Procurement - can the principles work for smaller businesses?

Published on 23 April 2024 at 14:49

The government recently published a press release congratulating its procurement department on its 10th anniversary for saving taxpayers £3.8 billion last year.

The government recently published a press release congratulating its procurement department on its 10th anniversary for saving taxpayers £3.8 billion last year.

Larger corporations often have dedicated purchasing departments to handle procuring supplies, services and other business purchases. Specialising in this way allows for finding or negotiating the best deals for purchases and can save businesses considerable amounts of money.

Savings are welcome in businesses of all sizes, but smaller businesses may lack the resources to have a specialised purchasing function in the business. Can businesses without a dedicated purchasing department still harness the benefits of procurement?

We would say yes, here’s how:

1. Embrace technology

There are procurement software and online platforms available that can streamline purchasing processes. See how you can make use of them in your business.

Many affordable solutions cater to small businesses, offering features such as vendor management, purchase order creation, and expense tracking. These tools can help you to automate repetitive tasks and give you insights into spending patterns.

2. Centralise purchasing authority

Designate a specific individual or team within your business to oversee purchasing.

This will enable you to establish clear guidelines for how purchases are made and allow you to introduce some controls to make sure that purchases are made within the bounds of predetermined policies. It can be surprising how many purchase requests disappear, can be reduced, or a cheaper price can be found if the buying process can be governed by a procedure.

A further advantage is that duplicate purchases are avoided, and it is often easier to negotiate better deals with suppliers when you have a single point of contact building a relationship with them.

3. Foster supplier relationships

Even without the leverage of large-scale purchasing volumes, small businesses can still negotiate favourable terms, discounts, or flexible payment arrangements with suppliers.

Why not see if you can take a supplier to lunch or make a point of remembering an anniversary and sending flowers. Building long-term relationships may make preferential treatment or access to exclusive deals possible.

4. Implement cost effective sourcing strategies

You may have alternatives for sourcing purchases that go beyond traditional suppliers. Local businesses, online marketplaces, or group purchasing organisations might be able to get you access to more competitive pricing and a wider range of products or services.

You may find that another business would be happy to pool resources so that together you can meet minimum order quantities that give you a lower price. Or you could explore joining a cooperative buying network.

5. Invest in employee training

Help your employees to develop the skills and knowledge to make informed purchasing decisions. There are training sessions or workshops available on procurement best practices, budget management and how to evaluate suppliers. Some of this training can be accessed free or at low cost.

6. Monitor and improve

As with any aspect of business, measuring performance helps you to identify where you are currently and see progress. Monitoring costs savings and supplier performance could help you to see areas that can be further optimised.

Regularly reviewing your procurement processes will also help you spot areas that can be improved and give you additional savings.

In conclusion, while smaller businesses may lack the resources for a dedicated purchasing department, you can still gain significant benefits by applying procurement principles in your business.

Doing so, will help you gain a competitive edge in the marketplace and fuel your ongoing growth and success.