Procurement consulting has become a common exercise for companies seeking to source from low-cost countries. Such consulting is now offered by specialized and general consulting firms all across the globe. Yet, many businesses that would benefit from seeking such consultation have no idea about its existence or purpose.
A procurement consulting firm explores options and factors for sourcing goods and procurement requirements. Not just businesses, universities and governments have also started to switch to consulting services to cut down costs.
What is Procurement Consulting?
Procurement consulting is mainly of two types:
- Direct Procurement Consulting for raw material and production goods;
- Indirect Procurement Consulting for operating supplies, outsourcing, maintenance, etc.
In direct procurement consulting, the consultants and managers focus on collecting raw materials, pricing and the result of the goods/services procured.
In indirect procurement consulting, the aim is to optimize existing operations, such as making the procurement of raw materials cheaper.
Procurement usually follows the following steps with further sub-steps as per the clients:
Spotting needs → Analysis of the market → Identifying suppliers and vendors → Negotiation → Purchasing → Expediting the sourcing → Keeping records → Final assessment of all steps and party relations.
Any business consultation can help companies optimize their processes and profits. Procurement consulting works like any other consulting, but the differentiating factor is that it helps companies analyze and come up with strategic sourcing besides price negotiations.
As the name suggests, strategic sourcing means figuring out all aspects of your sourcing needs and drawing a long-term road map. For example, identifying suppliers, and market audiences, analyzing the pros and cons of a specific investment, handling the supply chain and managing contracts.
Benefits of Hiring a Procurement Consulting Firm
This is the larger goal that procurement consultation helps companies achieve. By facilitating informed discussions combined with the expertise and connections that many businesses lack, procurement consulting helps:
1. Reduce Costs
Consider this, if you are sourcing wheat from some part of the US for 6 dollars per kg, consulting might help you bring that down to 4 dollars by negotiating a contract for you or reducing other costs in getting that supply to you.
2. Facilitate efficiency
This can help fasten the process by having to-the-point solutions for your problems rather than wasting time revising procurement strategies repeatedly for your company. e.g., outsourcing manufacturing to cheaper organizations in other parts of the world.
3. Improve All Aspects of your Supply
Supply is more than just deciding what goods you need, raw material or otherwise. Consultation can help you develop better import or export methods, better supply chain management, easy ways to lower taxes or customs levied on your goods and help handle your supply roadmap better.
4. Access to Better Resources and Connections
Consulting firms also provide concrete solutions. Thus, they bring various contacts you wouldn’t have thought of or don’t have and open access to resources without having to go through much trouble.
This doesn’t mean that procurement and sourcing are the same. On the contrary, the former leads to the latter and is a means to achieve a strategy for sourcing. The difference lies in ideation and execution.
Procurement consulting helps develop a plan for execution and a long-term vision or sourcing strategy.
Finding the right procurement consulting firm can be tricky, so you should shop around and see the different perspectives each company has. If you have a set budget and an aim in mind, the work of any consulting firm will become easier, and they will be able to help you better.
Ultimately, you should choose the one that matches your insight the most. It is easy to compromise on the quality of consulting if you lack the knowledge and don’t research.
Ask for testimonials and approaches taken by these firms in similar matters. Keep an open mind and go with your gut. It is the key to running a successful business.
Indeed reviewing multiple procurement consultants can be expensive but worth the investment. Especially if you are an entrepreneur with no experience in the industry but a solid entrepreneurial vision.