11 Benefits to Streamlining your Procurement and Procurement Processes
6th August 2018
More often than not businesses are resigned to the fact that they deal with a huge number of suppliers. However, consolidating suppliers (and their invoices) can be extremely beneficial to organisations that are dealing with a high volume across numerous business locations and sites.
Invoice consolidation is the process of streamlining your business’ supply chain and essentially reducing the amount of suppliers. Supplier rationalisation is the optimisation and prioritisation of your supply base and about how you manage engagement with them. Both angles are equally as important when considering consolidation and rationalisation; Streamlining your procurement and procurement processes.
The work required to carry out a full supplier review is often off-putting to both businesses and charities. It can also be a risky process if not managed correctly but done well, it’ll help your organisation reap a number of benefits, including;
1. Improved Payment Terms
If your business is working across a reduced number of suppliers, and therefore invoices, you will have better control of invoice payment terms and suppliers may extend terms for their larger accounts.
2. Keeping Accounts Up To Date
Fewer invoices will mean it’s easier for your accounts team to keep your accounts up to date. It’ll also help plot your business’ outgoings over the financial year.
3. Efficiency and Effectiveness
It will increase supply efficiency and effectiveness, bringing order and logic to all aspects of the supply environment through reduced delivery numbers and reduced processing of those deliveries.
4. Improved Invoice Administration
Streamlining the number of suppliers that your company works with and the number of invoices that your company needs to process will increase back-office efficiency as your administrators and accounting team will be able to scale back the number of transactions they make each month. This could help to decrease staffing costs and reduce the administrative resource required. It may also help with making sure that transactions are processed within the given payment terms as stipulated by your suppliers’ Terms and Conditions.
5. Corporate Social Responsibility
The convergence of business cost control, risk reduction and sustainability measures leading to a desire to bring suppliers closer to the business (which is much easier when there are fewer of them), in terms of their strength of relationship and increasingly, their location. For example, companies, the public sector and third sector can demonstrate social value and their CSR objectives by sourcing locally, but through one supplier.
6. Maverick spending
Supplier rationalisation will help prevent maverick spend across the departments where their own supplier relationships are in place. A supplier (or a few strategic suppliers) that can support the whole organisation is the introduction to bringing spend under control. While “quick fixes” like individual departments purchasing from any available supplier may seem like the best way to handle occasional problems, this can quickly become the pattern if left unchecked. The sooner you plan and implement a centralised procurement strategy, the sooner you will see the returns from it.
7. Improved Expenditure Planning
By streamlining the number of suppliers that you work with and the volume of invoices that your organisation processes, it will be much easier to keep track of your expenditure over the year. This means that you will be able to set out fixed expenses to near certainty and allow for variable expenses.
8. Cost Saving Beyond Product Price
Purchased costs include the price of products as well as shipping and handling, taxes, duties or fees and other associated costs such as Goods In operations etc. By consolidating and lowering the number of suppliers and implementing strategic sourcing methods, purchased costs are lowered and your buying power is enhanced.
9. Management Reporting
Visibility of information is critical as a basis for analysing your suppliers and effective rationalisation; it’s ultimately about making changes based on knowing who you are buying from, how much you buy and critically how much it costs your organisation to do so. Information visibility and reporting, is greater following rationalisation within the supply chain and is essential in taking a step back to understand the true requirements of the business. Supplier rationalisation has become much more about in-depth analysis and segmentation and less about blanket changes and rules.
10. Process Cost Saving
Supplier management costs offer an opportunity for efficiency improvements in the supply chain, which also adds up to significant savings on an ongoing basis. The number of individual transactions and associated costs is lower when you’re interacting with fewer suppliers, as is the amount of time invested in supplier set-up, management and supporting processes.
11. Supplier Accountability
Streamlining the supply chain can help to make it more obvious which supplier is responsible; for both good and poor performance. Standardisation can be driven more easily with fewer suppliers, which in itself can generate more efficiency and accountability.
But What About Innovation?
A main concern from Procurement regarding streamlining, consolidation and rationalisation within the supply chain is around the topic of innovation. The fear is that innovation through the supply chain will not be seen or passed on because there are fewer suppliers. And whether the strategic relationships, with suppliers, allows for innovation post consolidation etc.
Working with a third partner and outsourced procurement company can eradicate this. Procuright, for example, take cold calls. We make it easy for companies to come to us. We take their calls and emails. We speak with them. We have the mantra of, “if you get in touch we’ll listen; we may well find a gold nugget and our clients then win!” By speaking and listening, even to the suppliers that aren’t on our panel, we’re always aware of what’s out there. What the current trends are and what the latest technology, processes and innovation can do for clients’ businesses. And simply, the innovative ones are added to our supply chain panel.
"The work required to carry out a full supplier review is often off-putting to both businesses and charities. It can also be a risky process if not managed correctly but done well, it’ll help your organisation reap a number of benefits.........................."