In order for any large business to maximize its profits, it must reduce expenses as much as possible. To this end, companies are often on the lookout to reduce unnecessary headcount, outsource job responsibilities when possible, and lower their recurring operating expenses however they can.
Unfortunately, in an effort to reduce their costs, many businesses overlook one of the biggest areas where significant savings can be found: procurement.
Believe it or not, more than half of the average large company’s expenses—51 percent—aren’t scrutinized to the point where purchasing managers can be fairly confident they’re getting the best deals. This results in a loss of $14 million each year for the average organization.
This, of course, takes an enormous bite out of the bottom line—and is completely unnecessary.
The good news is that by getting your procurement house in order—and gaining full procurement visibility into your spend—you stand to benefit from the peace of mind that comes with knowing you’re getting the best deals possible and investing your dollars most effectively.
By polishing your procurement strategy and investing in procurement systems that make it abundantly clear where money is flowing and who’s spending it, you can gain full procurement visibility and start down the path toward increased profitability.
Once you’ve unlocked 100 percent procurement visibility, you’ll gain helpful new insights that make it that much easier to fully optimize your organization’s spend management efforts. Some of these insights include:
1. Find out how much money you’re spending and which vendors are getting paid
If you don’t know how much money you’re paying out to which vendors, you won’t be able to reduce expenditures in any substantial way.
By gaining complete visibility into your spend, you’re able to easily see where cash is flowing. Armed with that information, you can then begin to take proactive steps to rein it in.
2. Figure out whether you’re getting the best deals and most favorable terms
Once you know where your money’s going, do your due diligence to determine whether the vendors you’re working with are giving you the best deals. If, for example, you find out that you’re paying upwards of $500,000 a quarter to a vendor that operates in a particularly competitive market, you should be able to talk prices down—or at least get more favorable payment terms (e.g., net 90).
3. Enjoy complete control over your inventory levels
When you have too much inventory on hand, your cash is tied up and the space in your warehouse is occupied. When you don’t have enough inventory, serving your customers in a timely manner becomes difficult.
The trick is finding the right balance. With full visibility into your spend, you’re able to quickly see where your inventory levels stand. This makes it easier to stick to the right amount of inventory all year long.
4. Discover whether rogue spending is a problem at your organization
Do any employees at your organization make purchases without authorization? Do you even know?
According to one report, 54 percent of workers admit they’ve gone rogue before, buying items without going through the codified approval process. This is a big problem because rogue spending is completely unbudgeted and companies are forced to somehow absorb the expenditures.
With full procurement visibility, you’re able to quickly detect rogue spending—and, in many cases, thwart it altogether.
5. See where bottlenecks are slowing your team down
Is there are certain area of your procurement strategy that seems to slow the entire process down?
Full visibility into your spend allows you to see where any bottlenecks in your workflows may exist. Once you identify them, you can take quick steps to remedy the problem.
6. Leverage an accelerated requisition process to increase effectiveness
Does your requisition process take more than a week? Gain full visibility into your procurement process and use the right tools, and you’ll be able to speed that process up considerably.
For example, using eRequester can help companies shorten their requisition processes to under two days—thereby increasing efficiency and driving competitive advantage.
If you don’t have full visibility into your procurement processes, don’t sweat it—you’re not alone. In fact, 72 percent of organizations say they don’t have enough visibility into their supply chains, for example.
By taking a proactive approach to spend management and obtaining full visibility into your procurement process, however, you can eliminate unnecessary expenses and bolster your bottom line.