Anybody running a small business will know only too well how many different hats they have to wear in the average working day. Strategy, operations, business development, staffing, finance and customer relationship management, to name but a few.
As a result, procurement can often be treated as a low-priority issue that gets very little attention or strategic focus. This can be a big mistake when you consider that small and medium sized businesses spend at least 50 percent of their sales revenue on procurement of input services and materials.
Put that way, it is easy to see the impact that even a small improvement in procurement efficiencies could have on your bottom line. Here are some tips for adding some strategy to your procurement function.
1. Strategic partnerships
Unsurprisingly, the first and most important point to consider is making the best choice of suppliers. The digital age makes this easier than ever, and online platforms like probrand.co.uk can set out a choice of vendors in both products and services. When you have chosen the right suppliers for you, seek to carve out long term deals.
This way, you save time and build trust. If you are dealing with a supplier as a strategic partner, you can talk openly to him about your needs and spending constraints, and work together to fine tune your processes.
It is a win / win for both you and the supplier, as they will have the benefit of a reliable customer, and the regular business between you can improve efficiencies for everyone. Good relationships also give you better bargaining power when negotiating rates.
2. Streamline processes
There are a number of IT software solutions available that can make procurement easier, slicker and more transparent. Supply chain management software, integrated accounting and Enterprise Resource Planning (ERP) systems and supplier management systems are just a few examples.
Leveraging the right technology can have an enormous influence on your organisation’s purchasing, logistics and overall business performance. Easily said, but there is a greater risk factor attached to small businesses when it comes to buying, learning and adopting new tools and software.
While a proprietary all singing and dancing ERP system might sound great, it is a major investment, and you are additionally faced with the challenge and distraction of getting it fully implemented, training the staff and so on.
A viable alternative is to consider basic open-source software as a way of acquiring effective procurement tools that are bespoke to your organisation and will not cost the earth.
3. Consider a consortium
The clue to one of the unavoidable challenges of running a small business is in the name – it is small, and cannot leverage the economies of scale that larger competitors enjoy. This can present a real problem in getting the best supplier rates and competing with the major players.
A potential solution is to form purchasing consortia with other SMEs. Partnerships like these can yield significant discounts.
Competing in the 21st Century
Today’s small businesses cannot afford to overlook any aspect or function if they hope to survive in the modern day competitive environment. Taking a strategic look at your procurement processes can have a serious impact on your bottom line.