Unlike large corporations, SMEs often have to operate within more limited resources when it comes to procurement management and do not have the same level of experienced procurement professionals or advanced procurement techniques. This can make it more challenging to optimize procurement processes and achieve the same level of cost savings and risk management as larger enterprises. However, under the right circumstances, SMEs can also reap the same benefits from procurement as larger corporations.
Typically, SMEs will spend 45% to 65% of sales revenue on purchasing investment. Procurement is therefore a significant opportunity to reduce costs and increase efficiency. Here are five strategies that can help SMBs succeed at almost any procurement stage.
1. Leverage Procurement Technology
Technological improvements in procurement give businesses more time and information while allowing for easier integration. For example, SMB owners are increasingly using cloud-based software services, with spending on this technology up 7% over last year, and 85% of SMBs plan to increase software spending over the next five years.
Research shows that the right technology can positively impact a company's strategic sourcing, logistics integration and business performance. However, in the face of new technologies, SMEs may be vacillating when adopting new processes and tools, making it difficult to learn and facing greater financial challenges and risks.
2. Improve internal procurement processes
SMEs can track suppliers' performance in terms of flexibility, on-time delivery, cost and quality through a standardized systematic evaluation of suppliers. This process can highlight supplier inefficiencies and create ordering calendars for each individual category. The data collected can be used to assess a business' overall supply chain and identify opportunities to shorten it.
Procurement should also include an annual analysis of spending and demand, as well as a semi-annual or quarterly review of supplier pricing. A spend analysis details all procurement-related costs and terms, and a needs analysis identifies basic requirements with a focus on improving cost and volume.
In general, the internal procurement process should try to follow the procurement rules of large enterprises and structured staff training. Standardized procurement helps control costs, clarify accountability, enable tracking and monitoring of spending, simplify reporting and set the stage for growth.
3. Cultivate strategic partnerships
SMEs should establish strategic partnerships with key suppliers in order to save time and resources and build trust. As a small business owner, having candid conversations with strategic partners can help ensure your business doesn't overspend with unnecessary costs.
In addition, if there are avoidable costs, the supplier is likely to actively assist in eliminating these costs, thereby improving the efficiency of business operations. For example, neither party benefits from unnecessary customization if a standard product can achieve the same goal. Building strong supplier relationships can help increase bargaining power in negotiations, as these discussions should revolve around mutually beneficial outcomes for both parties.
4. Joint purchasing with others
Even with the latest and greatest technology, improved procurement processes and strong strategic partnerships with suppliers, SMEs are still unable to achieve optimal procurement savings due to their relatively small size. This is because they may lose purchasing power due to lower sales.
To address this challenge, SMEs can partner with other businesses through joint purchasing, thereby obtaining volume discounts and realizing savings. Joint procurement allows small businesses to enjoy economies of scale that would otherwise have to pay more transaction costs.
5. Outsourced Procurement Needs
Due to the busy nature of the work of SMEs, and the time and expertise required to successfully complete a procurement plan, business owners may consider outsourcing the work to experts, which may ultimately save the business money and yield greater savings.
Invest in the Right Procurement Management Software
Procurement management software is an essential tool for any business, no matter its size. Small and medium enterprises can feel the greatest impact from implementing this software. 8Manage SRM is a one-stop procurement management software, including electronic procurement, electronic bidding, supplier portal and management, inventory management, custom integration, etc., supports decision-making with data, and effectively promotes the implementation of the above procurement strategies.
- Simplified procurement process:
8Manage SRM automates tasks such as purchase orders, invoice processing and supplier management, reducing the time and effort required to manage procurement activities. SMEs can optimize their entire procurement process by adopting this software.
-Enhanced Budget Control:
8Manage SRM provides valuable insights into spending patterns, enabling you to maintain tight control over your budget. SMEs often work with limited resources, and with 8Manage SRM, they can track costs and make informed decisions on procurement.
- Improve supplier management:
SMEs can use 8Manage SRM to evaluate their suppliers' performance, improve their procurement cycle, identify the most strategic suppliers and build long-term relationships with them.
-increase productivity:
8Manage SRM automates routine tasks such as purchase orders, supplier management and invoice processing, so team members can focus on more important tasks.
- Accurate reporting:
The integrated 8Manage SRM procurement management system provides real-time data analysis and reporting for enterprises. As a result, SMEs can keep up with the latest trends, identify possible issues, and fix them immediately before they become major problems.
Finally,
the above recommendations should be considered together. In order to gain a greater competitive advantage in the market, it is necessary for small and medium-sized enterprises to formulate purchasing management decisions that are in line with their own by strengthening supplier management decisions and integrating external resources of the enterprise. And to maximize the impact of your procurement strategy, using the right procurement management software is a worthwhile investment.