Procurement Savings – Ways To Increase Your Profits

Procurement savings can be made in a number of areas within a Purchasing Department. The aim of procurement savings are to drive down procurement costs, improve supplier terms and decrease product prices. Ways to do this include:

  1. Reviewing supplier’s terms and discounts.
    Ensure that a Master Agreement exists for all the suppliers. Discuss with your suppliers as to when you may make procurement savings by altering your purchasing patterns. It may be that by purchasing slightly more products your automatically receive a higher discount.
  2. Consolidating suppliers and deliveries
    Make savings in delivery charges and the costs of accepting those deliveries. Processing the purchasing documentation and payment processing charges will also fall.
  3. Consolidating purchasing requests and intervals
    This cuts down on delivery costs and purchasing documentation.
  4. Reviewing purchasing requirements
    This ensures that only strictly necessary purchases are made. It will cut down on excess costs and storage costs and is a good way to ensure that a company makes procurement savings.

  5. Purchasing from agreed catalogues
    Ensure that only one brand or type of a product is purchased. Duplication can be expensive and is unnecessary. Higher orders from one supplier lead to better discounts.
  6. Reviewing stock levels
    Stock left in warehouses is “dead money”. It costs money to store, can deteriorate and become obsolete.
  7. Reviewing the specification of purchased products.
    Is it possible to buy a lower spec that will do the same job?
  8. Review replacement strategies
    Renew items only when necessary and not as a routine replacement. Take care to factor in the cost of waiting for a replacement. So it is necessary to replace an important machinery part on a regular basis but it is not necessary to replace most lights before they fail.
  9. Ensuring that the correct management controls are in place Adhered to them for ad hoc purchases in particular. Are the correct people ordering the right products for the job? This should cut down on excess or incorrect purchasing.
  10. Train staffon cost effective purchasing and encourage them to save money whenever possible.
  11. Computerizing the purchasing process.
    This costs money to start with, but by speeding up and simplifying purchasing, savings should be made.
  12. Linking the purchasing systemto the inventory and accounting systems. This not only saves in staffing costs but also cuts down on mistakes.
  13. Using e technology to be quicker and cut down on communication costs. This also enables purchasers to access supplier catalogues and enhances the choice of products that may lead to purchase savings.
  14. Using tendering and procurement auctions to drive down costs and improve terms.
  15. Centralize disparate purchasing functionalities, which allows for savings in staff, processes and technology.
  16. Centralize warehousing which can give great real estate and staff savings.

Good management of the Purchasing Department is crucial to a profitable company and procurement savings can only be beneficial. There are a considerable number of ways to make procurement savings and all staff and managers should be aware of them and trained in good purchasing.


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