Industry Insight

5 Ways to Save Money - Procurement Consolidation

Whether your organization purchases just the basics or has a long list of small and capital purchases, you
can save money, time and resources by considering implementing 5 steps to procurement cost reduction.

1. Get to know the numbers.
2. Buy in bulk.
3. Get online.
4. Established preferred vendors.
5. Consolidate your procurement function.

1. Get to know the numbers.

• How many people have purchasing authority?
• What is the total spend on your lowest and highest
  ticket items?
• How much time does each individual spend on
  vendor negotiations?
• What is your total small item and capital purchase
  expenditure per year?

This information can help you to better understand the
resource time, total cost and potential savings of
consolidating all items under one function.

2. Buy in bulk.

• Your per item cost increases every time a single
  department buys only what they need.
• Individual purchases require resource time,
  individual shipping costs and financial tracking.
• Budget for company-wide purchases, single
  accounts for common purchases eliminate costly
  resource time and energy.
  

Not everything can be bought in bulk but a simple
consolidation of office supplies, fuel purchases or
regular professional services can mean big savings
when done for the entire organization.

3. Get online.

• Put a process in place utilizing online or electronic
  systems.
• Find out if vendors provide online ordering and
  invoice tracking.
• Involve finance in the process of automating your
  purchasing process.
• Getting your procurement functions online can save
  time to reconciliation, eliminate invoicing delays and
  reduce tracking headaches. Even minimal use of
  online systems can reduce resource time by 30% and
  helps to reduce hardcopy file and storage
  requirements.

4.Established preferred vendors.

• Create a list of vendors with negotiated
  agreements.
• Communicate the preferred vendor lists to
  everyone with purchasing authority.
• Recognize and publicize the savings.
• Create incentives for buyers who utilize preferred
  vendors.

Previously negotiated and preferred vendors allow
quick selection of vendors, reduces the negotiation
time required for each purchase and provides quick
savings using negotiated rates. Publicizing your
savings shows employees you are committed to
opmimizing costs and recognize their efforts in
supporting that.

5. Consolidate your procurement function.

• Keep buying functions within operations or
  finance.
• Allocate a small number of dedicated resources to
  the procurement function.
• Free up non-procurement resource time to
  dedicate to their primary responsibilities.
• Save time, money and energy with consolidated
  management, responsibility and oversight.

Consolidation of your procurement activities has
shown to free-up 10-40% of funds previously spent on
small and capital purchases. From printer paper to
equipmenet purchases, it makes sense to manage
and track it wisely.