Your company's product purchasing strategy should bring you the best products from the best suppliers at the best prices. In the real world, you may have to compromise. However, your sourcing goals remain the same: the less you spend on high quality products from reliable suppliers, the better off your business will be.
The problem? Not all business owners have started as a procurement expert. You can be a master in sales or product development, but sourcing presents a wide range of challenges and opportunities. When you don't know what to do, a procurement expert can provide impartial judgment to help you make the right decision.
A procurement expert could put your business on the right track when:
1. You are considering a GPO.
Group purchasing organizations, or GPOs, allow groups of companies to access the prices of group purchasing. These organizations hold a ton of influence in the eyes of suppliers, especially when multiple companies within the same industry come together. If you're not in a GPO but want to explore your options, a procurement expert can help you sift through the noise to determine which GPO would be best suited.
While all GPOs are looking to provide better prices for their members, you should not join the most popular GPO in your industry without researching your options. Your business can differentiate itself in the market through better quality products or services. The wrong Group Policy object can bring the wrong products to your business and give customers the wrong impression of your priorities.
2. You are entering a new market.
When your business enters a new arena, you need new supplies and new products to make the jump. Often your existing suppliers cannot meet your new needs, so you have to look elsewhere. A procurement expert can make sure you get off to a good start in new territory.
Even if your existing suppliers have what you need to move, new markets offer new opportunities. Perhaps another supplier or group of suppliers could supply better products at lower prices. You will only know if you are looking – and if you do not know where to look, a procurement expert can help you find 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 the industry standard profit margins. If your margins are low, you may be paying more for the same products as your competitors for less.
Consult with a procurement expert in your field to make sure you don't miss potential savings. A difference of just one percentage point could make a huge difference in the profitability of your business. As global competition intensifies, you cannot afford to waste money when others source identical (or better) products at lower prices. A procurement expert can help you identify opportunities and, if necessary, move on to new suppliers.
4. Your customer retention rates are low.
Maybe your margins are good, but your customers don't stay after the first purchase. Loyalty and Lifetime Value (LTV) are linked to several factors, such as customer experience, but Wikibuy's research from Capital One found that product quality was the most important factor in brand loyalty.
When your customers once try your brand and look for better options, your products can be the problem. You can test this theory by offering a new premium product or improving your existing product line with better supplies. Even if your margins decrease, you will more than make up for the difference if you create a significant increase in customer LTV. A procurement expert can help you discover and assess your options.
5. You are not satisfied with your current suppliers.
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 endure poor customer service, weak communication or shipping delays. By consulting a procurement expert, you can eliminate the bad suppliers and start working with people who keep their word.
More stable supplier relationships can create a chain reaction within your business. Reliable supply means your logistics team can provide more accurate estimates to sales and service teams, who can turn around and deliver good news to customers more often. Procurement experts know your options and can share data and stories about suppliers with the best reputation.
Even if you have enough time to research your sourcing strategy, you can save time and money in the long run by consulting with a sourcing professional. The next time you find yourself in one of these difficult situations, call on an expert to spend less time browsing marketing materials and more time building better relationships for your business.