Whenever you need to purchase a product or service for your company, you should ask yourself some questions which will help you save a lot at the end of each month.
1. Have to Have or Nice to Have?
Author Keith J. Cunningham advises any manager to ask themselves the question “Is it a Nice to Have, or a Have to Have?” before making any purchase or taking up any expenditure in a company.
Basically, you should always determine whether your business really needs what you are considering buying in order to function, or if it is simply something you would like to possess. You can decide by evaluating if what you are about to purchase will have a direct or indirect return on the business profitability.
In the case of a transport company, for instance: the purchase of tyres or oil filters for trucks is a necessary cost which will guarantee that the fleet circulates safely with up-to-date servicing. But what will be the impact on the business operations and profitability if, in the same company, you consider buying top generation smartphones and laptops for all drivers? Will productivity increase? Will there be any profit linked to a new software? Or is it only Nice to Have?
2. Do we have it in stock?
How often have you heard about obsolete products stored in warehouses? Or that somebody found some forgotten unexpected quantity of a certain item in a depot? Why does this happen?
Frequently, there is no real inventory control that allows us to know what is stored in the company´s depots. Due to that lack of control, we often buy products or pieces that were already in stock…
Despite being simple and obvious, the solution does not always arise: to verify what is available before initiating the procurement process.
3. What are the supplier´s conditions?
Comparing prices between suppliers is not only a good practice but a must within companies that have internal procedures for it. This is often even included in the quality management system of the company.
However, this may not be sufficient. Price is one of the determining factors but there are others you should take into consideration, such as delivery time, warranty, minimum quantities, and payment conditions.
Financially, what we wish to get is the lowest price for the best product. You might also want to discuss the minimum quantity to order and compare it with possible quantity discounts.
4. Do we have a systematized process?
We at 2iBi believe that businesses need to be managed by systems and that systems are managed by people.
Such as all other processes within the company, purchases, inventory and procurement need to follow a documented procedure.
The advantages of having documented processes include the fact that the process will always follow the same stages and the expected result will always be the same, no matter who is involved.
4.5 Are we using any software to automate this process?
Automation is the best ally to systematization and procedures. An organization with efficient cost management generally uses an ERP software which provides mechanisms and automation options for inventory control, price comparison, as well as the approval of purchase orders and meeting internal requests in a fast and efficient way.
With the right software, you can also guarantee that the processes of decision making are transparent.
For more information about the solutions we have for your company in this area, you can start by checking what you can do with Reqwest, the solution that allows you to control costs and reduce waste. Find more here.