Procurement 101The R-Word: A Corporate Survival Checklist for the Recession
Many business ideas intended to revive declining sales are at risk of failure. Decisions made during a period of stress are often overly aggressive and price-driven, factors which can impair even the best judgement. When an economy is in a recession a company may be tempted to stop manufacturing a product and let the inventory count fall to zero. The words promotion and sale may be tossed around with reckless abandon as a Band-Aid solution for the gaping wound of profit loss. Salad dressing may be marketed as a dip, soup, sports drink, and/or fuel for the car.
Are these the best ideas? Probably not. But let’s cheer up! Here’s a checklist of six ways to strategically control corporate expenditure and save, even during economically volatile times. Every point a company is able to check off equals a healthier balance sheet.
- Negotiate With a Number of Suppliers
Grow your supplier base by seeking numerous suppliers before you begin the negotiation process with the top contenders. Comparing all options is a preparatory step to ensuring that the final choice is the most economical – relying on only one supplier can quickly become expensive. With multiple suppliers, the pros and cons of every supplier can be measured in a thoughtful manner. This allows a company to then move to weighing the advantages and disadvantages of each offer, a strategy which ultimately results in savings.
- Centralize Purchasing to Leverage Buying Power
Collect multiple requisitions from throughout the organization and consolidate them into a single order. Better deals can be secured when buyer power is leveraged – ordering in bulk is a great way to obtain discounts. This system streamlines the ordering process for employees and is more economical for the company as a whole.
- Assess Vendors Against Historical Data
Past vendor performance can help a company determine its future direction – the same mistakes don’t have to be repeated. Sort through old paperwork to identify which suppliers had the most reasonable (or unreasonable) terms. Factors beyond price should be considered: the overall quality of the product, shipping details, and the degree to which specific requests were accommodated can make certain suppliers more valuable.
- Enforce Approvals
All company spending should go through an approval system. This ensures that money isn’t flooding out without a dam (or a damn). When purchases are screened before they’re made the end result is savings. Maverick spending, that is, uncontrolled spending that doesn’t comply with established contract terms and budget parameters can be eliminated.
- Develop a Category Management Strategy
Company spend should be managed through the creation of categories. Designating purchasing categories minimizes the possibility of wayward transactions. How? When company spending is slotted into predetermined categories there’s less chance that money will be scattered across unnecessary purchases on a whim. The oversight of spend can be immediately validated.
- Implement a Procurement Solution
By checking off this one point, a company automatically fulfills all the points listed above. E-procurement platforms offer a means of re-grouping purchasing activities and/or creating economies of scale when buying goods and services. E-procurement can reduce unnecessary spending and generate measurable savings through the elimination of messy, paper-based processes. The benefits of e-procurement facilitate organizational control, improved negotiation, and data analysis. Savings are at your fingertips.
Try out these suggestions and your company won’t have to design a decompression room for nervous breakdowns. Even better, the recession might not wreak financial havoc on your bottom line.
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