More often than not, I’ve found organizations lack a solid procurement process. This is Part Three of a three-part series I’ve created on the things you need to do in order to make your purchasing function a strong contributor to your company’s bottom line. You can read Part One here and Part Two here.
3) Include Procurement in the Strategic Business Plan
A colleague of mine has a saying: “If you don’t have time, you’d better have money.”
It’s true. If you include procurement in the strategic business planning process from the beginning, they have time to fully understand the organization’s overall needs; time to research markets, vendors, and potential solutions; time to make better decisions, which can translate into bottom-line savings.
If they don’t have in-depth understanding and time, what kind of prices do you think you’ll end up paying?
4) Create a Formal, Centralized Purchasing Process
The best way for a purchasing process to have a measurable impact on an organization is to have a formal process for making purchases. Consolidating vendors, consolidating and standardizing sku’s and purchasing in greater volume all offer opportunities for savings. For example, your organization could be purchasing five different types of widgets, when all you really need are two.
Creating a formal process also helps reduce renegade spenders and creates a mechanism for identifying improvement opportunities, especially when you have several locations. For instance, I worked with a manufacturer who discovered that each of its locations was using three or four different types of safety gloves. Once they were able to determine what types of gloves were really needed and most effective to protect workers’ hands, they were able to reduce the number of gloves to three and get a price break on them because they ordered in bulk.
So, before you attempt to implement a supplier diversity program, make sure you’ve got your procurement process in good shape. Then you’ll be well positioned to achieve diversity objectives while saving money!
What have some of your experiences been? How have you been able to improve your procurement process?