As a business owner, you may have to source materials from other parts of the world to improve the return on investment. The sourcing market is huge, and the US alone imported close to $4 trillion of goods and services in 2022 (source). Procuring materials can significantly lower your input costs and improve your profit margin. However, procuring materials can be daunting, and you must consider multiple factors to make this process smoother and easier. In this article, we will share with you six essential points you must consider when purchasing supplies for your business.
Six factors you should consider when procuring materials
Here is a list of six factors that you must consider when procuring materials.
- Contact your suppliers: First, you must identify the materials and supplies you need for your business. Once that is done, you should contact suppliers and build a strong relationship with them to strengthen your overall material procurement process. Explain to them your requirements and the specifics of the product or service.
- It is preferable to buy closer to the producer: If you want to buy goods from outside your country, you should look for suppliers close to your home, as they will give you many benefits. When you buy goods from suppliers close to your business, shipping costs and delivery times are both lower, which is a big plus. Also, if you work with a reputable procurement company that gets its goods from nearby suppliers, you can be sure about the quality of the goods.
- Consider the make-or-buy decision: Do a full cost-benefit analysis to figure out if it makes more sense to make the goods yourself or to buy them from someone else. The make-or-buy decision is an essential part of material procurement. To make the right decision, you must calculate the relative costs and time required to produce the goods in your manufacturing unit and compare them with those of an outside supplier.
- Learn how to bargain effectively: If you want to enjoy the benefits of a great deal, you must know how to bargain effectively. To do this, you should first look around the market carefully for different sellers of the goods you want to buy. It will give you a good idea about the current market price, which will help you negotiate better with the suppliers. When negotiating, make sure you are polite but firm and emphasize your purchasing power by indicating that you are willing to move on to another supplier if they do not provide you with a good deal.
- Don’t buy from just one company for each product: If you put all your eggs in the same basket, it is possible that if that supplier falls short of their promise, you may face big problems. Therefore, you must never shop around and purchase all your supplies from one procurement company. Always try to aim for having multiple vendors meet your sourcing requirements.
- Use tools for managing the supply chain: You must invest in various tools to make your supply chain management more efficient and productive. One such tool is inventory management software, which will help you track the supplies in your stock, their level, and when you will need to replenish them. Such tools give you better visibility of your inventory level. They can also help forecast the requirements so that you can place your orders on time. This will ensure that you do not face the problem of a shortage of products in your business.
When choosing suppliers, you need to pay close attention to a number of things. You need to compare prices, read the contract carefully, and make sure the supplier has high-quality materials. Also, you should carefully figure out how much shipping will cost and how long it will take to get the goods to your business before choosing a supplier.