Procurement Strategies for Business

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By: Tina Samuels 

Procurement strategies are an important part of growing a business.

By incorporating new strategies, a business can find their distribution channels grow, along with enjoying sizable profit margins. A downturned economy caused businesses to think about changing how their procurement procedures were handled, as the global economy improves these strategic moves in procurement have become standard practice.

Outsourcing

Outsourcing has become a top resource for businesses around the world.

Large, well known companies have led the way with such outsourcing. For example, Boeing procured outsourced development for their new 787 Dreamliner. With small exceptions, most of the Dreamliner – development and fabrication – has been outsourced to companies like Mitsubishi and Messier-Dowty.

The use of outsourcing is most apparent in customer service industries.

Many call centers are located outside of a company's home country. This is due to the lower cost of outsourced customer service. Parts and other supplies are often imported from China, India, and other countries where labor can be found at a lower rate than in countries that have been industrialized longer. Major companies use outsourcing for more than customer service – as with Boeing and the 787 development.

Supply Management

Supply management is just one avenue for procurement strategy.

Many companies today work with others to develop products for consumers. Clorox and Teflon put their innovations together for surface protecting cleansers. Clorox uses many companies to help develop products or find ways to combine the unique assets of products into one new product.

While Clorox does not outsource all of the development procedures, it is a leader in procurement strategy. Supply management is no longer merely an operation function of a company. As technology moves forward, businesses must compete with the on-demand and instant gratification lifestyle such always on technology has created among consumers. Procurement in the supply management sector will lead the way as one of the most integral parts of business today.

Chain Supply

Chain supply around the nation, or globe, will set a business ahead of others in the pack if managed properly.

Distribution centers in centralized regions will cut down on shipping time, which in turns helps feed the instant gratification craved by consumers. General demand for items to always be in stock or to be on the shelves at a certain time drives the procurement strategy efforts of all business.

One example of using chain supply to the best advantage is during the Superbowl.

A company has no way of knowing who will win, but they can be on standby with merchandise to sell after the game. A procurement strategy would be to have a chain of suppliers of different jerseys ready to deliver at a moment's notice. Even a clothing printer chain, to avoid double purchases.

Procurement Organizations

Procurement organizations are one avenue for businesses to find others that can help them in their projects.

When a business needs new suppliers with fresh ideas, they can contact a procurement organization. This allows the original business to focus on their own product without spending valuable time on procurement. Procurement organizations are not focuses solely on supplies. If a business needs marketing, then the organization will seek the best marketing match.

This innovation in procurement can save thousands. Not only can the company in search of supplies or other services find their best partner, they can cut back on the resources used in office.

Full time departments for such procurement require employees, office space, energy resources, and more. Hourly wages alone can run into the thousands, while outsourcing may have a flat rate. The cost will vary according to the organization, a monthly fee or yearly fee may apply.

Innovation Agencies

Other innovations in procurement may be found by bringing in agencies that can identify ways to cut costs on development or products or re-building existing products. These companies take apart a product or line of products in order to find design flaws or find new ways to build those products at a lower cost. Appliance manufacturers are major users of such innovation companies. Appliances are taken apart, piece by piece, and recommendations are given based on the investigators findings. One such company, the Henkel Group, found 14 ways to save money during refrigerator manufacturing.

Saving Resources

Procurement strategies are more than just finding new ways to supply consumers, develop products, and innovate. Strategies in this sector help save resources of a business for other efforts.

The growing impact of procurement on business and outsourcing supply or services has allowed companies to spend more of their own profits in investing in better offices, newer designs, and streamlining their workflow. Profit margins are growing due to the use of procurement strategies which smart businesses are implementing each day.

Perhaps the most significant impact across business is the way partnerships are being forged. More companies work together to create products and services.

Consumers are often surprised to find that previous competitors are now partners in a new product or service.

Tina Samuels writes for many small business blogs, including covering Internet reputation management services.