Secrets to Improving Your Procurement Efficiency

Efficient procurement reduces input costs, helps maintain a steady flow of high-quality parts and raw materials to production and R&D, and is an integral part of project planning and supplier quality activities. Far beyond just shopping around for the lowest prices, negotiating lead times, and asking for quotes, procurement encompasses many workflows which can add value to the whole organization.

On the web, there are a lot of pages dedicated to giving procurement advice to OEMs aiming to increase the efficiency of their procurement departments. As a full-service contract manufacturer (CM) who frequently sources components for our customers—and is also on the receiving end of the process for our OEM customers, we’ve distilled our own procurement expertise for our readers’ benefit.

Approach procurement as a value driver—because it is

By staying abreast of what materials are being used, by whom, and for what purpose, procurement professionals can make smarter purchase decisions, more frequently consolidate shipments, and spend less on unnecessary expedite fees. Also, when buyers incorporate feedback from key stakeholders across departments and product lines, the procurement department can get a much more complete picture of the quality of every supplier. That input can then be used to trim down potential replacements for an end-of-life part for example, leading to streamlined component validation and a quicker overall replacement process.

Another tip for buyers: strive for deeper knowledge into your organization’s business. This, together with getting involved at earlier stages in critical business decisions, will help you spot opportunities to transform the business.

Focus on relationships, not RFQ’s

Frequently sending out bid requests to new and current vendors seems like a surefire way to keep material costs low, but in reality finalizing those deals, researching, and qualifying new vendors is very time consuming, leading to increased costs. It is actually more efficient to develop a cadre of trusted (and trusting) qualified vendors. Not only does this streamline procurement, but also engenders the critical supply chain partnerships that ultimately bring the biggest and most sustained cost savings.

Call it the open secret of supply chain management: the key to more efficient sourcing is to invest in positive, long-term relationships with your suppliers.

These long-term relationships give your suppliers the confidence to grow with you and invest in their own businesses, yielding efficiencies through economies of scale and adoption of technology which then return to you in the form of higher quality parts, shorter lead times, lower prices, and greater responsiveness to changes. Not only that, but those suppliers are then in a much healthier position to support future bold and innovative moves that you want to make.

Not only will procurement efficiency increase, but supply chain resiliency will also improve when you put a greater focus on partnership. Stable, ongoing, and fair business relationships combined with the assurance of future business establishes plenty of goodwill with your suppliers. It also gives them plenty of reason to prioritize you over that supplier’s other customers when disruptions occur (e.g. storms forcing factories to close, strikes, damage due to transportation accidents). Thus, your business is less likely to be impacted.

Conversely, constantly changing suppliers reduce the reliability of your own operations while increasing the risk of poor service. That behavior will also create an air of distrust around your brand, limiting the number of vendors who will want to work with you.

As a full-service CM in business since 1995, RiverSide Integrated Solutions understands the value of supply chain partnerships—in fact it’s the cornerstone of our business. By offering individual supply chain services in addition to turnkey solutions, RiverSide Integrated has the flexibility and reliability to provide value for OEMs at all stages and at any size.