Happy New Year!

Regardless of how you fare with New Year’s resolutions in general, now is a great time to resolve to squeeze every penny you can out of your procurement dollar. Looking back on our blogs from 2011, you’ll discover some great tips to help you realize savings by updating your organization’s procurement process. For your convenience, I am summarizing some of the high-profile tasks you should take on immediately.

Task #1 - Make procurement a priority in 2012.

Task #2 – Commit to forming a mutually-beneficial relationship with your vendor partners

Task #3 – Commit to exploring and leveraging eProcurement

Task #4 – Create and implement an effective plan

In Part 1 of this two-part blog, I shared with you critical procurement savings opportunities which you and your company can employ. I continue in Part 2 with this valuable list. Again, I use much of the content found in the on-line article,Procurement Savings – Ways to Increase Your Profits, because it does such a fine job of highlighting what we promote to all of our Buyer partners. I have somewhat paraphrased the list for this blog.

Savings Opportunities Continued

8. Review replacement strategies. 
Item renewal or replacement should be based on necessity, not routine replacement. This may fly in the face of some routine maintenance “best practices,” which in better times, to be honest were more for convenience than savings. Having said that, take care to factor in the cost of waiting for a replacement. While replacing an important machinery part on a regular basis may be necessary, it is not necessary to replace most lights before they fail.

9. Put correct management controls in place.
This is particularly the case for Ad Hoc purchases. Are the right people ordering the rights supplies for the job at hand? This should reduce excess or incorrect purchasing.

10. Train, train, train.
Training your staff on cost-effective purchasing and encouraging them to save money whenever possible can yield significant savings without sacrificing the services your company provides.

11. Computerize the purchasing process.
Procurement automation enables you to consolidate the practices mentioned above and to realize real-time compliance and cost performance. Refer to my earlier blogs about procurement automation and eCommerce Evolution.

12. Link the purchasing system to the inventory and accounting systems. 
From PO creation, to order approval, placement, receiving, verification, and accounting, procurement automation can greatly reduce errors, improve efficiency, and save money.

13. Use procurement automaton to be quicker and to reduce communication costs. 
Purchasers can readily access supplier catalogues and comply with the choice of products that may lead to purchase savings.

14. You may want to consider centralizing disparate purchasing functionalities where it makes logistical sense, which allows for savings in staff, processes, delivery charges, and technology.

Question: What other practices have you discovered that have helped you, or you anticipate will help you, realize sustainable savings?

Happy New Year and may 2012 be a banner year for your team!

The impact of the 11.1% cut to Medicare reimbursement on long term care providers across the country has been substantial. With revenues down margins are tight, very tight. To discover ways to reduce waste and get the most from the dollar expended, providers are examining every facet of their operations, including procurement. While labor may represent the bulk of its expenses, a company also needs to review its procurement practices, contract terms, pricing points, and price protection regularly. In this day and age, every penny counts.

In the this first of a two-part blog, I'll share with you some salient savings opportunities that we recommend and which are concisely mentioned in an article I found recently online, Procurement Savings – Ways to Increase Your Profits. I’ve somewhat paraphrased the content.

1. Review supplier’s terms and discounts.
You should have a Master Agreement with all suppliers. As partners, you and your suppliers may achieve procurement savings by altering your purchasing patterns. By purchasing slightly more products less frequently, you may automatically receive a better discount.  If you are using outside contract management or GPOs (Group Purchasing Organizations), you may also want to review those resources and any agreement they have with you, along with their contracts and pricing with the vendors or product categories in which they are being utilized.  

2. Consolidate suppliers and deliveries.
Savings in delivery charges and the costs of accepting those deliveries can result when you consolidate deliveries. In some cases, it may make sense to consolidate what you purchase from which suppliers. It may be more convenient to purchase from a local vendor, however, like the neighborhood hardware store, “convenience” can become a black hole for your cash. Also, by consolidating suppliers, costs related to processing purchase orders and invoices can also decline.

3. Consolidate purchasing requests and intervals.
By consolidating your orders and reducing their frequency, you can reduce delivery and documentation processing costs.

4. Review purchasing requirements.
This ensures that only strictly necessary purchases are made. It will cut down on excess costs and storage costs.

5. Purchase from agreed catalogues.
Combined with #2 above, purchasing from catalogues specifically negotiated for your company containing specific brands or types of a product will result in savings. As mentioned above a greater volume of orders from one vendor can result in deeper discounts.

6. Review stock levels. 
With consolidation and the advice to buy in greater volume must be tempered by sound inventory control practices.

7. Review purchased products specifications. 
What may have been ideal a while ago may have been superseded by an item or class of items that function better at a cheaper price.

In Part 2, we'll conclude with the rest of these critical savings opportunities. In the meantime, I wish you and yours a very Merry Christmas!