7 practices for sourcing and buying quality products for your business
1. Developing Frameworks
Strong management frameworks reduce procurement inefficiencies and gaps, while enabling transparent oversight for all parties involved. Each procurement stage should have clear, actionable steps for aspects like tracking, approval, and vendor management. Don’t overlook quality assurance, invoicing, payments, and perform three-way matching to ensure purchase orders, invoices, and delivery receipts match. Last, but not least, maintain thorough records.
These guidelines must be used to train purchasing agents, buyers, and other stakeholders that impact the procurement process. Analyzing your existing workflow can help build standard operation procedures (SOPs) to set clear expectations from the start. Creating comprehensive supplier lists and contracts, and regularly evaluating suppliers’ performance, will help identify if they meet your standards and where their competitors stand in comparison.
2. Automating Procurement
Procurement affects almost every aspect of your operations and profit margins. The Foley Supply Chain survey report found that 23 percent of companies now use automation solutions. Other surveys cite that over 40 percent of workers spend 25 percent of their week executing manually repetitive tasks and 60 percent of employees believe they can save at least six hours per week via automation.
Investing in digital solutions to automate procurement can minimize monotonous tasks like data entry, approvals, record updates, and document hand-off, to free up time for employees, reduce the potential for human error, and build systems that make processing cost-effective.
3. Centralizing Documentation
COVID-19 created procurement issues and supply chain shortages, and 22 percent of companies cited contract complications. Such complications cause delays while creating inconsistencies across contracts, markets, and management, resulting in more costly and significant problems. If procurement leaders don’t have visibility of the full supply chain, they can't accurately determine the impact of different disruptions and failures, or detect risks and mitigate them.
A centralized location for employees to access relevant information ensures fewer errors, consistent communication, and less time dealing with remedial documentation work. A temporary repository within a secure documentation hub like Google Docs, or dedicated contract management software like DocuSign or Concord, can be used to build a central hub for templates and commonly used contracts to provide full visibility and improve compliance.
4. Optimizing Inventory
Carrying costs can run anywhere from 20-30 percent of your total cost of inventory. Therefore, optimizing your inventory will cut unnecessary costs, streamline spending, and ensure you sufficiently meet customer demands without paying additional logistics fees.
Advanced analytics and artificially intelligent tools help determine optimal inventory levels in real-time, and accurately predict future requirements.
5. Strengthening Supplier-Relations
A strategic approach, that prioritizes building strong relationships with suppliers, helps streamline product delivery and routine maintenance. Tools like Procurify and Precoro offer better insights into your suppliers, track performance, evaluate relationships, and enhance engagement. The following steps can ensure your business needs are met:
Clearly communicate: Make sure your suppliers are promptly briefed and aware of what needs to be done by any given deadline.
Establish expectations early: Use your market knowledge to hold vendors accountable and clearly outline expectations from the beginning of your contract.
Performance tracking: Regularly evaluate delivery performance, especially early on, to identify and handle risks and monitor supplier performance against contracts to ensure consistent service is provided.
Mind the competition: Take time to understand vendor markets and how your suppliers compare to the competition, in order to make informed business decisions.
Pay suppliers on time: Make it easy for suppliers to do business with you. This can be done through direct communication to speed up payment processes, and creating self-service portals that allow suppliers to submit invoices, proposals, and contracts.
6. Integrating Processes
Guardrails are necessary but procurement processes with countless approvals cause too many barriers. Automating certain aspects of sourcing like dispatch authorization, budget requests, and quality control checks is great - but it could result in ill-connected workflows.
Barriers can be reduced by integrating various procurement processes to create a smooth journey from start to finish. This can accelerate processing time and bridge gaps between different systems to guarantee a seamless flow of data. Additionally, it will enable quality assurance and verification at a faster pace.
7. Going Beyond Cost Reduction
Only focusing on cutting costs puts your business at a severe disadvantage. Market trends and customer preferences constantly change, so your business must continually adapt to maintain its competitive edge. Analyze your current procurement system to identify opportunities that leverage your supply chain, and use those insights to develop better supplier relations, while establishing better and faster services to stay ahead.
Automating manual tasks creates more time for your acquisition team to focus on value-add activities that eradicate waste and provide you with more resources to innovate. Following these guidelines can help you unlock greater enterprise resilience and strengthen organizational agility and efficiency.
About the author
A seasoned operational head with vast experience in the Middle East e-commerce space, Marius Ciavola is Chief Executive Officer at Tradeling.com, the MENA region’s B2B e-commerce platform. As a transformational executive with foresight and imagination, Ciavola has a history of surpassing ambitious business goals and delivering revolutionary technology innovations.