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Quick ways for SMEs to reinforce their procurement

Small and mid-sized companies are generally late to the procurement technologies as they cart a multitude of demands like staffing, financing, inventory management, marketing and customer service which consume maximum of their time and focus and impact their daily operations. As a result, procurement tends to be an additional obligation — when it should be approached strategically.

Research says, small businesses spend approx. 60 percent of sales revenue on procurement of inputs. Therefore, procurement should be considered a viable opportunity to reduce costs and improve efficiency.

smes

Here are few tips that can help small and mid-sized businesses in nearly any stage of their procurement efforts:

• Technology expansion: Technological expansions give companies more time and information with a comfort of easier integrations. However, small businesses face financial challenges and risk when adopting new tools and technologies but opting the right technology can have a positive influence on a business’s strategic purchasing, logistics integration, and business performance. There are solutions available in the market at lower cost with much of the functionality and easy to configure.

• Strong supplier relationships: Strong supplier relationships can offer great benefit for small businesses. Small firms should seek strategic partnerships with key suppliers. Purchasing from fewer suppliers saves time, resources and energy while building trust.

• Well organised structure: In addition to the improvements in technology and supplier relationships, SMEs should seek internal structural changes in their procurement process. By assessing suppliers within a well-structured system, a small business can find discrepancies in the system and track supplier performance over time in terms of flexibility, on-time delivery, costs and quality. The data collected here can be used further to evaluate the company’s supply chain as a whole and locate any opportunities to shorten it.

• Collaborate with others: Small businesses inevitably have less purchasing power due to lower volumes. Partnership with other small businesses can yield volume discounts and achieves savings. In some industries there are buying consortiums who combine their demand to procure goods and services to leverage cost benefits.

Consider all the recommendations together. Great technology is ineffective without a strong structured process. Likewise, buying consortium will not go over well if the company has not clearly analysed and defined its own requirements.

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