Friday, December 5, 2008

PURCHASING ~ Best Business Practices

Purchasing best practice delivers profit growth!

Would you take a pile of ten dollar notes and set fire to them? I thought not. Yet that is exactly what an awful lot of businesses do in the way they approach their purchasing.

Apart from salaries, the biggest area of expense for most businesses is purchasing. In our experience, a sharpened focus on buying can reduce a business’s costs by as much as 20%. What would be the impact on your business of even a 10% saving on your
total purchase bill?

All too often purchasing is treated as the poor relation compared with other functions within a business. Yet, apart from sales, no other area of a business has so much potential to impact on the bottom line. Every pound saved by better buying is a dollar of additional profit. And it goes further than that. More value and improved innovation from your suppliers equate to a superior proposition for your customers.
So better buying can deliver both lower total cost and improved revenues.
You ignore your organisation’s purchasing function at your peril.

How does your business measures up?


Gravity Gardener said...

As part of our discovery process, we engage the purchasing areas early on in the project to understand the specific issues relative their own business. We continually find that many customers are looking for three primary Cost Saving

Goals when implementing our solutions:

1. Contract Compliance
2. Process Efficiencies
3. Spend Analysis

We are often asked to provide best practices as part of our implementation process. Each one will addressed here at a high level:

Contract Compliance – The lack of reporting tools and resources plague many of our new customers as they look for ways to squeeze budget dollars. Many of our customers are increasingly challenged to track their spend to ensure they are leveraging established contracts. We recommend that the supplier catalogs selected by the customer be focused on their top vendors for each category. Many customers are able to determine this by analyzing their current PO Volume. We also recommend that each category have a primary supplier only and that they resist diluting their spend by adding multiple vendors to each category.

Process Efficiencies – Moving from Paper to our application inherently creates a more efficient set of business processes and control points. We typically see a reduction in Requisition to Purchase cycle times from weeks to days…and even faster in some cases…In addition, the ability for each requisitioner to be able to track their request through the entire process eliminates wasted e-mails and phone calls.

Spend Analysis – Once the entity has gone live and built some purchasing volume through our application, they can track spend very quickly utilizing our “Purchase Reports”. Instituting a practice of ongoing reviews of vendor throughput, will allow the purchasing organization to leverage the data for future pricing negotiations with those vendors.

E-procurement allows an organization to step out of the mundane paper process and become more efficient in saving money through efficient process and contract compliance.

Gravity Gardener