Top 5 Procurement
David Daffner, Vice President
We’re all under pressure to contain costs and generate results — usually while facing some pretty serious obstacles. The ultimate goal? Streamline operations, increase productivity and improve profitability. That’s no small feat. Simply maintaining status quo isn’t enough. You need to transform your approach to managed services procurement by incorporating these five best practices. Make them part of your business resolutions for 2019.
- Take a company-wide team approach to procurement.
Create a procurement committee or supply chain counsel that includes executive stakeholders and representatives from key departments. This group should provide governance and direction to ensure over-arching corporate strategy is aligned throughout the organization. It’s critical to provide consistent cross-functional communication so all employees are following the same set of objectives.
- Build long-term relationships with reliable suppliers.
Avoid the trap of choosing a vendor solely based on competitive pricing. That practice usually leads to chasing the lowest price, changing vendors constantly and inconsistent service. Instead build a relationship with a select group of stable suppliers who offer quality products and services at a fair price. In return you’re likely to receive better customer service and flexibility when needed.
- Gain cost efficiencies from e-procurement technology.
Let technology do some of the heavy lifting when it comes to procurement. You know, all the mundane, time-consuming tasks that just seem to add to overhead costs. E-procurement can help with receiving products, service payments, billing, financial reporting, electronic communications and more. Most businesses find more accountability and greater efficiencies when using e-procurement software.
- Focus on Total Cost of Ownership (TCO).
While price will always be a factor in procurement decisions, it’s important to take other considerations into account as well, such as the total cost of owning or consuming a product or service. Sometime it’s easy to forget the majority of that — 60-75 percent — is comprised of operating, training, maintenance, warehousing, environmental, quality and transportation costs, plus the cost to salvage the product’s value when it’s no longer useful.
- Always seek best value.
The concept of best value goes beyond TCO and takes into account intangible values such as market opportunities, social responsibility, responsiveness and flexibility. This process takes more time and effort because value must be quantified. One example would be switching to a higher quality, more expensive machine part that, over time, reduces the cost of parts and labor because it needs to be replaced less often.