Procurement is an essential and important part of any company. Gone are the days when the function is treated simply as one that buys goods and services. Effective procurement minimizes risk, increases competitiveness, fosters innovation, reduces costs and helps maximize customer satisfaction.
Gaining a competitive edge in the procurement process requires professionals to possess a sound understanding on the issues that affect it. An efficient purchasing process consists of many strands and relies of various tools and techniques. One of the key processes is supplier selection. Sourcing appropriate suppliers is at the heart of an effective purchasing function – poor suppliers bring with them many issues – these can range from poor schedule adherence, weak capabilities and high cost – but what are the foundations in supplier selection and appraisal? Consider the following:
1. Do you keep an up-dated database of suppliers? Often companies fail to update their data base after adding the information on a new supplier. A robust supplier database, which is rich in not just contacts but information regarding key requirements such as capability, compliancy and capacity can be a key asset but unreliable information or outdated data can hinder. The procurement process requires timely and relevant information, and neglecting the importance of a robust approved list of suppliers can result in delays and increased cost.
2. Are you equipped with the necessary systems and tools to appraise your suppliers against key compliancy and regulatory requirements? Non-compliance may prevent you from carrying out your business as well as damaging your image as a company.
3. How frequently do you review your existing supplier base? What is your confidence level in terms of utilizing the best and most appropriate supplier available? The advantage of getting the best and most suitable supplier is the inherent competitive edge that it offers plus lower risks. How many suppliers can provide your commodity? How accessible are the new and potential suppliers?
4. Do you benchmark your suppliers and if so how often? Regular supplier benchmarking i gives you the opportunity to optimize your supplier network. This can also keep you abreast with information on your suppliers and leverage increased performance and pricing opportunities. Reviewing your approved supplier list should be conducted regularly to keep you in touch of new technologies, better quality and changes in prices. Monitoring each commodity and the potential suppliers will give you access to improve your supply chain.
By simply not taking your suppliers for granted, regularly reviewing what’s available and keeping a close eye on performance and quality will guide you in identifying possible problem areas. Purchasing typically represents a significant element of the total cost of your operations, focus and efforts on making it more efficient will give your company quick returns and a firmer footing within the marketplace.