Small businesses often face unique challenges when it comes to procurement, as they may not have the same resources and capabilities as larger organizations. However, there are several best practices that small businesses can follow to improve their procurement processes and achieve better results.
- Develop a procurement strategy: A procurement strategy outlines the organization's objectives and goals for procurement and provides a framework for making decisions about sourcing and supplier selection. According to a study by the National Small Business Association, small businesses that have a well-defined, written procurement strategy are more likely to be successful in their procurement efforts.
- Conduct market research: Small businesses should conduct market research to identify potential suppliers and understand the market conditions for the goods and services they need to purchase. According to a study by the National Small Business Association, small businesses that conduct market research are more likely to find the best suppliers at the best prices.
- Build a strong supplier base: Small businesses should focus on building long-term relationships with a small number of suppliers, rather than constantly switching to new suppliers. By building strong relationships with suppliers, small businesses are able to negotiate better prices and terms, and to work with suppliers to improve quality and delivery times. According to a study by McKinsey & Company, companies that establish long-term relationships with suppliers achieve 20-30% higher profits than those that don't.
- Make use of procurement technology: Small businesses can make use of procurement technology, such as e-sourcing, e-procurement, and supplier management software, to automate and streamline procurement processes, reduce costs, and improve supplier performance. According to a study by the Aberdeen Group, companies that make use of procurement technology achieve, on average, 12% lower costs and 15% higher supplier performance.
- Involve employees in the procurement process: Small businesses should involve employees in the procurement process, as they are often closest to the goods and services that the business needs to purchase. By involving employees in the procurement process, small businesses are able to gather valuable insights and information that can help improve the procurement process.
- Establish metrics to track supplier performance: Small businesses should establish metrics to track supplier performance, such as on-time delivery, quality, and cost. By tracking supplier performance, small businesses are able to identify which suppliers are performing well and which are not. This information can be used to negotiate better prices and terms, and to make decisions about which suppliers to continue doing business with.
- Be aware of laws and regulations: Small businesses should be aware of laws and regulations that apply to procurement, such as the Federal Acquisition Regulation (FAR), the Small Business Administration (SBA) rules, and state and local regulations. Failure to comply with these laws and regulations can result in penalties and legal action.
- Make use of procurement experts: Small businesses can make use of procurement experts, such as consultants, to help them navigate the procurement process and achieve better results. These experts can provide valuable guidance and advice on how to develop a procurement strategy, conduct market research, and build strong supplier relationships.
In summary, small businesses can leverage various best practices detailed above to transform and derive value from their procurement organization to achieve better results and improve their bottom line.
FactWise is an end-to-end procurement platform designed with a focus on small and mid-sized product manufacturing companies across industries. Our Source-to-Pay solution enables cost reduction up to 25% using holistic analytics and better supplier management, improves efficiency and oversight by up to 31%, and enables teams to leverage the benefits of strategic sourcing, advanced RfX management, and immense customizations as per their specific workflows for direct materials management.
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