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How to Negotiate a better purchase price ?
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1. Get Multiple Quotes:
This helps to understand the price range available in the product market.
2. Do cost break-up:
This provides fair insight about how much the product “Should Cost” .
3. Go for Extras:
Go beyond the price – Eg. Free Delivery, Free Installation etc.
4. Research an Alternate solution:
Is there any other product which can largely meet your requirements? It will improve your power of negotiation.
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What percentage of materials would you guess are still in use six months after their
purchase date? 50%? Or maybe 20%? As little as 15%?
The answer is even less than that. Just 1% of consumer products in the US remain in use after half a year. This means that 99% of the materials that are sourced, manufactured and transported are thrown
away within six months!
It is hard to imagine how such a wasteful way of life can be sustained on this planet in the long term.
This issue has been of both personal and professional concern to us for a considerable time. We believe that the solution lies in achieving a circular economy and changing the buying habits of consumers and – more importantly – organizations
The challenge presented by circularity is mainly technical in nature. To make a
circular product we look at the materials required for manufacturing as well as
the design and assembly method of the products in question. Circularity means
that the resources or materials required to create products can be optimally
reused or recycled for the same purpose or alternative applications. In order
to maximize the reuse of components and materials, easy disassembly methods are
a key driver for circularity.
Why do we focus on procurement?
At first glance, procurement does not seem to be a glamorous or exciting topic.
Traditionally, procurement is focused on maximizing value for money. What
happens when purchasing power is used in order to change the world? That’s when
procurement becomes a vastly interesting topic! Your demand can help influence
pricing, availability of raw materials and can create opportunities to spur
technical innovation and sustainability. In this sense, procurement is an
immensely powerful tool in our pursuit of a better world.
We focus on procurement because making the world a better place starts with asking
better questions in formulating our demands. And formulating our demands is precisely
what the procurement process is all about. For this reason, procurement can
make a substantial contribution by providing solutions to vital and complex
issues such as circularity and the transition to a circular economy.
Circular procurement is the process in which a product, a service or a project is purchased
according to the principles of a circular economy. In this process the
technical aspects of the product are as circular as possible, taking
maintenance and return policies at the end of the use period into account, as
well as including financial incentives to guarantee circular use.
How do we achieve this?
There are broadly 8 steps.
Wish to explore?
Let us connect.
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(A) Technology, design, cost, co-development, quality, intellectual property, and risk management
(B) Delivery, cost, and quality
(C)Supplier contract and relationship
(D) The supplier's history with the buying company
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Given the multiplicity of firms offering digital transformation initiatives and the challenge that selecting the right provider for your needs presents, it is incumbent on supply management professionals to ensure that the needs of the organization are accurately defined and embraced by senior management.
This sounds like common sense but notes that in 2017, the World Commerce and Contracting organization sponsored a study of its global members and found that, for that year, the $13 B USD spent on digitization projects, over $900 M USD of the spend on those projects did not return a single benefit. That means that almost 70% of those corporation funds were lost.
Why?
A review of the World Commerce and contracting organization’s “Ten Pitfalls to Avoid in Contracting” presents some compelling elements that point to the failure of adequate change management.
Those pitfalls are available on the World Commerce & contracting website at Ten Pitfalls to Avoid in Contracting (worldcc.com).
We will not discuss all of the pitfalls here but suffice to say that over the last ten years the list has changed extraordinarily little.
From a change management perspective, the pitfalls that stand out are 1) lack of clear scope and goals, 2) failure to engage stakeholders, 3) contracts lack flexibility, 4) insufficient focus on governance and 5) poor handover to the implementation team. These five pitfalls plus the other five listed in the article have been found to lead to contract value erosion of 9.2%. Very few companies can afford to maintain that type of erosion.
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According to Wikipedia, Change management (sometimes abbreviated as CM) is a collective term for all approaches to prepare, support, and help individuals, teams, and organizations in making organizational change. It includes methods that redirect or redefine the use of resources, business processes, budget allocations, or other modes of operation that significantly change a company or organization.
