When it comes to controlling procurement costs and looking at cost reduction strategies, there are many approaches that can help identify hidden expenditure as well significantly reduce procurement costs. Most procurement expenditures need monitoring, or at least oversight of what you’re spending and where.
Good cost control is more than just a win for the short-term, it also helps to inform and provide you with the needed data to help improve current and as well as future efficiency.
Five important cost saving strategies for your retail business
Having strong and reliable procurement practices is essential for the financial health of any business. While the focus for many organisations is on strong management of direct product costs, there are huge opportunities for indirect costs too as these tend to be forgotten or overlooked in the overall drive for cost reduction.
So where is a good place to start on those quick wins that lead to more robust, transparent and lasting procurement cost control? As they say, to measure is to know – so let’s start there!
Retail Spend Analysis
Do you know how much exactly is being spent and where? Having this kind of visibility of overall cost can transform supplier management as well as providing real understanding on how budgets are being spent. When it comes to indirect procurement costs, this normally represents around 25% of an organisation’s operational spend so creating any cost savings here will be significant.
By identifying your top suppliers and looking into spending patterns with them, you could then look for opportunities to consolidate purchases for example. This results in reducing administrative costs with fewer suppliers to manage, fewer invoices to process – as well as being able to look at negotiating improved terms and procurement savings opportunities.
Leveraging Technology for Retail Procurement Costs
How can technology improve procurement performance? Being able to automate procurement processes helps to unlock time savings and improve operational efficiency. When procurement teams and procurement professionals have access to supplier purchasing portals, this can make managing inventory and reducing costs incredibly easy.
Having the ability to see spend in one place, as well as the functionality to see all orders and accept or decline them, keeping tight controls on permitted spend, and diving into historical purchasing data to create more accurate forecasting – it’s all at your finger tips.
Bringing automation to the cost approval process is an easy way to reduce unnecessary expenses, reduce procurement costs and improve inventory management and eliminate manual invoice processing.
Bespoke purchasing platforms such as MyAcopia, widely used by retailers for the procurement of their consumables, creates a ripple effect of efficiencies right across a retail network. Being able to spot potential overspend before it happens means the business can eliminate maverick spending and consequently over-stocking challenges.
MyAcopia is built entirely round the customer’s product range to keep all spend to an approved list to control costs.
Setting budgets through an online purchasing platform for every shop across a network, for example, is an excellent way to achieve instant cost reduction.
Consolidating Retail Suppliers
Mentioned earlier, the idea of consolidating suppliers may seem at odds to the idea of securing more competitive pricing. But building a strong supplier relationship with a reduced number of suppliers, or even one as a single source supplier, can pay dividends when it comes to reducing procurement costs and supporting the procurement process.
Concentrating your business with a single supplier often provides greater leverage in negotiations for improved terms and pricing, especially volume discounts.
Working with a single supplier allows for greater collaboration, resulting in improved service, faster response times when urgent support as required, as well as consistent quality of products. Strong relationships can also result in greater innovation or bespoke solutions tailored to your specific needs.
Thinking about this type of strategic sourcing and having a more targeted approach to your procurement activity can reduce costs, improve the purchasing process and means you’ll get more from vendor performance.
Optimising Storage and Logistics for Retail
Are you getting value for money for storage and transport? The suppliers you work with should be working hard to consolidate your deliveries, making the most of shared delivery networks to not only bring down your costs but also your carbon footprint, supporting more sustainable procurement practices. Working with a single source supplier makes this strategy easier, co-ordinating all your deliveries as cost effectively as possible.
Getting low cost or even free warehouse storage as part of your contract with a supplier is another example of the leverage you can gain if you are looking to place all your business with a single supplier. Storage fees can range up to £11 per square foot a week, and significantly more in prime city locations.
Reducing waste in Retail
A huge part of procurement cost reduction is about identifying and uncovering ways that can save money but also perhaps bring opportunities for more sustainable procurement practices.
Looking at your supply chain and preferred suppliers, can they bring alternative more sustainable products to the table that could help reduce packaging waste for example? More eco-friendly packaging solutions would attract lower disposal costs, especially with new EPR legislation, and even help to boost sales with increased customer demand through improved perception.
Collaboration with your preferred or single source supplier will deliver these Best Practice outcomes for your retail brand.
Next steps for controlling spend
So when it comes to procurement cost savings, it’s clear a multi-faceted approach will help to deliver significant positive impact. These will all help to drive up profit margins, boosting stronger resilience and improving risk management.
Eliminating time consuming purchasing processes free up resources and for teams that have access to the historical data – this provides the building blocks and foundations of the long term vision and on-going financial health.
Want to know more about how a supplier procurement platform can help reduce costs? Take a tour of MyAcopia here