Any business regardless of size needs to ensure that all costs are kept to an absolute minimum in order to make the most amount of profit.
Problems start to arise when unwise purchases are made, particularly those that end up costing the firm a lot of money because they have to be replaced in a short period of time as they are not fit for purpose, for example.
Here are some reasons why it would make sense to have a procurement department established within your business or organisation:
True Cost Of Ownership
Many people assume that finding the ‘best deal’ on a product would just mean finding the cheapest supplier. But the truth is, an experienced and skilled buyer working in a procurement department would be able to determine what the true cost of ownership is for the firm.
For example, you walk into a computer store and immediately spot that there is a special offer on an inkjet printer for just £30. If you were looking for a new inkjet printer for your company, you might just buy that particular one.
But what many people fail to realise is that the true cost of ownership will be considerably higher than £30. For example, inkjet cartridges will eventually run out, and because that particular model uses four different cartridges priced at £8 each, you could potentially be spending a minimum of £32 a month on inkjet cartridges.
An experienced buyer, on the other hand, will determine that an inkjet printer which costs £40 to buy uses just one inkjet cartridge that contains all the required colours, and that not only do the cartridges cost £10, but they last four times as long as the ones used in the ‘cheap’ printer.
If you hire skilled and experienced procurement staff, you can be sure that the department’s processes will be streamlined with highly efficient procurement solutions that help to promote excellent levels of productivity both within the team and when dealing with third parties such as suppliers and team members from other departments.
Procurement staff will be able to organise how things are done within their team, and ensure that everyone works to a set of common guidelines.
One of the key things that procurement staff do is work with what’s known as ‘internal customers’ – i.e. people from other company departments – to determine what it is they need to achieve, what their requirements are, and how much they are looking to spend.
Rather than simply taking requests to buy products on their behalf, they can ensure that a solution which best fits the needs of their internal customers are met, whilst buying goods that will retain their value and offer a low overall cost of ownership.
As mentioned earlier in this blog post, the last thing a company wants to do is spend money on something only to find that it’s not useful to achieve certain results, and then more time and money has to be spent on an alternative solution!