Cost of Bad Purchasing
Let’s talk money. In your day-to-day business, you set up budgets, plan your revenue and calculate taxes you need to pay. But do you aim at cost reductions? When agreeing a budget do you keep an eye on the minimum and maximum spend you want to achieve and could afford? When planning your purchases for a year, do you expect to pay less or do you just accept price increases, because that’s the way life goes?
If you never thought about it, you may be bleeding money without even noticing it.
Imagine you need safety devices to be installed in your workshop, somebody from your team knew a supplier from previous experience, called and ordered the devices they had available. Seems easy, right? No hassle purchasing and the workshop is well equipped. But did you know, that you might have lost a big amount of money and might have paid several times more than you would have if you applied simple purchasing practices?
Say, the price you paid was 15000 Euro for five devices. If you did some benchmarking and involved several suppliers, you would have seen that the prices vary from 12000 Euro per piece for an order of 5 pieces to 340 Euro for an order of 250 pieces. You see a cost reduction potential here, don’t you? At first sight, it’s more than 13k to be put into your pocket. Of course, you discard the expensive option and double-check, why the cheap one is so cheap; it might be that it doesn’t have the functionality you need. But you have 5-7 suppliers to choose from and one of them will be the right hit.
But you are not done yet. You start negotiating the prices and as a result, some suppliers give you a discount of at least 3%, while others refuse to improve the prices because you are not buying in good volumes, five pieces is not really something to impress a supplier with.
Wait a second, we hear you say, how much time am I supposed to plan for this? If I spend my whole day doing just that, I have no time left to work in my workshop. Not to mention that I am not comfortable negotiating with suppliers.
But let us summarise first: when negotiations are completed, the price for the device you needed so much dropped to 1600 Euro. So, the price you paid for skipping the whole sourcing circle is 7000 Euro or almost 47% in savings against what you paid.
This is a real-life example, and of course, we can’t calculate for you how much 47% cost reduction would be in terms of your turnover, so we leave it to you. But from experience we can tell, savings of any level bring benefits to any business, big or small. Business owners love paying less for every order they place.
We don’t want to tease you, but there is further potential to reduce prices. If only there was a way to get your five devices while paying the price valid for an order of 250 pcs, the price per piece would have gone down to 800 Euro, resulting in savings of around 73% against the price you paid. And #EoS4U offers to you just that because on our platform we accumulate volumes from different businesses to make sure that you receive your 5 devices at a price of bulk order.
On top of this #EoS4U takes over the whole negotiation process as we’ve just seen it (and even more, because negotiations are our job). With this we want to answer your question, what to do - to work or to negotiate; to buy ad hoc or to try to find ways to save money. The answer is very simple: work and let us do the purchasing for you, all the cost reductions and savings will be passed directly to you, no strings attached.
In the 21st century, smaller businesses should not endure the costs of bad purchasing.