With end-of-year approaching quickly, now is a great time to review your purchasing procedures.   Particularly in multi-site operations, you may be very surprised to find out just how much money you are spending with certain vendors and/or on everyday products. Use these steps to trim your purchasing costs:

Identify all vendors where spending totals $10,000 or more.

Strategy – First and foremost, identify costs that were completely unnecessary. Inefficient procedures and lack of foresight and planning can produce last-minute spending. Eliminate these costs in 1999 through better procedures and planning.

Strategy – On necessary items, total annual spending. With these amounts itemized in writing, call or visit major vendors to negotiate quantity or good-customer discounts for your 1999 purchases. Don’t forget the phrase, “Is that the best you can do for me?”  Most vendors don’t offer up their best deal on the first pass!

Identify all purchase needs by product where spending was $10,000 or more in 1998. This could include anything from soap to tires to drums to truck repairs.

Strategy – If you are currently buying similar product(s) from several vendors, consider moving to a single vendor.   Theoretically, the more business you bring to a vendor, the lower your price should be. (Vendors unwilling to move down on price when shown your quantity better have great service if they want to keep your business!)

Strategy – Bid out your expected 1999 needs. With hard data in hand of what you spent in 1998, you’re in the driver’s seat to obtain quotes on all your expected purchases. It’s amazing how vendors sharpen up the pencil when they know they are in competition! When bidding, a good rule of thumb is restrict your bid to three vendors. A 33% chance of successfully obtaining your business keeps vendors interested. Anything less may not be worth their time and best shot.

Analyze all major vendors for potential partnership or acquisition.

Strategy – Vendor partnerships can do more than reduce costs, they can be new sources of revenue! For instance, consider renting space in your store or plant to a vendor that would create additional sales opportunities for you.

For example, grocery stores produce extra revenue and customer count by renting space to banks, while at the same time getting super-cheap or waived bank fees! Similarly, a progressive marketer charged a bank rent for ATM space and found they increased customer count in their store by 1800 people per month. Wow! Review your vendor list now for any win/win alliances you may be missing.

PetroAnswers Slash Purchase Costs