When it comes to running your business there are so many moving parts and priorities, not least of which will be maximising sales, marketing to identify and retain loyal customers, handling employee relations and dealing with myriad other pressing commercial and legal matters. As a result, Procurement can often find itself being handled by multiple staff members within your business, conscientiously looking after their own discreet areas but perhaps not seeing the bigger picture and potential for making cumulative savings to drive real value for the business.
The following is a guide to refining and enhancing how you already procure goods and services.
1. Work on the supplier spend data
To get under the bonnet on the who, what, when of your supplier spend and create a baseline, obtain a supplier spend report from your accounting system which covers a 12 month period. Then categorise and segment the intel into the size and savings opportunity. For more detailed analysis, look out the actual invoices. Also remember to check your bank direct debits and standing orders as these may not appear on the accounting system report.
2. Engage with the business stakeholders
Get known and get to know the business quickly. With a new function or a new outlook to getting things done, there may be some initial push back from those within the business who wish to protect their own interests. Look for the low hanging fruit and help deliver quick wins to kickstart conversations and prove the value of the procurement function. Create a process where regular status updates are implemented to track momentum and value. Ensure a new or revamped procurement function truly understands the business and how it operates to ensure the service helps deliver on individual and wider Company objectives.
3. Contact your suppliers
Work out where the balance of power exists in the buyer: supplier equation. Where you believe it is perhaps weighted disadvantageously, work with your supply chain to balance things more in your Company’s favour. Suppliers like all businesses are in existence to make a profit for their owners and shareholders. Accept that and get on with negotiating great terms, really understanding the drivers in the suppliers business and how you can leverage those for mutually satisfactory benefit. Creating robust supplier relationships will cement the procurement function as the de facto gatekeeper within your company for any communications relating to supplier service, price, terms and quality.
4. Devise and implement a Procurement Policy
To drive procurement best practice, a clear and unambiguous policy is a must-have. The policy should cover areas including how to engage with suppliers, delegated expenditure levels, rules around ethics, sustainability and how to minimize risk in the supply chain. Senior executives should endorse it in the business and the procurement function will then embed it within your Company acting as an ardent advocate to ensure everyone is working on the same basis and understanding to help deliver value.
5. Build a Procurement Toolkit
To create a consistent approach for all procurement activity, irrespective of the spend category, including supplier management, tendering, requests for information, proposal etc, cost analysis, a key element of the procurement armoury is to establish a library of templates. This will help save time and money and avoid reinventing the wheel each time.
6. Track the savings and successes
It can be easy to become so enmeshed in the detail of delivering the deals that a timely record of savings and efficiencies is not maintained. This is a crucial element – whilst the numbers will filter through to the P&L, it is critical to measure the success to ensure every £ of value of derived from your procurement activity.