Successful companies achieve greater savings by creating a collaborative partnership between procurement budget and their suppliers. Procurement professionals are continually trying to find the savings, consumed by the notion that “a penny saved is a penny earned.” While this is indeed true, it is also true that procurement professionals are often guilty of spending many dollars to save a few cents. Cutting costs isn’t always about finding the nickels and dimes; sometimes it’s more about smart use of the dollar.
Time is money
When companies set out to trim procurement costs, they typically focus on the two areas of savings that procurement ofﬁces control directly: price negotiation and supplier selection, which both help companies buy better. Negotiating lower prices for everything a company buys may sound obvious, but many companies struggle with how to do this when the offering is more customized, as in certain service categories.
Buying better is critical but spending better can double a company’s procurement gains or more. There is a huge variety of products in the international market that businesses must find out, evaluate and choose the best fit for their needs in order to spend their budget better. Companies that do both —buy better and spend better— canvass the entire landscape of opportunities for reducing procurement cost.
Rethink your specifications
Successful companies evaluate the total cost of owning expensive items. Paying more upfront can be the more economical choice if savings over time outweigh an initial higher cost. And they work with suppliers to reduce supplier complexity and bring costs down.
Procurement generates savings at the category level, but business-unit managers spend at the budget level. When your budget requires certain actions to be made, there in not enough room to improve your savings. But working with your suppliers and rethinking your projects specifications can tip the savings your way by finding more effective ways to implement a project.
Flexibility is key
The key aspect to reduce your procurement budget is flexibility. Choosing one material over another may cost your business more on the purchase but you gain more on the reuse of it. Thinking about the product life-circle use helps you make a more informative choice. This kind of budget flexibility is often overlooked by procurement managers. Product reuse and rebranding is a certain way to reduce costs and having the right supplier as a partner can help you get more value on your investment.
Invest in new technologies
An ideal procurement team must be up to date with the latest technology trends in their respected field. Research and continuous testing provide new, cutting-edge products that can solve many budgeting problems and earn you more money to spend. New technology is not always easy to know. If you want to seek alternative ways to promote your business, always think outside the box and imagine what your ideal solution would be. Then talking to your supplier and sharing your concerns about improving, can lead to solutions you could not think were possible.