurement process should monitor everything for compliance, including payment terms. If any non-compliant purchases are made, which caused leakage, procurement can help prevent it from happening again.
Compare prices by allowing companies the opportunity to bid for their work. Their bids should include how their company will solve your business problems and provide an estimate for their work. This process will help you receive high-quality goods and services at competitive prices.
If you notice that a company you’d like to work with if giving you a higher bid than you’d like, contact them. You can ask if there is any way you can work together for a lower amount. You may also give them the average bid amount and tell them you would like to stay in that range.
Many businesses don’t want to spend money into training their employees. However, by doing this, you can improve your bottom line in the long run and keep your business running smoothly. Investing in training to develop certain skills, such as negotiation skills, or training them how to use a procurement system, will improve the whole procurement process.
Remember that your employees are your most significant asset, so investing in them is like investing in your own business. If you have someone in the company who would be a good teacher, schedule them for some time to train other employees how to do their job. While you may lose money for just that day, you will earn it back and then some as your employees learn new skills.
Review your suppliers’ terms and discounts and make a master agreement. Talk with your suppliers to find savings by changing your purchasing patterns. Buying in bulk may save you money from one supplier but can cost you from another.
You will want to make suppliers compete with one another so that you can get the best terms. You can do this by telling them another supplier has agreed to certain terms in your favor and that you will only be able to work with suppliers who can meet those terms.
While some suppliers won’t allow you to change your terms, they do want your business. It’s in your best interest to try to find ways to work together and come up with a solution that benefits both parties.
Technology can improve efficiency and keep costs down. E-procurement software, for example, can help your team communicate faster and get more work done. Utilizing technology is one of the most effective ways to increase the procurement process cost savings.
Communicate with your employees and stakeholders so that you can work together to come up with a plan. Your goal should always be efficiency and effectiveness. If you are finding that too many mistakes are being made in the procurement process and notice that it costs too much money to keep fixing these issues, brainstorm how the company can better work together.
Make sure to include employees across apartments since finance, human resources, and even your assistant may all have ideas that can improve the process.
Business intelligence (BI) is all about data that can be used to improve business functions. One is the procurement functions, which is integral part of corporate performance. Procurement can be a complicated process, but business owners must be able to continue to obtain high-quality products and services at sustainable costs. BI is an effective way to do this as it provides essential data to businesses who may not have the information they need to make the correct business decisions.
In general, BI is the use of analytics, technologies, and software to retrieve and extract data from enterprise resource planning (ERP) systems. That data is then converted into readable, valuable information.
BI allows businesses to summarize lots of data into meaningful, fact-based information. This information helps business owners and stakeholders make decisions and solve information-related problems.
Purchase order software provides its own business intelligence. Because business intelligence is all about data, effective purchasing software can quickly interpret data and turn it into readable information for business decision-makers. It can also automate processes, such as approvals, to make the entire procurement process go faster. At the very basic level, the data provided by procurement software can help businesses determine where in their procurement process, there is a breakdown, causing the entire process to delay and negatively impacting business relationships.
Business intelligence and the software that comes with it can help with strategically sourcing goods and services to provide procurement analytics. E procurement software can easily provide your business with the business intelligence it needs to make important decisions.
Procurement and supply management can keep costs down. The management of these aspects of a business should include real-time collection, tracking, and analysis of every part of the procurement process. The most effective procurement software collects and analyzes data at each stage to ensure optimum cost and maximum profit. Each activity, transition, and event generates data that should be analyzed.
Let’s take a look at how business intelligence involved in the procurement process can improve its function.
Real-Time Data to Identify Cost Savings
Organizations should integrate spending and transaction data across departments into a single system. Blending these sources allows the procurement team to gain timely insight into spending patterns and take measures to correct any issues. In other words, BI allows the team to be proactive instead of reactive.
Procurement data used to focus on the past, but this approach is now evolving. Intelligent data will help procurement teams work with data that looks forward and proactively develop strategies.
