Purchasing functions are at the center of a successful supply chain and for many years now, purchasing teams have been working towards cutting costs and increasing revenue. However, in doing so have faced many barriers including manual purchasing processes and a lack of clarity, especially when it comes to negotiating contract terms for rebates.
According to a report prepared by Harvard Business Review, 24% of respondents said they do not effectively evaluate supplier business practices at their companies, citing manual and incomplete data entry processes as a significant barrier. It doesn’t help that rebate contract terms are rarely the same from one agreement to another and they can be very detailed and rather complex. The purchasing function needs to have a clearer understanding of the suppliers’ contract requirements and the overall status of all their deals.
Since the purchasing process touches every organizational function and impacts revenue directly, it is essential to keep the process running smoothly by regularly reviewing what’s working well and what may need to be optimized for greater efficiency. Here are the ways purchasing functions can optimize their purchasing processes to boost their rebate deals.
According to Deloitte’s 2019 Global CPO Survey, 93% of CPOs cited cost reduction as a strong business priority and some are being asked to reduce the organization’s overall spend, some by as much as 20% in a year. A well-run purchasing function should allow your organization to achieve immediate savings by choosing a mix of suppliers who can provide the best prices and terms.
In this purchasing process, relationships with suppliers who cannot provide the right level of quality at the prices required should be terminated. The purchasing function can also help lower costs by providing better transparency into how your company spends, which will in turn allow them to negotiate better deals and free up your cash flow.
Establish a go-to list of suppliers
Choosing the right suppliers to do business with is rather complex, so it makes sense to establish a centralized list of suppliers with all relevant information in a standardized format. This will allow the purchasing function to quickly determine which supplier might be right for an individual job, and also build better collaboration across the supply chain over time.
However, don’t forget the smaller suppliers. Even as purchasing build relationships with suppliers, they need to consider looking outside the box to find new suppliers that might allow them to procure materials more quickly, cost-effectively, and reliably.
Manage strong supplier relationships
The challenge of the purchasing function is to get the supplier interested in working with your business, getting them to invest in the long-term relationship. Once onboard, the purchasing function needs to build and maintain that supplier relationship to eliminate the need to start from scratch and encourage fair, detailed, and straightforward negotiations.
It’s essential that the purchasing function is seen by the wider business to be a proactive force, and clearly a major part of that role involves ensuring that suppliers are on-side. If you can save your organization money, create better deals or improve the quality of the goods or services you buy from your suppliers, your business stands to gain.
Good quality data
Data quality is key for an accurate view of all your deals in order to make the right decisions, successfully manage supplier relationships and avoid repetitive manual data entry. Not having access to accurate data in real-time can significantly hinder an organizations competitive advantage in the market as it can slow decision-making and drain resources. Digital technologies like rebate management software have the potential to boost data quality to a whole new level.
Negotiate better deals
If members of the purchasing team improve their negotiation skills, this in turn ensures good deals for the company, leading to higher profitability. To make sure deal negotiations go smoothly, instead of emailing back and forth which can often lead to confusion, implement a rebate management platform. This makes negotiation much simpler as everyone is now able to proof, edit, and comment all in one place.
Use your analytical skills to make better decisions
Between vetting suppliers and negotiating the best deals, being in the purchasing function means having top-notch analytical skills. Having a full perspective on every part of the purchasing process keeps projects on track and finances in check. Most modern rebate management systems have extensive reporting capabilities that will make gathering metrics and reporting back simple and effective.
Centralize your information
The purchasing function cannot be efficient if all the information about the purchasing process is stored in multiple places. If your organization doesn’t have a centralized process for information collection, from rebates to supplier information, it should be one of your first priorities. Centralizing all information related to purchasing will help your teams access it more quickly when making crucial decisions about your deals.
Leverage rebate management software
Despite the advances in cloud computing and SaaS solutions, 50% of purchasing functions run on static spreadsheets, to store and analyze their data, according to a 2019 Cognitive Sourcing Study from LevaData. Spreadsheets lack collaboration and real-time capabilities; therefore, your purchasing function should identify rebate management software to address these manual purchasing processes.
For example, in Enable, purchasing functions can track their rebate data plus when it comes to the time-consuming task of negotiating contracts with hundreds of vendors every year. Purchasing can send out standard contract templates to be signed off digitally.
What’s next for the purchasing function?
Of course, rebate management technology remains the enabler that will allow your organization to optimize your purchasing processes to boost your deals. The goal should be to encourage the above purchasing processes in order to free them from repetitive and time-consuming tasks, allowing them to focus on more business-critical operations. By optimizing the whole purchasing process, your organization can create significant business value and achieve overwhelming success.