How does a company lower its procurement cost?

Brainstorm to look for the best ways to reduce costs. Comparison shopping, buying in bulk, negotiating by building relationships and buying cyclically during sales are always going to be smart choices. The following are some of the strategies that have proven to be the most efficient and effective for all types of businesses:

• Advertising—Check online media marketing versus traditional advertising. See if businesses in your neighborhood can team up with you to get better prices from advertisers.
• Trucking and Shipping Expenses—Deduct costs for your car or truck in your business.
• Contract Labor—Consider contractors. Often, it can reduce costs to contract as opposed to hire full-time employees.
• Depreciation—Check with your accountant to see if your eligible for depreciation tax credits.
• Consider Buying Used—Are there any categories of supplies you can buy used, reconditioned, or get for free from sister businesses? Look online for opportunities to get gently used items.
• Maintenance—Is it possible to use equipment longer? Regular maintenance can save thousands. Educate your employees before problems arise.
• Create Your Own Supply Line—Can you cut out the middle man? You can save as much as75 percent by buying directly from the manufacturer.
• Utilities—Small savings per month ends up being large savings per year.

Training your purchasing employees can lead to big reductions in cost. It is worth developing workshops to teach your procurement employees to spend each corporate dollar as if it were their own. Train your purchasing employees to be well-versed in the skills of pre-planning, relationship building and good spending choices.

It is my point of view that your procurement function should:

1. Be a driver of sustainable savings (when, where, why and how) across the organisation.
2. Be engaged with the wider organisation to understand how procurement can reduce costs across the value chain.
3. Ensure that value is realised through contract management and supplier relationship management frameworks which are operationalised.
4. Be delivering procurement within an operating model that connects commercial and technical capability to drive optimal client outcomes.

Two important factors that I have noticed that tend to be forgotten are:

1- Have data bases of material costs.

2- Follow market trends.

BY MAINTAINING SUFFICIENT  INVENTORY, ADVANCE PLANNING

By negotiating for sustainable prices, single sourcing which might reduce administration costs and use the vendor managed inventory which reduces the bull whip effect.

A company can lower the Procurement cost by following means.

1.By following proper Purchase process and RFP/Tenders process.

2.By carefully examining the Need for said procurement to be done 

3.Purchase only the necessary relevant material only, Avoid unnecessary stock.

4.Have Proper storage and Inventory arrangements.

5.Have your In-house team for maintenance and repairs if possible this will improve quality of service and expenses on maintenance.

6.Have good relationship and credit record in Market with vendors and get better negotiations.

7.Approach OEMS directly rather via dealers. This will get you better cost and genuine products.

8. Study and decide properly what model between CAPEX & OPEX  is useful and better suits the organization, investing High capital at the start of business may be risky so Opt for OPEX model and once the business becomes stable then only think of CAPEX based model.

9.Have close monitoring on expenses and the heads of expenses done so that once can reduce the root cause causing it.

By improving ans strictly following the procurement business processes.

Procurement Coordinator can save a lot of money by taking the focus off product price and putting it on elements like ease of order placement, on-time delivery, product quality, and even the condition of the packaging when it arrives at the dock door. When all of these elements are in place,the efficiencies that result will drive down overall costs and play into that ‘holistic’ view that all buyer should be thinking about.

by assigning the professional technical team and coordination between (technical/ procurement .

by keeping the alternative sources always .

It depend on your strategy , first you know what & how & what to buy.

develop your strategy to buy from manufacture knowing the cost of the goods & lead time