Two methods for increasing profits include increasing revenues or decreasing costs. You can lower costs by letting employees go, outsource or offshore, pay less for materials and supplies. Effective and efficient purchasing programs lower costs and thus increase profits. While some computer programs or online systems can streamline purchasing, a lot of low tech solutions also exist.
Suggestions from the Experts
Equip Advanced Supply Management posted an article on Procurement Best Practices. They recommended:
- Get control of your cost drivers: “Cost drivers are all those elements and ingredients that determine the total cost of a business process.”
- Maintain supplier relationships: “Focus on picking a number of suppliers who provide reasonable prices and quality materials, then forging a long-term relationship with them. In this way, businesses secure their line of goods and can forgo the extra costs and delays of finding new suppliers all the time.”
- Use technology wisely: “Before new technology is brought in to the purchasing picture, a sound supply strategy needs to laid out and that technology needs to be placed in the right part of the big picture.”
- Garner strong support from top management: top managers “need to provide adequate funding for the program. When there's not enough money, the program will never work. They need to hire individuals who are knowledgeable about the program being implemented and who will be able to implement a strategy. Additionally, they have to convince the lower level managers and employees that they are truly committed to the endeavor.”
- Create a procurement team approach: Purchasing “should involve individuals from throughout the company and from all different departments. In teams, company personnel can work together in order to achieve the larger goals of the business's designated procurement strategy.”
Helpful Web Sites
- Best Practices in E-Procurement by the Aberdeen Group at the University of Pennsylvania
- U.S. Counties Procurement-based Small Business Development Best Practices by Insight and DelACCESS Consortium
- Institute for Supply Management the professional association for procurement
Saturday will explore how payroll & staffing services can help you control costs
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