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
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
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
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
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
Bio: Nathan Sykes is the editor of Finding an Outlet, a source for the latest in IT and business news and trends.