Data-Driven Decision Making
You may have experienced aspects of ineffective processes, but were unable to prove them, making it difficult to enact change in the procurement process. With interactive dashboards, the procurement staff now has the data to back up their decisions. By collecting this data over time, it can positively influence procurement strategies across departments. The data can then be used to set key performance indicators (KPIs) so that teams can evaluate factors that are crucial to success.
BI dashboards help to ensure proper data integration so that changes can be made in real-time.
Analyzing Supplier Relationships
The difficult and complex process for maintaining supplier relationships can create strained partnerships. Without the proper data and insights, there is a lack of trust and transparency between partners.
Your business requires quality goods and services by a certain date at the best possible price. On the other side of this, the suppliers need more business, and they want to receive advance notice of purchases and demand patterns. There is a new procurement trend dealing with supplier relationships that involve optimizing value over just price. This will determine the total cost of acquisition and operating costs. Procurement analytics provide insights that will further develop beneficial symbiosis between businesses and suppliers.
Enabling Automatic Purchases
Using BI solutions within the procurement process can provide benefits to both the supplier and business. These applications can lift the workload burden off of the busy shoulders of many procurement teams.
Procurement professionals often have to spend much of their time with transactions, distracting them from the more complex responsibilities involved in strategic sourcing. BI dashboards make automated purchasing possible, reducing the buyers’ workload and allowing them to focus on more difficult tasks.
With this, the buyer doesn’t need to be involved because the information is sent directly to strategic suppliers so that the business receives the best value for the items they need within the established time frame. Automated purchasing allows buyers to provide concrete feedback to their suppliers.
BI lets you monitor supplier performance in real-time. With easy access and data-based decision making, you can choose the suppliers that benefit your business. With BI tools like dashboards and reports, the procurement team can easily analyze cost, quality, and delivery performance by the supplier.
These analyses allow for quick identification of the most efficient and reliable business partners to provide data and support communication with them. If a supplier has breached the contract, you will then have data to back up your claims. Also, by utilizing data visualization practices, you can view and compare supplier performance quickly and easily.
Data allows for transparent and business-beneficial negotiations between businesses and their suppliers. BI tools can organize data and tell a story to show how suppliers are performing compared to other suppliers. BI purchasing software dashboards can show this information:
An effective procurement process should always utilize procurement software to get the best, real-time business intelligence. This data will provide individuals across departments with the analytics they need to make data-driven decisions. This information will help increase efficiency and keep costs down, helping businesses achieve success and growth.
The procurement process can be complicated, which is why many businesses are still using spreadsheets and manual processes to control and manage their purchasing. Strategic procurement spans across all different departments of an organization. A successful procurement process is crucial for keeping costs down and making businesses more efficient. An effective procurement strategy includes a financial plan which helps manage budgets, workflows, and production timelines to keep everything aligned with the business objectives.
Without a defined process, it will be challenging to keep the daily functions of a business efficient and productive. It will also be near impossible to stay on budget. While every strategy should be tailored to the individual business, it should consider the company’s current status, stakeholders, market conditions, and company goals.
These are the goals of a procurement strategy:
Here are the steps you can take for a successful procurement process:
By not integrating procurement software, you could be losing money from errors, delays, and even overpayments. Procurement software increases productivity while minimizing errors and reducing the need for data entry and redundancy. You can also track purchases from purchase order to payment, eliminate the need for waiting on approvals, create invoices from PO’s, and use the data for all parts of business operation.
Know how the company is doing at this very moment before moving forward. If you have a strategy in place or are currently using spreadsheets or inexpensive accounting software, determine if this software is meeting your needs. If your business is growing, assess whether these purchase order software systems will be able to meet your future needs when it comes to inventory, invoicing, and accounting. Identify any weak areas of the procurement process that need improvement and look for areas where the money is being wasted.
It may also be beneficial to talk to all of your employees involved in the purchasing process so that they can give you an idea of their day-to-day and what maybe disrupting the process.
The stakeholders will need to be involved when you are refining, or even defining, your procurement process. Make them understand the goals and sell them on the idea of a speedy turnaround and better production time, with more efficient workflows, reduced errors, and significant cost savings.
