As your business grows and you need to deal with more vendors, managing the procurement process gets harder and harder. Even when your business is fairly small and you don’t have to deal with that many suppliers, it can be a job in itself to keep track of contracts and their terms, monitor vendor spending, and make sure you’re getting the best deals on the supplies and materials you need.
Category management makes it simpler. It’s a means of streamlining supply and inventory sourcing to optimize vendor spend. It’s useful for any business that needs regular supplies and inventory, and it’s effective in sourcing strategy as well as financial planning for your business. The right category management tools can help you cut costs significantly, by negotiating better contracts, managing your supply chain risk, and more.
Negotiate Better Contracts
When you’re negotiating your contracts one at a time, it can be hard to get the best terms. You might be in a hurry and just want to order the to-go cups you need or whatever, and get on with your life. You’re probably not keeping track of which vendors you have contracts with, how much you’re paying them, and what you’re getting. You might not know that they’re offering better deals under better terms to other businesses with more streamlined procurement processes.
But while keeping track of all that stuff manually might be an onerous task, the right category management software can help you understand all your procurement basics at a glance, so you have the information you need to negotiate better contracts.
The right tool will even help you renegotiate contracts based on changes in a supplier’s risk level. You can consolidate vendors to negotiate better terms for bulk buys or buys in different categories, ask for value-added bonuses like free shipping or extended warranties, or even encourage suppliers to engage in a bidding war and/or use bid information to encourage other suppliers to lower their rates.
Manage Vendor Risk
Supply chain risk is one of the biggest threats to any business because it can render both short-term damage to your profits and long-term damage to your reputation. Fortunately, category management tools for procurement give small business owners vendor risk management tools they can use to monitor supply chain risk and take action to mitigate the damage in real-time.
With the right tool, you’ll get info on vendor risk and real-time updates to those risk profiles, so you’ll know right away whether you need to take action, instead of waiting for the problem to blowback on your company. With real-time info on vendor risk, you can renegotiate contracts as needed, suspend purchases from high-risk vendors, and even search for alternative suppliers.
Plug the Leaks and Rein in the Mavericks
Spend leakage, or spending outside the terms of a vendor contract, can nickel and dime your company to death. A strong procurement management strategy lets you pinpoint those sources of extraneous spending, so you can slow or stop the leakage and make sure that every part of your vendor relationship — including your payments — is compliant with contract terms.
Inefficient and disorganized procurement processes can lead to maverick spending or uncontrolled spending in excess of contract terms. This might occur when team members aren’t aware of the procurement protocol, or when they misunderstand contract terms — or even when two different people are dealing with the same vendor. Spend analysis is your friend here. It can help you identify maverick spending and tie it to both a vendor and, if necessary, specific employees who need to be spoken with regarding their uncontrolled procurement spending.
Lower Internal Expenses
One of the biggest benefits of implementing a category management tool for procurement is that it can cut internal expenses, largely by automating so many of the procurement and category management that used to be done manually. This can free up your time and your employees’ time so that you can all move on to more important tasks that can’t be done manually. Your business will operate more efficiently, you’ll get more productivity out of your employees, and you’ll save money.
If you’re not using category management tools and strategies to streamline your business procurement process, you could be throwing money away. Put that money where it’s really needed, and take the stress out of your procurement processes — implement category management in your business today.