How third-party procurement solutions groups help you lower costs
If you’re like most of today’s business leaders, you face constant and growing pressure to reduce costs while simultaneously maintaining or enhancing operational efficiency. This can be difficult to achieve, requiring a creative and strategic solution—or a combination of multiple solutions.
One increasingly popular way to streamline processes and cut unnecessary expenses is supply chain outsourcing via third-party procurement solutions groups. These organizations provide specialized expertise, technologies, and processes that manufacturers would otherwise be unable to achieve themselves without significant investment. In today’s post, we’ll explore more about procurement providers and why they’ve become one of the leading cost saving strategies in procurement.
What’s a procurement solutions group?
Procurement solutions groups are specialized organizations that offer a range of procurement services, from sourcing and purchasing to inventory management and logistics. For OEMs wanting to reduce the complexity and time burden of an overly complicated supply chain, procurement outsourcing services with a trusted third-party partner like Nelson Miller Group are a great option. You can farm out supply chain responsibilities to a group of experts who will create a custom solution that ensures a more cost-effective and reliable supply chain.
Procurement solutions groups leverage economies of scale, advanced technologies, and cost-effective processes to deliver significant savings to their clients. These solutions are especially beneficial for manufacturing companies wanting to optimize their supply chains without significant capital investment.
Five ways using a procurement solutions group cuts costs
There are many benefits to using a procurement solutions group to optimize your supply chain. Below are five of the top ways that outsourcing can enhance your business and lower overall expenses.
1. Reduce labor costs.
Labor costs represent a substantial portion of any manufacturer’s budget. From hiring and training to salaries and employee benefits, these expenses can add up quickly. Procurement activities, in particular, are often time-consuming and require significant personnel to manage the various supplier relationships. By outsourcing procurement activities to a third-party provider, organizations can drastically reduce these labor-related costs.
Procurement solutions groups already have specialized teams in place, so you don't have to worry about hiring additional staff or providing ongoing training. This also means you can avoid the costs of employee benefits, health insurance, retirement plans, and other overhead expenses. By outsourcing, you transform fixed labor costs into variable costs, providing greater flexibility to scale your operations up or down as needed.
Additionally, these third-party providers often employ advanced ERP software, automation, and AI-driven technologies that streamline routine tasks, further reducing the need for manual labor. This not only cuts costs but also minimizes human error, leading to greater procurement efficiency.
By partnering with a procurement solutions group like NMG, OEMs can focus their in-house resources on core business competencies and more value-added work. Additionally, procurement solutions groups connect OEMs to the right suppliers that have the facilities available and the resources and processes in place that enable completion of supply chain operations more efficiently. For these reasons, outsourcing supply chain activities results in lower labor and overhead costs for OEMs.
2. Cut inventory and warehousing costs.
Once teamed up with a procurement solutions group, OEMs not only tap into their partner’s supply chain expertise, but they also get to take advantage of their network of inventory and warehousing facilities—reducing, or in some cases eliminating, the need for OEMs to use their own floor space for these activities, leading to lower inventory and warehousing costs. This is a huge advantage, allowing OEMs to utilize their space and cash flow for other purposes including production growth opportunities and new business ventures.
Procurement solutions groups often have large networks of suppliers and advanced inventory management systems. This allows them to optimize stock levels, ensuring you have the right products at the right time without overstocking. By minimizing excess stock, procurement solutions groups eliminate unnecessary storage costs, lower the risk of product obsolescence, and make their cash flow more efficient. They can also provide just-in-time delivery solutions, reducing the need for extensive warehousing and minimizing carrying costs.
3. Gain purchasing power and scalability.
One of the most significant advantages of working with a procurement solutions group is gaining access to their purchasing power and scalability. These providers often have established relationships with suppliers and buy in large volumes,
allowing them to negotiate better prices for materials and services. The increased purchasing power can lead to reduced costs for raw materials, components, and other supplies, directly impacting your bottom line.
Third-party providers can additionally consolidate shipments and leverage their distribution networks to reduce transportation costs. Because they have a larger annual spend across their portfolio, procurement solutions groups can negotiate lower manufacturing and transport rates, yielding cost savings for all their customers.
Leveraging procurement outsourcing services additionally enhances your company's agility in responding to market demands. Since suppliers can more readily scale operations, OEMs are able to adjust production as necessary to respond to demand changes and market conditions. This flexibility allows you to scale up or down without incurring significant additional costs or operational disruptions—or sacrificing quality or time to market. In the end, this means higher customer satisfaction and better financial results for you.
4. Streamline your procurement.
Streamlining processes is crucial for reducing costs and enhancing procurement efficiency. Third-party procurement solutions groups bring specialized expertise and advanced technologies to the table, enabling them to optimize every step of the procurement process.
By offering end-to-end solutions, procurement groups handle everything from supplier sourcing to contract negotiation and compliance. This comprehensive approach eliminates the need for multiple vendors and ensures a seamless procurement process. Because each step of the manufacturing process builds upon the prior, having continuity from concept and design through production and distribution is more cost-effective, reducing administrative costs and complexity.
5. Improve risk management and compliance.
Risk management and compliance are critical components of a successful supply chain. Regulatory requirements, environmental standards, and ethical considerations all contribute to the complexity of procurement activities. Non-compliance can result in costly fines, legal issues, and reputational damage.
Third-party procurement solutions providers have dedicated teams focused on risk management and compliance. They stay up to date with the latest regulations and industry standards, ensuring that your procurement processes align with legal requirements. By outsourcing, you gain access to their expertise without having to build an in-house compliance team.
These providers also implement robust risk management strategies, such as supplier audits, quality control measures, and contingency planning. This proactive approach helps mitigate risks and ensures business continuity, reducing the potential for costly disruptions.
Reduce SCM costs with Nelson Miller Group.
As we’ve learned, third-party procurement solutions providers play a crucial role in cost saving strategies in procurement by helping OEMs reduce costs. By outsourcing to a specialized partner like NMG, you can benefit from reduced costs, lower inventory and warehousing expenses, increased purchasing power, greater procurement efficiency, and enhanced risk management and compliance. These advantages not only lead to immediate cost savings but also position you for long-term success in a competitive marketplace.
If you're a supply chain leader considering outsourcing some or all of your procurement activities, procurement outsourcing services could be the key to unlocking significant cost reductions and operational improvements. Contact NMG today to start building your custom supply chain solution!
About NMG
NMG has more than 85 years of experience partnering with organizations to bring their industrial, IoT, lighting, medical, telecommunications, consumer, and aerospace products to life. We solve your most complex challenges in engineering design, manufacturing, and supply chain management.
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