While the goal of your business may always be to make money, your strategic goals should be detailed. How will you make more money? A well-defined goal includes a target and a plan. A goal could be, for example, increasing sales by x percent. You should always make sure your goals are measurable and realistic. The best way to measure your results is by using that procurement software we discussed that will provide you with analytics to let you know how your business is doing.
It’s time to determine how to prioritize purchases. This process will vary from business to business. If you’re a retailer, for example, you’ll need to work with the marketing department to determine which goods should be pushed and when. Lucky for you, purchase order software allows you to more effectively communicate across departments with data that can affect your priority decision making.
You should make a list of authorized purchasers and a budget for each department so that it’s clear who is allowed to spend and how much. Expected purchases can be approved automatically using purchase order software, eliminating any wasted time that could be detrimental to a business relationship.
Define specific guidelines for each department when it does to procurement. This should include which suppliers are preferred, what would need approval, and who would provide approval.
If you’re in search of new suppliers, you should typically take bids from three or more suppliers. In order to take on new companies, you will need to refine your sourcing strategy. The policy should specify the criteria used to determine which suppliers are chosen. This criterion should include, supply quality, price, delivery times, service, compliance with regulations or company objectives, or anything else you value in a supplier.
You should already have a preferred vendor list that you crafted by evaluating suppliers based on specific criteria. If you think your list could be negatively impacting your business, it may be time to take another look and revise the requirements so that the purchasing decisions don’t lead to lost sales.
When it comes to negotiations with vendors, it’s essential to select the right bid. The lowest bid may not always be the cheapest option in the long run. If you go with the lowest bid and don’t have a strategy in place, you may end up with cheap products and your customers may lose faith in your business. Make sure your criteria cover all potential issues that can arise from a poor vendor relationship.
Once you have executed your plan, your new procurement process should be evaluated so that you can determine its success. Common metrics include:
Once you’re able to take a look at the metrics, you can continue to fine-tune your strategy as necessary to enhance the process as your business grows.
You can also use purchasing software to determine even more analytics that can help you measure success. You’ll be able to see where any breakdowns within the company occur and come up with a data-based solution to fix the issues.
Your procurement strategy should be a roadmap for business spend and used to maximize the budget and minimize errors, late payments, maverick spend, and anything else that may negatively impact the procurement process, and in turn, business relationships.
There are a variety of reasons why a company may make an acquisition. If a company is growing quickly, one of the most compelling reasons to make an acquisition is it can accelerate growth. Whether it’s talent or innovations, an acquisition in this type of scenario can shorten the amount of time it takes to hit the next milestone.
Although that scenario makes acquisitions sound very appealing, it’s important to understand that they’re by no means a guarantee of success. In fact, the majority of acquisitions fail. That truth spans from the smallest of businesses to huge corporations. So even though acquisitions offer so much potential, why is it rare for them to be truly successful?
The issue of acquisition failures comes down to a few issues. Those issues include incorrectly identifying targets, taking the wrong approach to financing and not properly integrating an acquisition. Since there are some very real challenges that stand in the way of making an acquisition successful, we want to cover the four most important elements entrepreneurs need to evaluate to get the results they actually desire from an acquisition:
The Right Timing
Many people underestimate just how big of a role timing plays in whether or not a startup is successful. Timing is just as important for acquisitions. A business needs to be at the right stage for an acquisition to work. One of the biggest mistakes a company can make is doing an acquisition because they think it will fix their weaknesses. If a business isn’t currently in a position of stability, they shouldn’t be thinking about an acquisition.
One of the reasons entrepreneurs should always think big is there’s a lot of risk involved in bringing a vision to life. As a result, there needs to be a very big upside. This same principle applies directly to acquisitions. Bringing two businesses together will need to create significantly more value (and definitely not less).
Opportunity to Negotiate
It’s important for an acquisition to be a good deal. That’s why there needs to be room for negotiation. Not only is negotiation important on the financial side of things, but if a company that’s being looked at for an acquisition isn’t willing to do any negotiating, chances are they’re going to drag down the entire acquisition process.
A Clear Way to Integrate
Even if the first three elements are in place, it’s still vital to have a clear way to integrate the acquisition. Without a clear vision for integration, an acquisition is almost guaranteed to fall short of expectations.
