What is the cost of doing business? Yes, behind a business strategy, signing a contract, and purchasing supplies, there is always a cost. It can be operational, taxes, financial transactions, production to fulfill a contract – as well as electricity, water, cleaning, telephone, infrastructure, etc. So, how do you measure the price of a purchasing operation?
There is no direct answer, after all, several factors influence this price, from the industry sector in which the company operates, to the country in which it is located, with its legal and accounting frameworks that make any operation even more costly.
However, there is another cost that is even more damaging to companies: the cost of their inefficiency, and this, in the Purchasing sector, takes a very high toll that can even impact the quality of the product or service offered to customers. However, it is possible to reduce or eliminate this cost by automating purchasing processes and making the processes involving the supply chain more efficient.
In other words, it is possible to better control the costs of a purchasing operation by embarking on a journey that digitizes the sector.
superfluous work
It may sound strange to talk about superfluous work, but it exists and highlights the problems in the sector. For example, manually entering data into a system. This leads to errors, which require rework, and the loss of important working hours that could be used to add value to the business.
And that's not all. An incorrectly registered purchase request delays the delivery of inputs, which can paralyze production and, therefore, delay the delivery of a product to the consumer, also impacting customer satisfaction. In other words, in addition to the financial costs, there is the cost of running the risk of losing the customer to a competitor, in addition to having your reputation affected.
Missed opportunities
Automation allows purchasing professionals to focus on other, more strategic functions, such as engaging in more important negotiations and making smarter purchases, where price is not the only deciding factor. In other words, they can generate more value for the business, such as finding new and better suppliers.
Supplier costs
According to Accenture, due to Covid-19, 94% of companies have faced disruptions in their supply chain. This requires companies to implement a contingency plan that optimizes their supply chain and makes it more resilient. Managing supplier risk is essential to face the uncertainties of times of crisis. And this has led many companies to seek new approaches to avoid suffering from unplanned interruptions in their production.
For example, understanding that the lowest price does not always mean the cheapest. After all, today, it is much more advantageous and safer to buy from a supplier in a nearby region than to bet on cheaper parts from manufacturers on another continent, which may delay delivery of the goods. This requires the Purchasing department to have a 360° view of its supply chain and to be able to capture the information needed to reduce the risk of shortages and the costs involved.
operational risk
Any business is at risk. These include environmental problems, economic crises, and system failures. All of these risks need to be monitored to reduce their impact, which is where technology comes into play. A platform that automates inventory, logistics, and supplier management processes, as well as capturing, classifying, and analyzing data from other sources, allows companies to anticipate potential problems and negative impacts on their business.
Making the supply chain more digital allows purchasing professionals to use the best tools to conduct business. A study by Boston Consulting shows that digitizing the supply chain increases operating margins by between 40% and 110%, thus reducing the cost of a purchasing operation.
In other words, investing in the digital transformation of the sector contributes to making businesses more efficient. And COSTDRIVERS can help you on this journey, after all, data is essential for the digitalization of the sector. Talk to us and find out more.