How to Reduce Costs from Procurement

What challenges are some of your customers facing in the area of procurement? Chances are your suppliers and your customers are facing similar problems and similar problems to you. What are your challenges in getting what you need? How could you get what you need at lower costs and faster and pass on that savings to your customer?

Before any improvement can happen, the first step always entails awareness, analysis, acceptance and acknowledgement of the desire to change.

Try to put yourself in your customer’s shoes. Is there something they would like to acquire but can’t? Is there something you could give them faster but don’t? What’s their work life like? What would their frustrations be?

After you’ve tried to imagine your customer’s point of view, talk to your customer. One of the biggest mistakes business executives is in their lack of understanding that learning how to get the best purchases is about building successful communication and friendships.

Brainstorm to look for the best ways to reduce costs. Comparison shopping, buying in bulk, negotiating by building relationships and buying cyclically during sales are always going to be smart choices. The following are some of the strategies that have proven to be the most efficient and effective for all types of businesses:

  • Advertising—Check online media marketing versus traditional advertising. See if businesses in your neighborhood can team up with you to get better prices from advertisers.
  • Trucking and Shipping Expenses—Deduct costs for your car or truck in your business.
  • Contract Labor—Consider contractors. Often, it can reduce costs to contract as opposed to hire full-time employees.
  • Depreciation—Check with your accountant to see if your eligible for depreciation tax credits.
  • Consider Buying Used—Are there any categories of supplies you can buy used, reconditioned, or get for free from sister businesses? Look online for opportunities to get gently used items.
  • Maintenance—Is it possible to use equipment longer? Regular maintenance can save thousands. Educate your employees before problems arise.
  • Create Your Own Supply Line—Can you cut out the middle man? You can save as much as 75 percent by buying directly from the manufacturer.
  • Utilities—Small savings per month ends up being large savings per year.

 

Training your purchasing employees can lead to big reductions in cost. It is worth developing workshops to teach your procurement employees to spend each corporate dollar as if it were their own. Train your purchasing employees to be well-versed in the skills of pre-planning, relationship building and good spending choices.

Ask for advice from your employees, colleagues, customers and mentors. What are their challenges and how do they overcome them? One of the best ways to reduce costs is to ask people around you what they are doing to reduce costs and share what you are doing to help your business. In the end, you need to tailor your solutions to your business. Sharing information will create good will and good savings.

Bill Brown is Marketing Lead, Procurement Management & Solutions for Procurex, Bordentown, N.J., which plays a key role in ensuring manufacturing companies with overall profitability and growth.

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