The supply base is an integral part of the work of the procurement department in a company. Depending on whether the company is large or small, there may be a large or small stock of goods.
But this means that there should be a department that fully takes care of this aspect of the work. Of course, there are many challenges, because this is a really responsible job. The
Procurement department is responsible for every item that enters the company. These people are in constant contact with suppliers, so they must manage the processes of supplying materials for work and for the office.
In fact, the supply base is part of that whole network of purchasing materials for work, from the point of view of the buyer. In this process, many contracts are signed, invoices are paid and timely delivery of the necessary goods for work is provided, whether they are ordinary pens or printing paper, or raw materials for industrial production.
This also means that every company should have a warehouse, where these material goods will be stored, which will later be used in the work. As you can see, this is a really big responsibility. Therefore, there is a need for reducing the supplier base, due to cost optimization, as well as easier management of procurement, collection, and timely orders of new inventory.
The need for appropriate software is more than obvious. If you visit this website, you can learn a lot more about the potential benefits of reducing the supplier base. Many processes can be digitized and automated, thus increasing the efficiency of procurement workers.
If you doubt, here are additional reasons to consider this option as the best one for your company or department.
1. Financial transparency
If you consolidate this supply base, you can easily see all the costs and pay the invoices on time. This will help you to always get the necessary items, equipment, or raw materials on time. At the same time, you will never incur additional costs due to late payment, and you will even be able to set priorities according to which you will fulfill your obligations.
This will help you and every employee to have an insight into the events. In that way, you help yourself to the more orderly management of the whole procurement process.
2. Better management of all costs
When the company reduces the supplier base, then it can save more money on other urgent costs. In fact, financial reserves are key to the proper and smooth running of the procurement department.
Also, collection processing is faster and there are no additional costs for urgent payments. Of course, this way you focus on the main priorities, which means that there will never be any delay, which is crucial in achieving the company’s goals.
3. You can connect to one large supplier
Nowadays there are big suppliers who have everything you need. This in a way means that you will have to terminate certain contracts so that you can work with as few suppliers as possible.
But consider the mitigating circumstances. You will not be stuck with a large number of invoices, because you will receive one, which is processed quickly and the payment will be recorded immediately.
This leaves room for you to plan other activities, ie to dedicate yourself to other aspects of procurement, such as storage, distribution, but also the assessment of the quality of the items. At the same time, this means reducing costs, which would make your department liquid, although, in principle, it exists to spend the money allocated for that purpose.
Benefits of supply base management
You’ve probably noticed it yourself, but the purpose of this idea is to make it easier to manage the supply base. As the head of that department, you can easily guess who your main and secondary suppliers are. You will also be able to evaluate your business relationships with sellers, and thus create lasting collaborations that will last a long time.
The position of head of procurement seems easy, but the truth is that these people have a really stressful job. Of course, if it is a large company, the responsibility of the individual is even greater. It is, therefore, necessary to optimize the process in the best possible way and to avoid unnecessary costs and wasting time in arranging orders and invoices.
So, you can be sure that this way:
- You reduce the risks of misunderstandings and you can always rely on it.
- You understand the legal policies in your company, but also with the supplier.
- You always pay the invoices on time and pick up the goods.
- You improve the relationship with your supplier.
- You always know how much good and raw materials are available and when you need to buy new stocks.
- Easily manage orders and payments.
- Less administrative work and paper documents.
- Financial visibility and easy cost processing.
- You create less waste, because incidental occurrences are reduced to a minimum, and you do not use paper invoices.
The Procurement Department requires full commitment to the work. However, reducing the supplier base provides you with an optimal flow of work responsibilities, as well as easier cost management. This is one of the major benefits of saving money, redefining the budget, and investing in useful purchases, training, maintenance, or improving the safety of workers.
Knowing the reasons and eventual benefits, we are sure that you will make the right choice at this point. It’s not that hard to implement a new working protocol, especially when it comes to sustainable solutions that save you money and don’t harm the environment.
We hope that this article was helpful for you and that now you have a good idea of how to improve the overall performance of the procurement department. Even though they are the biggest money spenders in the company, if you reduce the supplier base, you can save on it too. So, don’t wait, and try to implement a proper protocol of buying new supplies.