While the purchasing profession was thrust into the spotlight during the health crisis, small and medium-sized enterprises (SMEs) spearheaded the drive for innovation, adaptability and creativity. Analysing costs and risks, rethinking supplier relations and training buyers are all strategic elements in developing a purchasing strategy. Jean-Jacques Ruste, an expert in international purchasing and business organisation, takes a closer look.
Crises make us realise that certain things need to change. But what kind of change are we talking about?
An SME could change supplier for a 3 % price reduction. Later, it may also find that internal costs, late deliveries and poor quality are jeopardising its future.
Alternatively, this SME could negotiate a discount of 2 % by aligning its specifications and upgrading its selection criteria, where the weighting of the decision is based on price (50 %), delivery time (20 %), quality (20 %) and the notion of sustainable development, guarantee and service (10 %).
As far as I'm concerned, the second scenario is a common-sense approach that will deliver results in the long term.
So it's a change of organisation that awaits us.
First step: SMEs must uncover all their expenditure
More than 50 % of total sales are spent on purchasing! So, whatever their size or sector of activity, SMEs need to adopt a global approach to keep track of all their expenditure.
Of course, the first thing that comes to mind is direct purchasing, i.e. production. But we mustn't overlook indirect purchasing and overheads, where there are significant savings to be made.
In practice, SMEs naturally include production-related items in their purchases, but they "forget" to consider that the software used to prepare pay slips, or the service provider who prepares them, are purchases.
Energy, insurance, bank charges, service purchases, labour... everything needs to be mapped out, costed and negotiated.
Analyse internal and external costs
Each purchase must be analysed to understand the costs it generates. The overall cost includes sourcing, placing orders, supply and reception costs, stock costs, accounting costs, product obsolescence costs and recycling costs. At the end of the year, if we calculate the cost of each purchase and compare it with the average amount of each invoice, we can determine an average purchase. This is part of our internal costs.
Identifying expenditure and stakeholders will enable them to be mapped. The aim of this mapping is to organise the purchasing function and structure the work of buyers.
More importantly, this analysis helps us to realise that we are asking our suppliers to make specifications that cost an enormous amount of time and money when they are sometimes unnecessary. Visualising the purchasing gains made by your supplier is the beginning of responsible purchasing. Simple, effective and economical!
Purchasing strategy and vision
Analysing costs is an opportunity to ask questions: should purchasing be grouped together or made global? Should you use a specific platform, pool purchases with other companies, source, or rely on an expert who will relieve the company of the burden? In other words, analysing costs is a prerequisite for developing a purchasing strategy, but it is not enough. Developing a good purchasing strategy also requires tools, a vision of the objectives to be achieved and a risk analysis to anticipate crises.
Risk analysis, via the criticality index, is a good way of anticipating crises. All this can be calculated! Criticality = Stakes x Probability x Detection
An organisation tailored to each SME
Once the strategy has been chosen, the company benefits from putting in place an organisation tailored to its size, context and needs.
I often say that an SME is like a person with one head, two arms and two legs. Its head is its vision, i.e. the direction it wants to take. Its right arm is its teams. His left arm is his resources (offices, IT equipment, etc.). Its legs are the objectives to be achieved. When it comes to purchasing, you need to consider total cost, deadlines, quality and service. So a good buyer has four legs!
In an SME, the buyer has to adapt the objectives to the means at his disposal. In general, these resources are very limited! But buyers in SMEs also have an advantage: they are often the sole decision-makers.
Rethinking supplier relations and communicating with specifiers
Your suppliers are your best allies. "Be your supplier's favourite buyer": that's what I advise participants during training sessions. To do this, you need to :
- Develop partnerships with suppliers with whom you have worked for more than 3 years;
- understand your supplier's constraints ;
- visit its production site to analyse the complexities of your purchasing requests.
Furthermore, organising or reorganising purchasing means communicating internally. Those who used to order without referring to anyone else may feel "restricted". The sales department that used to book in any hotel will feel punished if there was no prior communication. Explaining the meaning of the approach therefore helps to limit resistance to change.
In purchasing, undertaking change management involves understanding the benefits of a purchasing approach, mapping expenditure, identifying the right people to contact, etc.
Innovation for better purchasing
For example, during the COVID-19 health crisis, the winning SMEs were those that innovated. Shortages, late deliveries, supplier failures, short-time working... Faced with these difficulties, they had to adapt and be creative to manage remotely, deliver to their customers or find substitute products.
Responsible purchasing
In terms of corporate social responsibility (CSR), the Responsible Supplier Relations charter is a good guide to organising your relationships with suppliers and service providers.
At the same time, SMEs also have every interest in communicating externally about their commitment to responsible purchasing. Obtaining the "Supplier Relations and Responsible Purchasing" label offers them both a differentiating factor and visibility with their customers.
Rely on training led by professionals
Buying is a complex business. For each SME, the organisation of the purchasing function must be adapted to the context, the nature of the purchases and the sector of activity. This is why ORSYS offers several training courses run by professionals and focused on practical application.
Every SME needs to consider the nature of its purchasing in order to understand which employees will benefit most from training. It is also important to determine which skills need to be developed: skills linked to purchasing gains and/or skills linked to the organisation of purchasing? For example, a company might decide to train a buyer in negotiation techniquesOthers will opt for in-company training, on the theme of responsible purchasing or sustainable development. Others will opt for in-company training courses on responsible purchasing or theinnovation with suppliers.
At the beginning of 2022, a purchasing manager contacted me following the training of her teams: "1.5 million over 2021, but above all it means suppliers who deliver on time and a sustainable development project that has been praised by my management..
A good strategy, combined with a well-trained team, creates value and puts the heart into the work.
