During the process of working with SME’s we have noticed that a few key points that lead them receiving uncompetitive pricing for the products and services they need to run their business.
While there are too many factors to mention here, we have identified six main points that you can consider and use to help to R.E.S.C.U.E. your cost base and make your business more attractive.
Resource
- Problem — Limited resource results in procurement becoming devolved to various departments resulting in numerous suppliers, lost leverage, limited negotiation, and inefficient tendering processes.
- Solution — If there are no dedicated procurement personnel identify one person to be responsible for purchasing. Look to reduce number of suppliers, maintain a contract database, stop automatic repeat orders, consolidate demand, tender all requirements, analyse, and challenge all quotations.
Expertise
- Problem — If there are no dedicated procurement personnel there can be a lack of specialist knowledge that is required on some commodities.
- Solution — Look to carry out as much research as possible to identify how costs are constructed. Utilise connections via social media to obtain information and advice or use an external resource.
Status Quo
- Problem — Some companies continue to use the same suppliers and products year after year. They miss out on advancements in the supply chain and continue to pay higher than market prices.
- Solution — Products and services must be retendered every 2 to 3 years and the company must be open to approaches from new suppliers and new products that are more competitive.
Control
- Problem — Too many people purchasing can result in no strategy, no direction & maverick purchases
- Solution — While all personnel can identify a requirement it is important that only one person is responsible for carrying out the act of purchasing. Authorisation procedures together with limited visibility of on-line catalogues can be used to remove maverick purchases.
Unknown
- Problem — It is sometimes difficult to identify that some supplier proposals contain misleading claims/offers
- Solution — Fully understand all the details of a supplier’s offer. Ask questions. Compare their whole offer and its analysis against your current baseline and all the other offers. Seek advice or specialist resource.
Examine
- Problem — Companies do not review a product/service as the company profile changes
- Solution — Regularly check the profile and the volume of your demand against the initial supply agreement. Look to tender at least every 2 years but more frequently if the profile / demand has changed.
We hope these quick tips give you some guidance on how you make some significant improvements and generate additional value straight to the bottom line.
In the coming weeks we will expand on each of these individual points, provide true life examples of the problems, their impact and how they were turned around.