Regardless of the wider economic context—downturn or recovery—any business that is going through difficult times must take decisions to reduce costs and thus maximize its cash assets and cash on hand. Determining effective strategies rapidly is vital, and one of the best strategies for achieving your cost-reduction goals is to optimize the purchasing process.
It is important to distinguish between practices that will produce short-term, even immediate, results, and others that will bring a much more lasting effect over the medium and long term. Here are three essential practices that J2 recommends you consider when it comes to optimizing your supply chain:
1. Group purchasing
Group purchasing, or group buying, is an excellent way to acquire goods and services at substantially lower prices. The laws of the market mean that at times, businesses will find themselves at a disadvantage in negotiations with suppliers. For example, in some situations the purchases at issue may represent a much greater proportion of your business’ sales than those of the supplier, which can cause negotiations to tilt in one direction. This is where the strength of a group can help you! When you are part of a group of buyers seeking the same product, suppliers can be persuaded to offer better prices, from which every member of the group will benefit.
2. Involve suppliers directly
Unfortunately, too few suppliers are aware of the impact that an SMB’s purchase can have on their sales figures. But some businesses are innovating by setting up purchasing processes in which offers received will be assessed not merely on the quality of the product, but primarily on the way that services will be provided. This change of perspective will inevitably bring into focus both the main advantages and the shortcomings of your suppliers, and eventually transform your relationship into a partnership that can only benefit both parties. There is a very strong chance that you will obtain a better quality/price ratio, and meeting ordering conditions will suddenly get easier.
3. Outsourcing your purchasing: a possibility worth considering
Outsourcing procurement is becoming a strong trend among businesses all over the world. Increasing numbers of SMBs are deciding to focus on their expertise and their core business activities, and to entrust management of their supply chain to experts in the field. Major companies are also using such services, because it allows their resources to concentrate on activities with greater added value. When you hand over part or all of your purchasing process to specialists, you gain in efficiency at every level.
You will quickly find that using one or more of these strategies—or even combining them—is easier than you might think, and that only long-term benefits for your business will result. The impact of the procurement chain on a business’ financial health is often overlooked, but it is a key expenditure item for any organization. Managing it more efficiently will bring big dividends!
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