The Seven Purchasing Tactics that All Procurement Managers Should Know & Implement
The right purchasing strategy offers immense benefits to your business. It helps you:
- Cut down costs
- Source quality goods
- Get goods and inventory at the right time
- Work out a win-win deal
When it comes to devising procurement strategies, different businesses and procurement managers swear by their own strategies. While some consider centralised purchasing as the best way to cut down costs, others believe that you shouldn’t place all your eggs in one basket.
Here are three of the commonly used procurement methods:
i. Single Source Procurement
Some businesses use a single source procurement strategy. As the name implies, this involves getting dedicated service from just one vendor. While single source procurement may seem like an easy and hassle-free way to handle purchasing, it’s not the best strategy. For example, if something goes wrong with your vendor, then you’re left without any alternatives.
ii. Purchasing Cycle
Here a business has a group of regular vendors and divides their purchases among those group of vendors.
iii. Procurement Auctions
Some businesses use procurement auctions to source goods at the best prices. The downside to this strategy is that it may not always be possible to get your desired goods, especially when there are multiple businesses competing for the same asset.
Regardless of which procurement method you use, there are 7 key procurement strategies that all procurement managers should be aware of:
1. Build an Optimal Relationship with your Suppliers
This is the first (and must do) step of procurement. Start by building a list of vendors who offer you the best terms and prices. Discard suppliers who don’t meet your quality requirements and prices. This way, you build a reliable vendor list that you can use anytime.
2. Test your Vendors for Quality at Periodic Intervals
Once you have built your vendor list, it’s common to become complacent. This is a crucial flaw and needs to be avoided. Make sure to retest all the suppliers in your list for quality at periodic intervals. There are multiple tools like Six Sigma that help you evaluate the quality of your vendors and suppliers.
3. When it comes to Risks, it’s Better to Be Extra Cautious
Today, with supply chains spanning across continents, more and more businesses are sourcing their supplies from different countries like India, China, and other parts of Asia. While sourcing from different countries has its advantages, it can be risky too.
To give an example, take the case of the 2011 nuclear disaster at Japan’s Fukushima. The nuclear meltdown in the Japanese prefecture of Fukushima caused several global chains to halt their supply chains. Production delays, product shortages and higher prices caused a huge devastation to the global supply chain.
Another recent example to consider is the border closing due to the pandemic. Companies that had concentrated their entire supply chain in China had to halt production as goods were delayed coming out of China. The recent Suez Canal blockade also demonstrates the need to factor in both planned and unplanned risks.
4. The Goldilocks of Global Sourcing
Today, multinationals see the whole world as one large market and source products from the best vendors at the best prices, irrespective of where they are located. While global sourcing is a great way to efficiently source goods at the best prices, it has its downsides too.
With customers demanding more eco-conscious deliveries, companies have to get the global sourcing strategy just right. Remember that global sourcing is here to stay. If you want to procure at the best prices, then you’ll have to rely on global suppliers who offer you their services more economically.
But, at the same time, make sure to partner with trusted global suppliers who comply with regulations, so that you can meet the expectations of changing customer demands.
5. Invest in Vendor Development
Once you have shortlisted preferred vendors, the next step is to work closely with them to develop their services. While this may seem like an unnecessary expense, it can pay you down the line. Think of vendor development as an investment and not an expense. By investing in the vendor, you can ensure that the products you get from them are of high-quality meeting your brand needs.
6. Green Procurement
With more and more customers demanding eco-friendly and sustainable products, there is a huge growth in the demand for green procurement solutions. Look for vendors who can help you source high-quality products at the best prices with a small carbon footprint.
7. Finally, Upskill your Procurement Team
If you don’t have the right team, then your procurement strategies are bound to fail. So, spend some time investing in providing the right training for your procurement team so that they are updated and on par with their skills and procurement strategies.
The Right Procurement Strategies can help you
- Minimize Costs
- Maximize Quality
- Find the best products right on time
Use these strategies to polish your procurement skills and find the best product at the best prices.
