In this age of click-and-buy, we’ve all become used to purchasing books, music, clothes, couches, transportation and whatever else we need in just a matter of moments and having it on our doorsteps in a day. We see it, we want it, and we get it. Done.
Well, that might work very well in your personal life, but purchasing in a business context takes a great deal more thought and planning. If you’re still ordering goods and services for your business the way you’d order pet food online, you’ve got a lot to brush upon.
For starters, purchasing is just part of it. The whole package of procurement begins with strategy: deciding what to buy and who to buy it from at the best price without sacrificing quality. Then there’s the process of negotiating contracts, issuing and tracking requisitions and purchase orders, monitoring deliveries and services provided, and resolving whatever problems might come up along the way. Rinse and repeat doesn’t always work, either, so consistent reevaluation has to be part of the process, too.
If you don’t have a cloud-based procurement management system, then it’s time you looked into it. Even if your business is small now, setting one up will keep everything on track as you grow, saving time and money and reducing inefficiencies all along the way.
Now for the elements of smart procurement practices:
Determining Company Strategy
Regardless of how they’re worded, every paradigm of basic business strategy includes statements of your core mission and your core values, a vision of what you hope to achieve, an action plan to get you there, and assessment tools to see how you’re doing.
Because procurement of goods and services controls 82% of the average business spend, it has a significant effect on what your company has the means to achieve, so it needs to be included along with all of the other operational aspects in a strategy that carries through from your human resources policies to the vendor you choose for copy paper. If, for example, you’re determined to do business in an eco-conscious way, then all of your purchasing decisions should begin with that consideration in mind.
Setting Up A Systematic Process
An effective procurement process needs to be both systematic and transparent. It doesn’t matter whether the ultimate purchase is the professional services of a consultant, airline tickets and hotel rooms for business travel, the shelving units for a retail store, or the raw materials you need for manufacturing. No matter how many of your employees are involved, the steps can be broken down in a way similar to this, with appropriate supervising authorities authorizing them as required:
- Identify the need. Once a need is identified, decide what goods or services are required to fill it and determine whether there are better or alternative options available. If there are other similar needs, consolidate them and see where costs can be minimized by bulk purchasing.
- Research suppliers. Compare costs, quality, warranty, guarantee and return policies, vendor reputations, customer service, and the other details that go toward making smart choices among suppliers who all want your business.
- Negotiate the contract. Some simple transactions have implied contract terms (buying that copy paper, for example), but most require negotiation of terms including description of deliverables, scope of work, timeline for delivery of goods or provision of services, timeline for workflow approval and/or payment schedule if appropriate, potential discounting and rebates, and other aspects of the vendor-client relationship.
- Administer the documentation. You might think of this as “paperwork”, but most of these functions should be digitized as part of an organized online system accessible to all relevant personnel. These functions include issuing purchase requisitions and subsequent purchase orders, receiving what has been ordered and seeing that it meets expectations of quality, approving invoices and making payments, as well as recording, reporting, and storing all records.
Procurement procedures should be evaluated on a regular basis to make sure that everything is running at top efficiency. “If it ain’t broke, don’t fix it” may be an easy out, but there’s almost always a way to improve things so that your spend is working for you in a positive way and helping you move forward toward where you want your business to go.