Beyond Price Savings in Procurement Costs

Beyond Price Savings in Procurement Costs

We’re all a little fixated on price when it comes to procurement costs. Unit price is the benchmark by which we are so often judged. It is both measurable in what we have delivered, and consistent in how we demonstrate our work. That’s why it’s sometimes difficult to look beyond that.

Unit price is an essential part of the procurement journey. But our obsession with it at the exclusion of other opportunities is a bit like concentrating on the road as we drive, and forgetting to check our mirrors. That makes it hard to notice what else is going on around you. It also makes it hard to react in time when the proverbial bull charges out from the bushes.

Today we’re going to check our mirrors, take a look around, and explore how savings in procurement costs go beyond simple unit price.

It’s great if you cut costs on things you need to purchase, but how about cutting out unnecessary purchases altogether? Indirect spend is one area where unnecessary costs can often be discovered and eliminated.

According to a study by EY, optimising indirect spend could save up to 25% of current costs. It’s clear that elements of indirect spend relate to unavoidable operational expenditure. But in any organisation you’re likely to discover unnecessary or legacy spending that can be trimmed completely.

Adopting e-procurement like Procurehere provides a valuable tool in tackling this type of spending, streamlining purchase requests through a single platform that enables easy oversight of completed purchases. However you decide to undertake it, a comprehensive analysis of purchasing within your organisation could provide insight on where to cut entirely unnecessary spend.

Unit price is about reducing costs within your current sphere of operation. Innovation goes beyond that to enable disruption which can completely alter your procurement strategy.

Encouraging innovation within your organisation, and with your key suppliers, can help unlock benefits far beyond shaving a tiny fraction from unit prices. Innovation means everything from adopting the latest e-procurement opportunities to imaginative ways of delivering or packaging your product or service. These fresh avenues of thinking could potentially discover new ways to work that pave the path towards significant savings for your organisation.

If it aint broke, don’t fix it? This must rank as one of the world’s most underwhelming mottos. We should constantly be looking for ways to improve our systems and ways of working. Procurement costs aren’t simply about capital expenditure at the point of purchase, they’re equally about understanding and reducing operational expenditure.

Assess and evaluate legacy systems and processes and explore better opportunities for business savings. Procurehere developed its cloud-based e-procurement system to directly tackle this problem, by providing a solution that requires no expensive IT infrastructure or excessive operational expenditure.

Ultimately e-procurement is just one example of how you can tackle this problem. Evaluate and look for ways to improve your systems that reduce your on-going operational costs. If you’re measuring unit price against the total underlying costs of acquiring those assets, including your own resourcing, then the lower your operational expenditure, the better value you’ve delivered.