Tips to reduce supplier management costs
Companies can considerably reduce their supplier expenditure by using the quality of the data fed back into management software. Efficiency, cost reduction and spend analysis are among the key objectives of purchasing management. The following strategies can reduce supplier management expenses, purchasing costs and even management costs.
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Get an exhaustive real-time view of supplier flows
Data linked to suppliers can strengthen their negotiating power. Like oil and gas companies, you need to have a 360° view of all your suppliers at all times. This is the most important factor to take into account if you want to reduce your supply costs. A digital supplier panel makes this job easier. This data makes it easier to negotiate prices and payment terms with suppliers.
You also need to have a full understanding of all supplier relationships and spend across the business as a whole. In addition to direct purchases, non-production purchases such as overheads also need to be kept under control. An order management application enables the data needed to manage supplier relations to be fed into the system via user flows. For example, the application helps to uncover hidden costs by centralising data. Or to reduce a supplier panel that can be costly to maintain and inefficient to manage, given the challenges facing the business.
So, to reduce your costs from an exhaustive view of your supplier panel, the following actions are possible:
- Eliminate the management costs involved in managing suppliers’ lifecycles
- Analyse their information
- Evaluate their performance
In addition,speeding up and simplifying processes is one of the purchasing function’s missions. Access to the panel, for example, for large companies. Or theautomation of the order process and purchasing workflows. Better management of supplier relations is also made possible by the provision of a supplier portal with a private link. A purchasing department needs to free up time and energy to strengthen relations with strategic suppliers and stimulate innovation, rather than being slowed down by administrative management.
Digitalising exchanges
The rapid transmission of information is the foundation of successful business development. Optimising this means reducing management costs. This is particularly true for manufacturers, distributors and retailers. If the product data supplied is accurate and complete across all distribution channels, the economies of scale are directly visible. For example, a missing product reduces technical risks. The result is higher margins and conversion rates in e-commerce, and faster product launches. 360° visibility significantly reduces manual effort and management costs. It streamlines the process of updating, managing and sharing product information with trading partners.
In addition, a number of cost-cutting levers are made possible depending on the quality of the data. This can relate to suppliers, products, raw materials and contracts. Good data helps you to obtain an accurate, global view of all supply chain operations. This enables you to make the right decisions, manage supplier relationships more effectively and take the lead on a responsible purchasing strategy.
As a result, data quality rules need to be part of all business applications, such as order management. This is an aspect that needs to be taken into account when looking to optimise logistics. This applies in particular to the verification of contact and address data, as we need to be aware of the additional costs associated with delivery to the wrong address. In addition, a penalty for late payment needs to be established very quickly, especially as it may be linked to an accidental shipment following the transmission of incorrect data.
Think productivity
It is important to take advantage of AI/ML to automate workflows in a supply chain. 68% of people in charge of inventory and stock management consider the improvement and automation of procurement processes to be a top priority in their organisation. Techniques enabled by artificial intelligence (AI) and machine learning (ML) need to be integrated into supply chain workflows. They contribute to boosting performance in a number of ways, because they significantly reduce or even eliminate manual and redundant workflows. With the right solutions, supplier integration and time-to-market can be accelerated. They can also increase agility and ensure that teams focus on what matters most.
It’s worth noting that reducing costs is often linked to saving time. Time that can be used to strengthen relationships with suppliers. It can be used to develop and drive innovative business ideas, or to explore new products and markets.
Developing a purchasing strategy
Supplier management costs can be analysed on the basis of several segments. Purchasing families, purchasing volume or wildcards. A good practice for reducing costs is to carry out a purchasing map at the start of the financial year. Often carried out by a purchasing department, there are tools available to help you do this. It can establish a new purchasing policy and generate reduction levers that go beyond supplier management.
The proportion devoted to indirect purchases and overheads can be decided at this stage, with the introduction of a budget. This exercise also promotes risk management. Finally, if the volume of purchases is known, an inventory management strategy can be initiated to increase the average cost per order and de facto reduce the cost of placing orders.
Want to find out more about digital purchasing and supplier relationship management solutions? Ask for a demonstration of Weproc, the SaaS purchasing solution specialising in this field. Find out about the benefits of a 360º view of supplier data and the tips you can use to make lasting savings on significant expenditure.
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Weproc is a SaaS software specialized in digitizing the procurement process of companies. From purchase requests to supplier invoicing, through the validation process, Weproc is designed to simplify the purchase management of SMEs and mid-sized companies by centralizing all purchase-related activities.