By: Janeen Stodulski
In today’s competitive economic climate, organizations of all sizes must find new ways to control costs—and achieve more with less. With most small and medium-sized companies typically spending between 45 and 65 percent of their sales revenue on the procurement of raw materials , fine-tuning your purchasing processes—and shaving off even a small percentage of your procurement costs—can go a long way in better positioning your business for the road ahead.
One of the best ways to do this is by establishing strong, long-term relationships with excellent suppliers—suppliers that will offer you top value at good prices on a continuous basis, both today and into the future. While this sounds easier said than done, finding such suppliers is possible—provided you follow a few simple rules of thumb.
1. Don’t put all your eggs in one basket.
Effective purchasing involves evaluating a number of available suppliers for performance, financial stability and efficiency, and identifying two or more preferred companies. Your ideal suppliers will quote consistently low prices, and their order processing shouldn’t generate extra costs for your company.
2. Visit your suppliers’—or prospective suppliers’—facilities.
While it may require an additional time commitment, and potentially some travel, visiting your suppliers’ facilities is recommended if you hope to find a company that will be able to work alongside you in the years to come. A tour of their facilities will help you qualify suppliers and make sure they meet all essential quality assurance guidelines, while also enabling you to determine whether they have the appropriate supply capacity to serve your company into the future.
Purchasing procedures should also include evaluation of the quality of products. Quality assurance guidelines often specify that companies may only purchase material from qualified suppliers. Your purchasing policies must include procedures for qualifying suppliers.
3. Pay attention to delivery time.
Aside from competitive pricing, on-time delivery is one of the most important qualities you can find in a supplier. Whether you’re able to house substantial inventories or require just-in-time service, your supplier must be able to meet its promised delivery times. To ensure there’s no miscommunication, and your suppliers fully understand what’s expected of them, your purchasing policies should include supplier delivery tracking requirements that highlight both your desired delivery speed and reliability expectations.
Purchasing is a critical function for any business because it can affect performance at all levels. To ensure the supplies you purchase meet your needs—both in terms of quality and price—it’s absolutely essential to take the extra time, and put in the extra legwork, to find premier suppliers that are both able and willing to work alongside you, today and into the future.
The author is a Senior Manager for Assurance Services Division at Grant Thornton Canada LLP. Grant Thornton International Ltd. is a leading global business adviser that helps dynamic organizations unlock their potential for growth. Punongbayan & Araullo (P&A) is the Philippine member firm of Grant Thornton International Ltd. For inquiries, you may direct them to 988-2288 ext. 760 or visit our website at grantthornton.com.ph