6 Signs You Need To Optimize Your Procurement Process

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Author: British Solomon

Your procurement process is undoubtedly one of the most important processes in your line of business. Procurement affects many other aspects of your company and is one of the hidden functions that makes everything else run smoothly. Therefore, optimizing procurement will save you time and money as well as manpower.

From time to time, you may need to optimize your procurement process. There are some telltale signs that you can look for, even though they may be slightly different depending on your company’s unique infrastructure. Here are six signs to look out for, even in a small business:

1. Difficulty managing suppliers
If your supply chain is getting out of hand, then you may need a bit of help in ordering your business. There is nothing wrong with this – many companies simply do not have the time to organize their entire vertical without losing out on the customer facing services they have to perform day-to-day. This is one of the reasons that you should optimize your process as soon as possible so that you can get the most out of it while spending the least amount of time and manpower.

2. Significant growth in purchases/going over budget
When a business grows, you may have to change your procurement process immensely. One of the most telling signs of a new infrastructure is when you are going over budget in your purchases. This growth in your budget is not because of load, but because you are expanding sales volume. Although this is essentially a good thing, but you need to have everything in order in the procurement line so that you can maintain the profit margins that you are happy with.

3. Improper/missing metrics
On the other hand, if your sales volume is not improving along with your profit margins, then you may have missing metrics that you need to go over. This is another reason that you may need to optimize your distribution and fulfillment vertical. Do not look at this as a mistake in your process. Rather, view it as an opportunity. If you have the ability to go into the last part of your customer journey and find out what is going wrong here, then you will likely have success in the rest of your customer journey as well.

4. Invoice discrepancy
If you have technical discrepancies in your invoices, then it is definitely time for change. Invoices have more than one implication – if you are not having records right, you are not only losing goodwill, but you may also pay for it on Tax Day. Optimize now while you have time so that you do not have to spend money on accountants and lawyers further down the line.

5. Trouble fixing procurement system issues/ takes too long
One of the telling signs of an aging procurement system is if you cannot fix that system in a timely fashion. No process is perfect. However, you should have the capacity to get back to a normal state of affairs if something happens to any part of your distribution or fulfillment. This is true on any scale of business. It is most important as a business grows, but it is absolutely essential while a business is small as well. Otherwise, it will not be allowed to grow. Make sure that you have the ability to fix your procurement system issues in a timely way so that you do not have to deal with problems from quarter to quarter.

6. No concrete policies/ technology/ systems in place
Procurement is a long-term investment. With this in mind, you need to have long term policies and long-term technology in place. By definition, fulfillment and distribution changes quite often with the onset of new abilities and technologies in the marketplace. Your company needs to keep up. If it does not, then it does not matter how good your staff are – they simply will not have the ability to keep up with the rising tide of technology. It is time to optimize your procurement process when you see that you do not have any concrete policies, technology or systems in place.

If you see that your procurement process has one or more of the above symptoms, you should take the time to immediately reassess what it is that you are doing. Procurement is far too important to any company to let any of these points hang on the vine.

Consider your overall business as you consider your procurement efforts. Distribution and fulfillment is an often-overlooked part of the customer journey, but it is one of the most important.

 

 

 

British Solomon is a contributing writer and media specialist for Muddy Boots. She regularly produces content for a variety of business and management blogs, based around the importance of establishing sustainable and efficient business practices.

 

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