We all need to spend money with third parties to keep our businesses going.
Whether it’s products for distribution, IT support or PPE, we have to buy them, but we make sure that we’re not spending over the odds.
It can be hard to know where to start, which is why I’ve put together 5 tips to save money with your suppliers.
Group Items Together
We call this ‘consolidating spend.’ It’s where you sort all the different types of products you buy into one category, such as: stationery, PPE, nuts & bolts.
When you have this list and the quantities that you’re likely to buy each year, you can approach suppliers for a price list that covers all those items.
It’s a bit like bulk buying, but you don’t have to buy the items until you need them. You just know in advance how much it will cost and your supplier ‘rewards’ you for your loyalty with preferential pricing.
It can also save you time because you don’t need to get quotes for items or decide which supplier should be used.
Note, the quantities that you give should be guidelines and you shouldn’t have to guarantee to buy a certain quantity.
Right-Size Your Suppliers
You want to be treated like a valuable customer. That way you’ll get better pricing and better service. I think we all know from our personal lives what it’s like to deal with a giant company that puts you through to random call centres!
Right-sizing is about finding the supplier that is big enough to cope with the quantities you want to buy but small enough for that volume to be valuable to them.
For example, if you have an office that has 50 people in it (normally!), it would be too big for a self-employed cleaner to take on the work. Conversely, it would be too small for a national company like Interserve or Serco to care much about the business. The trick is to find that (local) cleaning company who has capacity to service an office your size, but it’ll represent enough money to make a difference to their annual turnover.
Don’t underestimate how valuable good service is! Remember the times when you’ve had to deal with an incorrect energy bill or you’ve been overcharged for your mobile – it takes an awful lot of time to correct problems. It’s much more cost-effective to make sure you’re given good service from the beginning.
Ask!
You don’t always have to change suppliers to find a better price. Over time, contracts and pricing get rolled over automatically, and you see ‘price creep.’
Your supplier might not have realised that this is happening! Or, they might have an idea for how you can buy the items cheaper, such as in larger quantities or a different brand.
It’s seems counter-intuitive that suppliers would want you to spend less with them, but most want to give good customer service. And if they’re over-charging then they’ll lose you as a customer eventually anyway.
Share Your Goals
When you’re talking to your supplier, tell them about your business goals and ask them about theirs.
If your business is looking to expand, give better customer service or boost output, your suppliers might be able to help.
For example, if you’re a distributor and you want to be able to ship goods to your customers faster, your key suppliers might be able to do ‘drop ship’ orders direct to your customers under your branding. And that might tie up with their goals of increasing that side of their business.
Saving money is about more than just the price tag – it can mean reducing the amount of time you spend on everyday tasks.
Also, your supplier is going to be more motivated to give better pricing if they understand why you’re asking for it.
Reduce Your Transaction Costs
Every time you interact with a supplier it’s costing your business money, because you could be doing something that adds value to your customer.
These steps could include: asking for a quote, asking about a product or service, raising a Purchase Order, receiving the product into your warehouse and paying the invoice. That’s if there aren’t any problems with the delivery or order!
Taking out these steps will reduce your overall cost of working with a supplier. You could do this by:
- Having consolidated invoices, such as one per month instead of per order
- Having ‘vendor managed inventory’, where the supplier looks after your stock for you
- Using online ordering platforms
Conclusion | Price vs Value
My final tip would be to not confuse ‘price’ with ‘value’ – if something is cheaper but doesn’t last as long, it’s not good value.
Price is important but getting the right product or service for you is the key.
For support on how to get more value out of your supply chain, feel free to give me a ring on 07588 071975 or check out my page where you can get more procurement resources.
