Better Purchasing...the way to compete!Is Purchasing important? Every business person knows that Sales are the lifeblood of any company. However, in today’s competitive business world the need to generate profitable sales growth is increasingly difficult.
This change seems to have left Western governments with little imagination on how they can help businesses compete. Instead, they appear to stand in awe and continue to promote the transfer to a service rather than a manufacturing lead economies.
Self HelpAt present, it looks like manufacturing companies in the West will continue to have to rely on self help, addressing the areas that they can and refusing to be resigned to their eventual demise.The rally call clearly sounding is - It’s time to fight back! So what’s the answer? There are a number of strategies that companies can pursue, but one very effective approach is to look closely at how a company purchases its materials and services. Typically, the biggest cost to a company is its material cost of sales. And a percentage reduction in your purchase costs can deliver amplified improvements in profitability.
Is this radical enough?
This strategy may not be new to a number of companies. The economies of scale for larger organisations mean that they have got a great start on this process, but even they can learn new approaches.
As we come down in size, companies have tended to purchase through the same old trusted routes where relationships have been the prime driver. And at the smaller end, companies simply don’t have the clout to negotiate better pricing and service options, so tend to try and live with whatever they can achieve.
Learning to walk againThe first step towards regaining control is to recognise that cheaper overseas suppliers should be embraced.What! We hear you cry – this can’t be the way. Well, the logic is simple. It’s unlikely that you can quickly achieve a step improvement in efficiency. We also know that lower price competition will ultimately lead to “marginal” profits unless you choose to gain your supplies from the same sources.
Being close to the point of delivery offers enormous service benefits and service will add value. So to win, buy your materials and goods where it is cheaper and combine that process with your local expertise and service capability!
An amazing advantageWith India, China and Eastern Europe enjoying exponential growth, it would be easy to become very depressed! I client recently told me that he can source textiles from Eastern Europe at much lower cost. This is due to the labour costs in this market being some 14 times lower than in the UK.
UK companies are great at delivering service. After all, as a "Nation of Shopkeepers" we should know something about keeping the customer happy. So, the secret in competing with low cost producers is providing excellent service.
What about smaller companies?Smaller organisations should also examine this opportunity carefully.They may not have the size to pursue this separately, but can do so through a co-operative approach with other businesses. This may need a change in mind set, but by handling this through an independent 3rd party provider can preserve confidentiality.
How to do itTo achieve these aims, companies should first seek professional advice and the starting point may be their Trade Association or one of the expert procurement services companies that exist.The type of service that can be delivered depends upon the type of products and services that are required to be purchased. It does not mean that you have to hand over all of your purchasing requirements. Different approaches available range from a simple “Buying” function to a full blown and managed “Supply Chain”. There are a number of steps which should be considered:
Support is available, covering specific project management for the larger, very busy, well structured company through to acting as a complete outsourced support to smaller companies. In addition, it is possible to gain help in providing regular market testing of what price materials and services can be bought at. Alternatively, if you need help in deciding on the direction you wish to take with a project then strategic support can also be provided and should be sought out. If you want further help and support to ensure you generate success, please follow this link to Contact Us or call 0845 408 5978
FREE Special ReportComplete the following submission form to receive your FREE expert report which should be part of the thinking for every Business Start Up - Can you really afford not to!!!Return from Purchasing to Business Start Up
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Recent times have seen markets become far more challenging, particularly because of the entry of low cost producers from overseas.
Combine the cheaper costs with the expertise that Western companies have in understanding and servicing their marketplace and the competition will fall away!
But, whilst costs are lower, these countries have some very basic weaknesses in selling into the UK market:
