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4 procurement tips to build a billion dollar company

By Procurement Bloggers
Dec 10th, 2018

If you are already a billion dollar company and reading this, you will agree when I say that large companies are very effective in deploying independent procurement solution as they have the financial and human resources to do so. On the other hand, a midsize organization may mostly depend on an existing ERP stack or even manual interventions to solve their procurement needs. The primary reason for this dissimilarity is the difference in volume of goods concerned. A large multinational company has complex, global purchasing needs to manage, and its procurement group will typically have the strategy, budget and necessary software to meet that challenge. Small and medium-sized businesses, however, need a lower volume of goods and services supplied to stakeholders, and thus often lack the procurement infrastructure, strategy, budget and tools that larger organizations enjoy.

However, nowadays more and more midsize companies are moving away from this age-old tradition and adopting new age procurement solutions, and in most cases saving more money than ever! If you are struggling to convince your Procurement Head why you believe a holistic and dedicated procurement suite is what the company needs, then keep reading. We have uncovered five practical solutions that have been successfully field tested by other midsize companies.

  1. Control maverick spending – As a smaller enterprise, you already have an advantage over larger organizations as it is easier for you to expose maverick spending. However, this still remains a challenge if your revenue is over $500 million and your organization has multiple chains of commands. It is quite possible that a spender splurges $8000-$1000 without anyone noticing it as one such spending is just a drop in the ocean. Discovery is the toughest part. If one such spending happens once every week, assuming your sourcing requirement is high, imagine how much would be the losses once it is discovered! To avoid such mishaps, strategic sourcing can go a long way in offering the most comprehensive, detailed, accurate and consistent spend visibility into your organization-wide spend.
  2. Don’t fall for false promises – This sounds simple but this is the most complex part of purchasing. If you don’t give enough time and thought into who should be your vendor, you may end up spending more money than intended or saving less than you could. A vendor promises you the lowest cost but by the end of your purchasing cycle, you realize there were multiple hidden overheads which were not highlighted in the contract. You feel cheated but it’s too late to lament. A strategic sourcing platform can help you analyze all your suppliers’ overall performance in the past, set performance benchmarks, forecast savings and suggest best performing supplier thereby facilitating decision making and risk-avoidance.
  3. Get access to all suppliers – Do you face the constant pressure of buying from local suppliers? The major questions here are:
    1.  Will my company benefit from buying locally?
    2. Is a global player offering me more benefit at a lesser cost?
    3. How will I judge the quality of goods supplied by the local player?

Having access to a variety of suppliers is the key to savings. Thanks to procurement solution providers with existing reliable supplier database, small and medium-sized enterprises can freely get in touch with local suppliers, analyze their past performance, benchmark them against global suppliers and finally make a reliably sound decision.

  1. Have a 360° view – In October 2018, my friend who is the head of Supply Chain in a California based manufacturing firm invited me to her office for some work. Upon reaching there, I was surprised to find her behind huge stacks of papers piled up on her desk. She told me those were all the contracts since the last 2 years which she needs to check manually now that they have faced some breach issues. When I asked her what about e-contracts, she told me that some couldn’t be retrieved from old emails, some are untraceable as the in-charge quit office and some are entirely unaccountable. And she had absolutely no visibility into these. Imagine her horror! I get to know that the very next week her company fired her citing incompetence. He story is not unique. There are many such procurement leaders who face the constant challenge of streamlining all contracts and documents. Therefore, it is critical to deploy a procurement suite which will not only build, track and store all contracts but also give you a 360° view of your entire purchasing cycle.

Whether it’s a large organization or a midsize company, a sound procurement and supply management strategy is extremely crucial to the overall success of the organization. Depending on the size of the company, the strategy may be different, but it can work just as effectively as another.  There is no ‘one size fits all’ strategy that will work so don’t get caught up in a packaged, “ultimate procurement/sourcing” tool being offered up as a “magic bullet”. Instead, opt for a procurement solution provider who can offer you a customized solution based on your company’s need of the hour. For SMEs, every small purchase is meaningful. Common sense and open, honest communication is still the most practical purchasing solution for the small to medium size company. And therefore, a sound procurement and supply management strategy is extremely important to the overall success of the organization.

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