Procurement in relation to small business takes on a much different meaning than it’s big biz counterpart. Sure, they both involve similar practices, but in small business, it’s generally approached by a single person or small group — the most pertinent being the business owner. Small businesses don’t have access to a team of interns or professionals to handle research, vetting and communication. Instead, they have to do it all themselves.
Already, a small business owner has many demands and challenges on their plate from staffing and inventory management to customer service. Procurement, then, tends to be a much lower priority. But it shouldn’t be this way. In fact, most small businesses spend between 45 and 65 percent of their sales revenue on the procurement of inputs. It’s a massive undertaking for any company, big or small, so it should be afforded the appropriate attention.
In light of all this, let’s explore some tips and strategies that small to mid-sized businesses can leverage during procurement.
1. Form a Business Consortium
As a small business, you just don’t have the same buying power and influence as a major organization, at least not by yourself. In some cases, this issue can mean that many potential suppliers and vendors are off-limits simply because they work only with larger outfits. It also means that when you do find a potential partner, you may not save as much because you can’t meet optimal quantity limits. Vendors and suppliers will often offer exclusive discounts and deals for ordering in bulk.
Much of this inconvenience can be remedied by forming a consortium between local or similar small businesses. By partnering with others who need the same supplies, you can instantly meet volume requirements for additional savings and hold much more potency when it comes to buying power. Even when volume discounts aren’t offered, you can still benefit from cost savings, because the total investment is split between multiple parties as opposed to remaining solely on your shoulders.
2. Maintain Supplier and Vendor Relationships
Long-lasting relationships, especially with suppliers and vendors, tend to come with many benefits. It can save a lot of time and resources, for one, that you would otherwise waste looking for additional support. There’s also something to be said for the buildup of trust between loyal partners, as you can generally speak more freely and openly with a strategic partner you’ve dealt with over an extended period.
Perhaps even more relevant is the point that you’ll likely be evolving and scaling your operations as time goes on. This process will come naturally as your business grows, of course, but eventually, you’ll make an effort to improve efficiencies or output or just look for potential improvements to make. Having a strong bond or relationship with your vendors and suppliers means that you can include them in this process as well. You might even be able to stretch more enhancements out of helping them achieve optimizations too.
Indirect spending can also be reduced or mitigated by working with a single or small selection of vendors. The money you would spend on research, placing bids or seeking partners — and even varying prices from working with separate parties — can be outright eliminated. In fact, improving your procurement process can result in cost savings of 25 percent or more from indirect spending.
3. Consider Outsourcing
Outsourcing — in its many forms — may not be for everyone. However, if there’s one area of the business world where it can offer incredible benefits, it’s for small to mid-sized businesses. Generally, these operations don’t have access to extended resources, staff or equipment, so it’s difficult to keep up with the current state of the market and scale accordingly for more demanding customers.
Outsourcing involves balancing the work and operations so that a more qualified, capable party handles the tasks that your small business could not. There are many opportunities, service possibilities and providers out there, including outsourcing companies for finances, strategic analysis, IT, security and cloud computing solutions. Even supply and vendor management companies are available and will handle all duties related to logistics and inventory management.
Taking advantage of outsourcing also frees up the time of your limited staff so that you can handle more important or pressing matters. Taking into account the sheer number of responsibilities you have on your plate, that benefit in and of itself might be worth the investment.
4. Employ the Right Technologies
When researching potential suppliers, having access to the right software and systems can be instrumental. Even beyond that initial phase, software solutions can help create job postings and handle bidding processes, reference qualifications, submit and process payments and cover general vendor management duties. Not only will this assistance significantly cut costs associated with time and resource investments, but it will also simplify the entire process, eliminating most of the manual activities you’d otherwise have to follow.
Out of 200 businesses surveyed, 50.72 percent said their biggest tech adoption challenge was cost, being that the solutions they might be interested in are too expensive. A further 40.58 percent said that they didn’t have enough time to invest into finding or testing proper solutions, while 26.09 percent said the tech is too complicated.
If those businesses actually invested time into finding proper tech-based solutions, they’d also find cost savings, more free time — which could be used in better ways — and much easier process management. The reality is almost exactly the opposite of what many claimed in the survey.
When considering all these tips and potential procurement strategies, it becomes much easier to see how a business owner or small team could handle their duties. More importantly, it’s not just about getting the work done, but doing so efficiently and accurately. You need the proper time to research, trial and build a relationship with potential vendors, if only to improve the quality of your own products and services.
Procurement should never be an afterthought, even for small business.
Bio: Nathan Sykes is the editor of Finding an Outlet, a source for the latest in IT and business news and trends.