While there’s still no way to guarantee that an acquisition will be successful, focusing on these four elements is the best way for an entrepreneur to make an acquisition work as expected.
As the role of procurement continues to increase in scope and importance across organizations, more people are looking at exactly what makes great procurement professionals. While there was a time when procurement was an afterthought for many organizations, its increased role means organizations are looking for talented individuals who can deliver the results needed to thrive. Because countless organizations simply don’t know what they should look for in a procurement professional, we want to provide some clarity by highlighting the five traits that matter most:
Anyone who has come into contact with spend analytics knows they can provide clear information on spending activity. While that can be useful, the reason companies should care about these types of analytics is the information they can offer goes beyond just spending. Specifically, it can help a company increase productivity. It can also boost savings by making it possible to streamline existing purchase-to-pay practices.
How exactly can spend analytics help your business increase savings and streamline its practices? The answer is by identifying some specific areas that can be improved, which are:
Despite more CPOs reporting directly to CFOs, as well as lots of talk about the importance of synergy between procurement and finance, many organizations still keep these functions in very distinct silos. If your organization has more space than you’d like between the two departments, the good news is bringing them together can be a relatively smooth process. A big part of why organizations can find a lot of success by bringing procurement and finance into closer alignment is the two departments already have a lot in common. So with that in mind, here are a handful of steps that can be very useful in encouraging successful collaboration:
Contracts are crucial for enterprises. Without them, there wouldn’t be a way to cement the relationships that enterprises have with their suppliers. Given that suppliers are the source of goods and services that enterprises require to remain functional, it’s easy to understand why contracts are something that need to be taken seriously. Although contracts serve a very important function for enterprises, that doesn’t mean they’re always handled properly.
In recent years, purchasing departments have begun to play a more significant role within many organizations. A big driver of this shift has been the realization by companies of all sizes that purchasing can actually provide a competitive advantage. As a result of this increased significance, it’s important for companies to understand how to properly measure purchasing performance.
Even though it has many common characteristics of a buzzword, the cloud has proven itself to be a lasting shift across the business landscape. As costs continue to come down and options mature in the functionality they provide, businesses continue to shift their operations to cloud platforms.
If your company is exploring different cloud opportunities, we have several important considerations to share with you:
There’s a lot to be said for businesses that are able to maintain agile operations. Even as a business grows, staying agile can provide a significant competitive advantage. One big selling point of the cloud is it supports an agile approach to doing business. Because the cloud makes it possible to keep information shared and updated across an entire organization, it’s possible to avoid the types of communication barriers that can start to slow down a business as it grows in size.
Falling Costs and Increasing Functionality
A big part of why so many businesses choose to move forward with their transition to the cloud is because the numbers make so much sense. As competition continues to increase among cloud vendors, prices continue to be pushed down. The attractive pricing options for cloud technology makes it all that much easier for businesses to transition. What’s really great for businesses that want to use cloud technology is the increasing competition also means vendors are providing as many useful features as possible.
One thing that often gets overlooked in discussions about businesses and the cloud is this transition doesn’t have to be an all or nothing choice. Instead, businesses can take advantage of focused offerings to move the parts of their operations that make sense to the cloud.
Although there are exceptions, this type of targeted transition is generally the best option for the majority of small to medium businesses. The reason this approach works so well is it allows businesses to take advantage of the best cloud technologies that are available without facing any type of large technical hurdles.
A great example of a piece of focused cloud technology that can greatly benefit businesses is purchasing software. Because the purchase order software offered by Bellwether is 100% web-based, it’s easy to access from anywhere. Not only is this software specifically designed to give purchasing managers everything they need to be as efficient as possible, but it makes it possible to customize to specific needs.
From easily automating purchasing processes to enforcing budget thresholds, our cloud software is the top choice of small and mid market purchasing managers. Best of all, the fact that it’s based in the cloud means that it doesn’t require IT support. If you want to see exactly how our cloud solution can help your business save money through increased efficiency, we encourage you to take advantage of our 30 day free trial or let us walk you through a free live demo.
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