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Supplier Cost Reduction – Driving Down Procurement Costs

In order to negotiate corporate prices and payment terms with suppliers, you’ll need a total understanding of all relationships and spend with your suppliers across your business.

Make the relationship mutually beneficial: A business relationship works best when both parties benefit.  Procurement teams that have successfully aligned with their key suppliers have improved supplier capabilities of innovation, quality, reliability and costs/price reductions.

Within the Healthcare industry and Businesses of all industries alike – cost-reduction efforts are usually tactical, not strategic: Goals are modest, one time fixes and the causes behind inefficiency are not at all targeted. Such an approach is equivalent to treating symptoms rather than curing the disease. Healthcare service mission makes addressing clinical utilization (the right people doing the right things in the right way) especially challenging.

Not a One Time Fix – Treat the Disease not the Symptoms!

C-Level Executives should revisit their strategic sourcing contracts and work closely with their suppliers to analyze current spending and achieve maximum cost reductions.

Procurement savings can be made in a number of areas within a Purchasing Department. The aim of procurement savings are to drive down procurement costs, improve supplier terms and decrease product prices.

Empower your business with supply management efforts to reduce costs. Achieve cost reductions in procurement and negotiate corporate prices and payment terms with suppliers, here are some ways to drive down costs …

5 Strategic Ways to Drive Down Procurement Costs

  1. Negotiate Costs with Suppliers

Studies have shown that present suppliers become complacent about existing customers unless they are motivated to remain competitive. Discussions with a new or existing supplier may lead to a reduction in cost. Asking for new bids from a present source who knows that competitors are also submitting quotes is often all that is needed to obtain concessions from the present supplier.

  1. Reviewing supplier’s terms and discounts.

Ensure that a Master Agreement exists for all the suppliers. Discuss with your suppliers as to when you may make procurement savings by altering your purchasing patterns. It may be that by purchasing slightly more products your automatically receive a higher discount.

  1. Train Ordering Staff

Ensure that the correct management controls are in place.  Are the correct people ordering the right products for the job? This should cut down on excess or incorrect purchasing. Train staff on cost effective purchasing and encourage them to save money whenever possible.

  1. Sourcing

Changing suppliers is often a good way to obtain a cost reduction; however it has risks. The new supplier may not provide consistent quality, may not provide good service, and may end up asking for a higher price. Changing a source for a key item requires the buyer to carefully check a supplier’s references and inspect the facility. Working with just one or two vendors enables collaboration between institutions and vendors on pricing, as well as on emerging technologies and innovations. Such seemingly small efforts to reduce inefficient care can lead to the early wins that set the stage for other improvements.

  1. Purchasing Appropriate Quantities

Reducing the amount of inventory saves investment, saves space, and avoids deterioration and obsolescence. Buying the appropriate quantity minimizes inventory. Increasing the quantity ordered provides economies of scale to the supplier who in turn should pass on a portion in the form of quantity discounts. Any increases in quantity ordered must be compared with the cost of any need to keep additional inventory on hand. 

Good management of the Purchasing Department is crucial to a profitable company and procurement savings can only be beneficial. There are a considerable number of ways to make procurement savings and all staff and managers should be aware of them and trained in good purchasing.

At LIMITLESS we are your Trusted Partner and understand how to best help our Clients reduce costs, while ensuring you stay highly effective and efficient with your services. We strive daily to help you become more financially sound, putting more money back in your wallet. The average savings we find our clients is between 17% – 36%.

We use our Powerful Process to identify cost savings, improving and negotiating contracts, finding billing errors and obtaining refunds. Our Clients realize that they derive the most benefit by concentrating their efforts on their core business. Realistically, most organizations simply do not have the time or in-house expertise to analyze all the multitude of bills, contracts, suppliers and national pricing alternatives potentially available.

Our Proven Results have saved companies tens of thousands and in some cases even millions on their telecom, utility and vendor expenses with our proven cost reduction process. This “found money” allows our Clients to reinvest the “savings” into growth initiatives or apply these “found profits” to their bottom line.

Contact LIMITLESS today for a FREE CONSULTATION to discover how to get control of your unmanaged spend and reduce expenses in your business.

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