Your company’s product procurement strategy should bring you the best products through the best vendors at the best prices. In the real world, you may have to compromise. Your procurement goals, however, remain the same: The less you spend for high-quality products from reliable vendors, the better off your business will be.
The problem? Not every business owner started as a procurement expert. You may be a master when it comes to sales or product development, but procurement presents a wide range of challenges and opportunities. When you’re not sure what to do, a procurement expert can provide impartial judgment to help make the right decision.
A procurement expert could put your business on the right track when:
1. You’re considering a GPO.
Group purchasing organizations, or GPOs, allow groups of businesses to access bulk procurement pricing. These organizations hold a ton of sway in vendors’ eyes, especially when multiple companies within the same industry band together. If you aren’t in a GPO but would like to explore your options, a procurement expert can help you sift through the noise to figure out which GPO would be the best fit.
While all GPOs seek to get members access to better prices, you shouldn’t join the most popular GPO in your industry without researching your options. Your company might differentiate itself in the market through higher-quality products or services. The wrong GPO could bring the wrong products into your business — and give customers the wrong impression of your priorities.
2. You’re entering a new market.
When your business enters a new arena, you need new supplies and products to make the leap. Often, your existing vendors can’t meet your new needs, so you have to look elsewhere. A procurement expert can ensure you get started on the right foot in new territory.
Even if your existing vendors have what you need to make the move, new markets provide new opportunities. Perhaps another vendor or group of vendors could provide better products at cheaper prices. You won’t know unless you look — and if you don’t know where to look, a procurement expert can help unearth the best potential partners.
3. Your margins are thinner than they should be.
You probably don’t have direct access to your competitors’ books, but you should have an idea of standard profit margins for your industry. If your margins are low, you may be paying more money for the same products your competitors get for less.
Consult with a procurement expert in your field to make sure you’re not missing out on potential savings. A difference of a single percentage point could make a massive difference in your company’s profitability. As global competition increases, you can’t afford to waste money when others source the same (or better) products at cheaper prices. A procurement expert can help you identify areas of opportunity and, if necessary, switch to new providers.
4. Your customer retention rates are low.
Maybe your margins are good, but your customers don’t stick around after the first purchase. Customer retention and lifetime value (LTV) connect to several factors, such as customer experience, but research from Capital One’s Wikibuy found product quality to be the most important factor in brand loyalty.
When your customers try your brand once and keep looking for better options, your products may be the problem. You can test that theory by offering a new premium product or by upgrading your existing product line with better supplies. Even if your margins go down, you’ll more than make up the difference if you create a significant increase in customer LTV. A procurement expert can help you discover and evaluate your options.
5. You’re not happy with your current vendors.
What happens when your margins and customer satisfaction statistics look good, but you don’t like working with your current suppliers? You don’t have to put up with bad customer service, weak communication, or shipment delays. By consulting with a procurement expert, you can weed out bad suppliers and start working with people who keep their word.
Steadier supplier relations can create a chain reaction within your company. Supply-side reliability means your logistics crew can provide more accurate estimates to sales and service teams, who can turn around and provide customers with good news more often. Procurement experts know your options and can share data and stories about which providers have the best reputations.
Even if you have plenty of time to research your procurement strategy, you can save time and money in the long run by consulting a procurement professional. The next time you find yourself facing one of these tough situations, turn to an expert so you can spend less time sifting through marketing materials and more time building better relationships for your business.