It’s all too easy to order supplies or services without proper contracts. Many smaller businesses ring up the suppliers they know, negotiate a price, and go ahead, rather than take precious time to sit down and develop their procurement policy.
That’s understandable, you’re frequently busy and up against it. But it exposes you to risk – for example, if your supplier fails to deliver on time or to the desired quality.
The aim of a procurement strategy is to ensure your procurement aligns with your company’s objectives and relevant regulations. Once you’ve determined your strategy, it will save you time, increase your efficiency and almost certainly help your bottom line.
In many cases, you may just need a little fine tuning to put more structure and measurement into your processes, enabling you to negotiate supply contracts which are most favourable for your business while complying with your clients’ specifications.
Five reasons to develop a procurement strategy
- Avoid errors
- Achieve saving opportunities
- Identify approved suppliers
- Eliminate wastage
- Cut out cost overruns
How to develop your Procurement strategy
The first thing you need to do is understand what you’re trying to achieve – whether that’s ensuring your orders are delivered on time, that products are of sufficient quality, that you receive good customer service or that you balance risks correctly.
Once your strategy is in place, it will inform your tender documents as you will be able to clearly stipulate the criteria your supply chain needs to comply with. It will help you to understand what you need to know regarding their management and quality systems, their reliability and commitment.
A vital part of your strategy is to establish performance indicators to give you a tangible way of measuring success.
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Measuring risk in procurement
Risk management is an essential part of a successful procurement strategy. For example, if you are ordering concrete from a supplier, you need to consider how they would respond if the concrete arrived with the wrong design mix or at the wrong time. How efficiently this can be resolved will impact your ability to complete the project on time.
Once you have your approved list of trusted and reliable suppliers, this will lead to improved relationships and is a major step towards eliminating errors and overspends and helping you to manage your budgets.
Remember it’s not all about price, it’s about getting best value by finding that sweet spot between time, cost and quality.
Last year I helped a company which needed to procure new equipment. By defining the company’s objectives and putting a plan in place, I was able to help them to procure the right equipment for the job and ultimately help the business to be competitive and succeed.
If you wish to use the services of a professional quantity surveyor to advise on your procurement strategy, call ProQS today to discuss your needs.