Organizational change management (OCM) considers the full organization and what needs to change, while change management may be used solely to refer to how people and teams are affected by the such organizational transition. It deals with many different disciplines, from behavioral and social sciences to information technology and business solutions. As change management becomes more necessary in the business cycle of organizations, it is beginning to be taught as its own academic discipline at universities. There are a growing number of universities with research units dedicated to the study of organizational change. One common type of organizational change may be aimed at reducing outgoing costs while maintaining financial performance, in an attempt to secure future profit margins. In a project-management context, the term "change management" may be used as an alternative to change control processes wherein changes to the scope of a project are formally introduced and approved.
Drivers of change may include the ongoing evolution of technology, internal reviews of processes, crisis response, customer demand changes, competitive pressure, acquisitions and mergers, and organizational restructuring.
What do you think? Please do comment
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What is Digital Transformation?
According to Wikipedia Digital transformation (DX) is the adoption of digital technology by an organization. Common goals for its implementation are to improve efficiency, value, or innovation.
Also according to Wikipedia, digitization is the process of converting analog information into digital form using an analog-to-digital converter, such as in an image scanner or for digital audio recordings. As the usage of the internet has increased since the 1990s, the usage of digitization has also increased. Digital transformation, however, is broader than just the digitization of existing processes. Digital transformation entails considering how products, processes, and organizations can be changed through the use of new, digital technologies. A 2019 review proposes a definition of digital transformation as "a process that aims to improve an entity by triggering significant changes to its properties through combinations of information, computing, communication, and connectivity technologies." Digital transformation can also be seen as a socio-technical program.
Adopting digital technology can bring benefits to a business, however, some company cultures can struggle with the changes required by digital transformation.
A 2015 report stated that maturing digital companies were using cloud hosting, social media, mobile devices, and data analytics, while other companies were using individual technologies for specific problems. By 2017, one study found that less than 40% of industries had become digitized (although usage was high in the media, retail, and technology industries).
As of 2020, 37% of European companies and 27% of American companies had not embraced digital technology. Throughout 2017-2020, 70% of European municipalities have increased their spending on digital technologies. In a 2021 survey, 55% of European companies stated the COVID-19 pandemic has increased the demand for digitalization, and 46% of companies reported that they have grown more digital. Half of these
companies anticipate an increase in the usage of digital technologies in the future, with a greater proportion being companies that have previously used digital technology. A lack of digital infrastructure was viewed as a key barrier to investment by 16% of EU businesses, compared to 5% in the US. In a survey conducted in 2021, 89% of African banks polled claimed that the COVID-19 pandemic has hastened the digital transformation of their internal operations.
However, since there are no comprehensive data sets on digital transformation at the macro level, the overall effect of digital transformation is still too early to comment on.
If you wish to discuss this further and explore the skills needed to succeed, comment below.
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Direct and Indirect Spend
Direct spend involves the purchasing of goods, materials and services directly associated with the production of goods and services that a company is providing
Examples: Direct labor, direct materials, manufacturing supplies.
Indirect spend refers to expenses incurred for materials,services, and maintenance required to operate the business
Examples: are accounting, auditing, and legal fees, as well as business permits,office expenses, rent, supervisor salaries, telephone expense, and utilities.
Methods of procurement or procurement functions mainly revolve around;
· Vendor Selection
· Payment Terms Negotiation
· RFI, RFQ & RFQ
· Strategic Vetting
· Final Selection
· Contract Negotiation
· Final Purchase
The actual steps involved in procurement are as follows:
· Identification of Requirement
· Determination of the Specifics of the Requirement
· Sourcing
· Negotiation and Finalization of Price and Terms
· Purchase Requisition and Order
· Delivery of the Purchase Order
· Expediting
· Product/Service Supply and Inspection
· Payment Processing
· Record Keeping and Review
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