Your new business has looked into a procurement system, which automates inventorying and services purchasing. Since you have about 100 other things you’re focusing on as your company gets underway, you like the idea of a procurement system. What should you know before using such a system?
Here’s what you need to know before you start procuring systems for your new company:
- You need a procurement process
- You’ll have to reevaluate your procurement process
- You must be able to negotiate supplier contracts
- The entire process isn’t automated
- Analytics can indicate systems efficiency
Ahead, we’ll talk about procurement systems in Dallas in greater detail so you can decide where such a system fits into your new company budget.
5 Things to Know about Systems Procurement for New Companies
You Need a Procurement Process
We talked before about how systems procurement can be automated. This can be incredibly valuable for new companies. You’re likely short-staffed as you can’t yet afford to pay employees for the broad number of roles you’d ideally like them to fill. In the meantime, you’re fulfilling most of those roles yourself.
This can get very time-consuming and cause you to feel stretched thin. With automation, you can win more time back that you can redirect to other company goals.
Yet while automation can be a godsend for small, busy companies trying to find their footing, it doesn’t work without input from you. That’s why a systems procurement process is so critical for your new company.
This process will act as the blueprint that your company uses for systems procurement going forward. To create such a process, you need to consider the typical goods/services needs of your company from outside suppliers. Then you’d consolidate the various needs among your staff segments into a broad, overarching supply/product request list.
This is valuable not only in simplifying systems procurement but in saving money as well. That’s a must for any new business.
You also must manage risks as part of your systems procurement process, including contractual risks, operational risks, and financial risks. Where might these risks arise and what would your company do if they occurred? When you can answer these questions, then your systems procurement process is considered finished (for now).
You’ll Have to Reevaluate the Procurement Process
Sitting down with key stakeholders among your new company to discuss your systems procurement process does not mean the process is set in stone from here on out. At least annually, perhaps biannually, you want to meet with those same stakeholders again and discuss which changes, if any, might you add to the procurement process.
These changes can result due to outside factors such as trade law changes or even economic landscape shifts. Your new company, which was once rather small, might have grown quite significantly in a year. That also warrants going over the procurement process a second time.
So too will changes in supplier contracts (more on this in just a moment) and major changes to the products your own company sells, as this would affect which products or services you’d need in return.
Even if company growth wasn’t quite as steady as you had been hoping for, it’s still a good idea to go over your current systems procurement process every year. Perhaps you make no changes, but at least you know the current process works according to your business needs as they are now, not several years ago.
You Must Be Able to Negotiate Supplier Contracts
As part of the procurement reevaluations process, you must look at your supplier contracts. The suppliers you purchase from can run the gamut depending on your company’s industry or niche. You already consolidated the list so you’re only purchasing what’s necessary, which is helping your company save money.
If you’ll need a supplier’s products or services on an ongoing basis, then it’s worthwhile to craft a contract with them. The contract will include such crucial information as the delivery timelines, terms and conditions, project scope, and the pricing structure. Contracts protect both your company and the supplier.
If they’re continually late with their deliveries, as an example, then the supplier might be in breach of contract. In such a situation, your company could potentially take legal action.
Before you negotiate with any supplier, we recommend you do your research. The ideal supplier should provide the products and/or services you need at a price that’s affordable for your new company. Deliveries should occur on time.
You might meet with the supplier and tour their warehouse before talking of any contracts. A supplier contract can be shorter-term or longer-term depending on both your company’s needs and that of the supplier. It’s always best to ask for a shorter contract if you’re still feeling out the supplier, as you don’t want to be locked into an arrangement that might not suit your business.
As supplier contracts are up for renewal, you might decide to sign with that same supplier or move on to another one.
The Entire Process Isn’t Automated
As much as systems procurement can be automated, not every step of the process is. For instance, as we’ve talked about, you have to be the one to have a procurement system in place. You’ll also have to research your own suppliers and negotiate with them.
You must know the types of purchase orders as well, of which there are four types. Let’s talk about them now.
- Planned purchase orders: If you know the pricing for a product or service as well as the item you want and its quantity, but your supplier cannot accurately predict its deliverability, then you’d need a planned purchase order.
- Blanket purchase orders: A blanket purchase order doesn’t require a known delivery date either, but the delivery centers around pre-established requirements.
- Contract purchase orders: With a contract purchase order, you establish a period for obligation with details that are allowed to fluctuate as needed within the period.
- Standard purchase orders: Then there are standard purchase orders, which your new company will probably use the most often. To make one of these purchase orders, you must know the delivery schedule, item price, quantity, type, and item make as applicable.
Before your new company sends a purchase order, you’d contact the supplier with a purchase requisition. In the requisition are the workflow, supplier data, item quantity, and price. Then you’d send the purchase order, which can be an automated part of your systems procurement process.
You can also automate invoicing processing as well. Your company will receive an invoice after your supplier gets your purchase order. In some cases, companies pay ahead of the delivery of the agreed-upon product or service, and in other instances, it’s after delivery.
Analytics Indicate Systems Efficiency
Your procurement system should also include an analytics and reporting component. The data provided to you through the reporting will reveal such crucial metrics as order delivery times, invoicing accuracy, and orders processed.
Data reporting can identify trends the further back it goes. For instance, perhaps one of your suppliers is always early with their deliveries but another is almost always late. You can sit down with other members of your new company and try to identify any bottlenecks on your end that are causing the issue.
Perhaps you’re sending out your purchase orders too late? Or maybe you’re not following up about the order status often enough. It very well could be that the error isn’t due to your company, but the supplier.
If that’s the case, then you’d need to bring the issue to the supplier’s attention. Should they fail to rectify the issue, you might investigate your options. There may be a clause in your contract that would allow for early severance, for instance.
Analytics are useful even when the procurement system is working perfectly well for your company. You can continue to monitor the different areas of the procurement system to ensure their efficiency moving forward.
Systems procurement in Dallas is the automated purchasing of goods and services from suppliers. As a new company, having a systems procurement process in place early will set you up for success. Be sure to review that process at least annually but perhaps even more frequently at the beginning as your company experiences growth.