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​How to Cut Your Cost on Procurement

The procurement is among the significant areas where companies are making hefty expenses. A prudent Chief Procurement Officer (CPO) can cut the procurement costs without compromising quality, vendor relationships, and delivery schedules. A timely quality procurement from the trusted source can only assure the consistency of production and quality of goods. How can a procurement bill be contained in limits? The answer lies in the smart decision making by the CPO, minutely assessing the current and potential suppliers and listing them according to the company’s needs. The following cost cut recommendations can be supportive in making smart procurement decisions.

​Supplier Selection

The buyers are always in search of trustworthy suppliers and vendors. A good buyer/supplier relation helps the companies solving the biggest problem of maintaining the uninterrupted flow of their supplies. Forging a reliable buyer/supplier relation is a blessing for the streamlined supply chain. The best working relationship is the product of mutual understanding that leads to long term trust-building. 

​Transparency 

The supplier’s quote is the first document to prove fairness and moral strength. The suppliers sometimes skip information about the cost of transportation, insurance, and packing charges. Carefully examining the quote before closing a deal, help to review the hidden charges. The possible nondisclosure can be service calls, associated items, training, and financial costs. Following the guidelines by the American Purchasing Society can help to improve the supply chain process. 

​Interaction

The buyers have ease in working with local suppliers. The local supplier also feels it convenient to deal with the buyer’s head office directly. It helps to eradicate bottlenecks at both ends. The relationship remains binding due to easy access to each other and sorting out the issues in the face to face meetings. 

Overseas Suppliers

A different set of techniques and capabilities is required to maintain a working relationship with overseas suppliers. The skype and WhatsApp enabled communication is a blessing for buyers and suppliers. They can discuss and decide issues in a virtual meeting and video calls and share the documents in a real-time online environment.

​Sustained Buying

The purchasing is subject to meeting social standards in addition to product quality. These are resisting to child labor, going green, labor exploitation, and likewise. The regional regulations and global pacts on various issues bind the buyers to deal with suppliers capable of meeting social and environmental standards. The quotes from quality suppliers seem a bit higher in the first stance, but it helps make a significant saving against fines and quality losses if buying from low-end suppliers. 

​Technology Push

The technology-enabled procurement is no more a choice, but a must follow condition, for the buyers. The supplier must have access to requisite technical facilities. Procurement decisions are now made based on the pre-inspection of production facilities. The suppliers have become smart enough to become aware of the requirements and competing by keeping them suitably equipped. 

Mutual Trust

Money is hidden in inventories, time, and appropriate quality throughout the process. 

Association for Manufacturing Excellence

The companies are now spending on the facilities for improving standards, social compliance, and accelerated supply chain process. Making selection for long term reliable supply sources is no more a big deal for buyers. They only need to contact, negotiate, and analyze the potential suppliers at laid down criteria. Getting through a few transactions can help developing mutual understanding maturing into the trust in each other. Buyers at this stage enjoy a competitive edge to make savings by cutting costs instead of running into risks, testing new suppliers. 

Photo by Alexander Mils on Unsplash