If you're a fairly small manufacturer, you've probably had contracts in place with specific suppliers since you started your business. While those contracts may be working for you in terms of access and may be fitting your budget overall, that doesn't mean they are always the right solution all the time. In fact, if you take the time to evaluate your sourcing on a regular basis, you may find that there are not only more cost-effective ways to get the supplies that you need, but you may be able to find a supplier who can work with a customized procurement schedule and demand. Here's a look at a few of the reasons you should be considering strategic sourcing for your company's raw materials.
Understanding Strategic Sourcing
Strategic sourcing is the process of reaching out to many suppliers with bid requests and negotiating the cost of goods or services so that you are getting the best possible service and price. By opening up bids to many different providers, you're able to evaluate the market objectively and find the solution that is best for your operation and your capital budget.
Eliminating Unnecessary Negotiation
One of the biggest challenges for many business owners is the process of negotiating deals and haggling over pricing. When you take a strategic approach to your sourcing process, you'll have many suppliers coming to you with the best deals they can offer. This helps you to choose the best possible contract without having to waste hours negotiating pricing. You'll know right from the start what you're getting, allowing you to evaluate everything on its merits and get your procurement process flowing.
Minimizing Waste Across The Board
With strategic sourcing, you can take an objective look at your own company's production process and minimize waste. If you're working with a supplier currently who requires a minimum order size, you may be buying more product than you really need. Especially in cases where the material has a short shelf life, this can be wasteful. In addition, purchasing in bulk sizes that are larger than your company needs may even be costing you more than you realistically need to spend.
When seeking bids as part of your strategic sourcing process, you can specify the volume that you actually need and the budget that you're looking for. This could ultimately save you in wasted materials, unnecessary storage, excess spending, and more. Make sure that your bid requests are clear enough that you get just what you're looking for to help you control your company's waste throughout all departments.
Simplifying Your Evaluation Process
If you work with a strategic procurement specialist, you can even automate much of your evaluation. Procurement software designed specifically for strategic evaluation will look at the number of suppliers you're evaluating and help you not only consider the best general pitch, but also the cost of conversion from one contract to another, the administrative cost changes, and even the risk of supplier cartels. The automated process will allow you to come to a determination quickly or even evaluate multiple scenarios with the click of a button. There's no need to spend hours digging through contract after contract or multiple-page bids until you've narrowed down the best logical options for your company's needs.
Understanding strategic sourcing can help you to completely redesign your company's procurement process. With the information here and the help of a strategic procurement specialist, you'll be able to find the best suppliers and terms for your production line. Talk with a local company today for more guidance about how you can optimize your sourcing and save your company money over time.