Procurement 101Keep Your Eyes on What You Buy: Part 4 – Improving Efficiency & Effectiveness
In our last post, we talked about measuring efficiency across four major factors in procurement – quality, price, delivery and payment. In this post, we’ll talk about what to do when all your measurement indicates that something’s not working, and it’s time to make some changes.
When your ongoing measurement, through KPIs and ongoing supplier feedback indicate that some elements of the process might need fine-tuning or improvement in order to generate the results you expect, there are a number of good starting points.
The first two areas to consider – how can you improve the value that you get from:
1) your suppliers and, 2) your purchasing team and purchasing process.
Perform a thorough review of your supplier list, working to identify who your strong suppliers are as well as your weakest suppliers. Who is not delivering against their agreed upon terms? Is quality poorer than expected? Is the price not quite in the range that you would prefer? Are there other ways you need them to improve in order for your relationship to be mutually beneficial? Efficiency in procurement relies on the elimination or improvement of bad suppliers, ensuring you keep only the best.
From the suppliers at the bottom of your list in terms of performance, determine what you’d like each to improve and have a frank conversation with them about how you might achieve these results. If you haven’t already, let them know about your system of ongoing supplier measurement and review to inspire and motivate them to provide the best value to your business relationship (and ensure that they work hard to stay at the top of your list).
In addition to looking at the value you get from your suppliers, you should also look at ways to improve efficiency or increase the value that you get out of your purchasing team and process. Look at time saved, productivity or performance improvements. Tradogram is a cloud-based Supplier eNegotiation Platform that can play a role in making your purchasing process more effective, ensuring that aspects like price, payment, delivery and quality are easily trackable, along with supplier feedback and ratings. These tools also streamline the procurement process, ensuring your supplier and purchase information is all centrally stored and easy to access whenever you need it.
In addition to utilizing tools you want to look at factors that may be lowering performance – are you asking for quality standards your suppliers can’t meet? Pricing that they just can’t provide because of volume issues? Finding the perfect supplier often requires a bit of back and forth and adjustment throughout the process in order to establish the right balance so that everyone wins.
Keeping your procurement process running smoothly and efficiently (as well as productively, in terms of your businesses success) is an ongoing process — if you dedicate the time and effort to ongoing review and improvements, you’ll see the reward!
This is the fourth in our series of posts about keeping your eyes on what you buy. You can also read our previous post in this series: Measuring Efficiency.
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