Unlike the traditional B2C market, where innovation and efficiencies are typically implemented as soon as they become available, the B2B market struggles with the process. Streamlining the B2B purchasing process is difficult because of the various steps and limitations within the procurement process itself. What causes the delay? How can companies move beyond this constant behind-the-ball mindset to streamline efforts?
In this article, we’re going to look at the challenges of the B2B purchasing process and how you can streamline it. Don’t want to wait? Click here to jump directly to the Tips.
Common Problems that Create B2B Limitations
To make the B2B buying process easier, it’s essential to understand what’s behind the problem in the first place. Within any industry, there could be very specific factors, and many companies have their own, more personal challenges. The following are some of the most common limitations found across the landscape.
Cash Flow Imbalances
Cash flow challenges often hamper many companies, leading to further problems down the road. If there are any instances where cash flow limitations occur, this tends to affect each company in the supply chain. Cash flow problems within the supply chain procurement process may stem from:
- Limited supply purchases that lead to limited production and stifled profit margins (a key concern that leads to missed profit opportunities)
- Too much inventory is procured, often limiting working capital access, which ultimately limits profits and cash flow over time
- Expenses that are too high for what the company is earning from the sale of the product
- Inefficiencies in inventory as well as poor procedures and human errors
- Poor investment in capital that ultimately leads to limited growth
Disruptions Within the Supply Chain
The second common cause for B2B procurement limitations comes from disruptions within the supply chain. Many companies have felt this occur since the pandemic, with ramping up of protection being limited. This could occur for many reasons, including:
- Inefficient ports
- Raw materials not being available due to shortages in production
- Labor shortages in every stage of the supply chain
- Volatile market conditions — often making it hard for companies to know what to keep on hand
Poor Cash Flow Strategies
Another core area of concern is that the procurement process itself fails to generate the cost savings and value it could deliver. Hindrances and a lack of efficiencies built into the system are common reasons for cash flow to become limited.
In addition to this, there is also the risk of companies having poor credit, which could affect their financial stability. This makes it far more difficult for the company to continue to grow and expand, often due to a lack of funds to do so.
2 Tips to Streamline Your B2B Purchasing Process
Today’s organizations need support throughout the procurement process. By making some significant changes in operations and adopting new technologies, it may be possible for organizations to see a marked improvement in their B2B purchasing process. Any number of these changes could create significant opportunities for most companies. Here are some factors that could help.
Improve Inventory Management Procedures
One of the most important first steps companies can take is updating and modernizing their inventory management procedures. A good first step is to outline the procurement process and steps now so that you can negotiate changes throughout as they apply. For example, consider:
- Identifying goods and services needed: Are these the best products available?
- Determine which suppliers offer products: Are these the best suppliers available?
- Work to negotiate terms with the supplier, not just for lower costs, but for better management and delivery scheduling.
Consider a move to the Kanban methodology. This framework requires real-time communication of capacity. It also requires better transparency of the workflow. Tasks are managed in a more visual way on a Kanban board, which ensures all members of the team are within view of the entire team throughout the process. By making small changes to the procurement process over time, it may be possible to learn of new opportunities that lead to efficiencies.
Better communication allows for the formation of improved relationships, especially with suppliers. This is one of the most important tools in streamlining the procurement process because it ensures that the company and suppliers remain on the same page and have the same goals. With that insight, it is then possible to create a plan from which all members of the supply chain benefit.
Make it a point to take a closer look at supplier contracts on a routine basis to look for opportunities for improvement.
4 Key Components of Streamlining B2B Purchasing Processes and Cash Flow in your Company
To make these changes occur to inventory management procedures, including reductions and liquidation of expired inventory, companies can see solid improvement. However, they also want to focus on these areas: Invoice payment processes: Move to more modern and efficient invoice payment processes. This reduces delays that slow down the payment processing. Ensure your company is using the right level of software and advisory services to support the company’s purchasing needs.
1. Work to reduce lead time
Managing to lower lead time can enhance operations and encourage better performance in every area of the supply chain.
2. Take a look at credit terms
To improve cash flow, companies often need to examine how well their current interest rates and payment terms are working for them. Negotiate changes as needed.
3. Put the time into improved procurement services
Perhaps one of the most important steps companies can take when they are facing delays and inefficiencies is to look at their current procurement services and software. If it is more than a few years old, it is causing missed opportunities. Learn about new solutions designed to enhance the purchasing process.
4. Use KPIs
Key performance indicators, or KPIs, provide insight into how an operation is running. What is missing the mark? Data analytics can also provide a higher level of insight into opportunities for improvement.
Recognize the goals of streamlining. For many organizations, these goals focus on saving time within the process so that fewer delays in production occur. In other cases, a goal could be to reduce costs by identifying potential weaknesses within the budget.
With the help of the right innovative software and tools, especially in the area of procurement and managing finances, most B2B companies will see a marked improvement. That could include creating a future-proof business plan, maximizing every dollar spent on procurement, and always having a solid level of insight into where you stand in the process.
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Jennifer Ulrich is Senior Director of Advisory at Corcentric, a B2B payment solutions company. Ulrich is a transformation advisory and strategic sourcing expert with more than 10 years of experience leading large-scale organizational improvement and sourcing initiatives. She specializes in designing customized maturity assessments for procurement and AP organizations of all sizes, and in developing actionable roadmaps to realize sustainable transformations.