Any way in which a business can save money and streamline their processes is beneficial. An effective procurement strategy can achieve both of these aims and can be of great benefit to your business. So what exactly is procurement and what are the business advantages?
What is Procurement?
Procurement is a means of purchasing the goods and services that you require at the best possible price. Usually within a large organization, a central procurement department will deal with purchasing for the whole business. This allows them to combine their buying power in order to gain the best discounts. However, a procurement policy can also be beneficial for smaller companies.
Within the private sector, having a business purchasing strategy can enable businesses to reduce their overheads and increase their profits. The public sector operates slightly differently, but a procurement policy will still have its advantages. They need to make the best use of their budget by buying goods at the cheapest price.
Instead of buying all your business items separately from different suppliers, a procurement policy allows you to source the best one for each item. The company can then negotiate discounts depending on the amount of money they’ll spend over a certain period, for example, a year. Sometimes a company will have a central buying team that will negotiate all these deals. For smaller businesses, they might use a specialized procurement service.
A procurement strategy can help to reduce staffing costs as well. Within large companies, there are often a number of people all carrying out similar roles across different offices and departments. However, by combining all the functions into one centralized department, you can cut the number of staff required.
Without a procurement policy, an employee would have to search through lots of different suppliers to find the one that could provide the goods at the best price. However, they’re now able to know exactly what price they’ll be paying and who’ll be carrying out the work straightaway. They then need to speak with the procurement department and order the required goods.
By going to the same suppliers for goods rather than searching around, you can start to build long-term relationships. This helps you to get the best possible discounts on the goods, as the supplier knows that you’ll be coming back on a regular basis. Rather than treating each purchase as a one off transaction, the supplier will have predetermined rates, appropriate for each company. Building these relationships will also help your company if you need goods delivering quickly. A supplier is more likely to pull out all the stops for a trusted client, rather than someone who’s just contacted them.
Whether you are a large or small business, procurement could be a way of maximizing your resources whilst reducing your costs.