The procurement area of businesses is increasingly prominent due to its strategic functions. If before this area was seen only as an operational one, handling purchases of the most varied inputs and services, today its actions have a direct impact on numbers. This occurs because now the area is responsible for cost reduction directly, and therefore contributes to business growth. This reduction is crucial, particularly in times of unstable economy, when winning new customers is an additional challenge. That’s why reviewing and organizing processes are key to achieve expressive results.
If previously the procurement area conducted quotations with two or three suppliers, and closed the purchase process with the one who offered the lowest price, this purchase universe has now more emphasis on negotiation and intelligence, thus shaping the area for the Procurement 4.0 concept. Have you already thought about the advantages of devising a strategy to purchase items in larger volumes, and thus getting better deals? Or how can negotiation progress with the most appropriate supplier for a given product or service? All this is possible thanks to technology.Here are some ideas to help you (and your business) streamline and optimize the procurement process:
1. Adopt a B2B E-commerce platform
Some procurement areas still follow the conventional quotation model that results in a heavy operational load – either by not achieving enough proposals or by burdening the company with slow processes. The old model is limited, time-consuming, and therefore can be more costly. That’s where the electronic platform comes in. With its help, automating processes and searching for different suppliers concurrently become fully feasible. In order to save more, have bettter control and governance or improve the collaboration of your suppliers, B2B solutions can be a good option for your company. This is because electronic transactions minimize operational tasks and leave buyers free to negotiate. They can reduce 15% of overall operating costs on average.
2. Keep a catalog of smaller, everyday items
The negotiation of basic inputs, such as office supplies, usually takes longer than necessary. For this reason, it’s worth creating a catalog with these products or commodities, which gives the procurement staff more time to dedicate themselves to the company’s strategic negotiations. Here we can use the saying that the more time saved in routine tasks, the greater the cash volume will be. Another possibility is to outsource purchases of non-strategic items, and focus only on purchases that impact the business directly.
3. Don’t underestimate minor purchases related to your operation
As the cheap can get expensive, it’s preferable to purchase quality products and services. If you have a factory, for instance, that relies on heavy machinery to run, the parts of such machinery will be certainly vital to you. Don’t try to consider only prices in such cases. Pay attention not only to the quality of what is purchased, but also to the service provided by your supplier. In this case, having good partners as a support is always a valid option.
4. Look for as much information as possible
In general, those who have more information have more power in negotiations. According to this logic, with items of curve A – that is, those which are more important or with greater impact – you should make efforts to deeply know the entire cost composition of each product. This will allow you to understand the variation of your supplier’s costs, and thus inhibit cost increases without justification or with dubious explanations. The so-called “open worksheet” model can be a powerful tool in this case.
You can assemble the cost composition of one of the materials to be traded, specifying (for instance) the weight of each raw material in question. At negotiation time, you can then submit, to your suppliers, the values provided by the worksheet and show them that you have mastered all production-related expenses and investments. Thus, you will be able to negotiate more transparently throughout the procurement process.
5. Take advantage of reverse auctions
Specific, high value items can be traded through reverse auctions. With such auctions, you can publish purchase demands on an electronic platform, where all suppliers are invited to participate. Unlike the conventional auction, in the reverse one suppliers can propose decreasing bids, until their limit of lowest price is reached. In this way, the procurement area can negotiate very quickly – with auditability, transparency and more chances to get the lowest price. With reverse auctions, many companies can save up to 35% of the initial value of a product. But remember that price should not be the only distinguishing point when purchasing products and services linked to your core business. In such cases, quality, partner support and customer service are more important and should be combined to define the best supplier.