During the procurement process, there are only two sides involved in the transaction. Your vendors are a critical part and the reason for your company’s growth and success. Even if you use hundreds of vendors for the same service, there are always preferred vendors you look to first as you have built a good relationship with them. This relationship is the key to procurement and veterans know that.
If you choose to divert from this relationship, there are few unseen pitfalls that can occur from your non-compliance.
Losing money, time and resources
There is a cost related to searching for new vendors and setting up a contract. Searching for vendors can be a lengthy process which might be challenging and unsuitable. This leads many to consider buying in a group as not everyone needs to put their time and resources on an individual level. Buying in a group is a powerful tool that not only saves on the costs but provides the opportunity for bulk buying. There would also be cost-savings on transportation and delivery fees.
Changing vendors too often
One of the most important things in the procurement process is to maintain a good relationship with your suppliers – which happens over time. As your relationship with your supplier grows, you can likely save on costs as your business expands or when you’re in a financial crunch since there is now an understanding between you and your supplier. They would also be inclined to provide you with discounts and promotions not offered to new purchasers. If you don’t put in the time to build the relationship, your opportunities for cost-savings could be reduced.
Loss of the familiar
Changing your suppliers means that your team needs to learn new information and build new relationships. Conversations and interactions could become more time consuming as it would begin to feel like normal orders and operations are being discussed from scratch rather than from a repetitive stance. Increasing the frequency on this practice proves to be a waste of time and also confusing for all involved.
New products and technology
As your relationship with your supplier strengthens, they will be more generous in sharing inside knowledge, such as the latest tech and innovation that could help your company grow. You might even get the scoop on what not to do as the supplier knows the product best. Suppliers are more likely to share value-added information with those that they feel have a stronger loyalty to them.
Strong relationships are crucial to effective procurement processes. It takes time and effort to build depth to your relationship and show loyalty. We’ve seen repeatedly that putting time into these two factors are your best bet to get the most out of your procurement and avoid these pitfalls.
HPN Select is a group purchasing organization that specializes in assisting multi-family housing developer and operators.