What are Procurement Savings Types?
Procurement savings types, or PSTs, are the different categories of savings that can be achieved from a procurement process. By understanding and identifying these different types of savings, companies can better measure their progress and performance in achieving cost reduction objectives. In this article, we will discuss the different types of procurement savings as well as some strategies for best utilizing them to improve efficiency in your business. We will also talk about how you can use procurement to identify areas for potential savings opportunities and gain an understanding of the benefits of taking a strategic approach to procurement activities.
What is procurement?
The term “procurement” generally refers to the process of acquiring goods or services. Typically, procurement is done by businesses or organizations in order to obtain the materials needed to carry out their operations.
There are various types of procurement, but one of the most common is called “open procurement.” This is when a business solicits bids from multiple vendors and then chooses the one that offers the best price or terms. Another type of procurement is “sole source procurement,” which is used when there is only one supplier that can provide the required goods or services.
Procurement can also refer to the act of purchasing something. For example, if you go to a store and buy a product, you have “procured” that item.
What are the different types of procurement savings?
There are many different types of procurement savings that can be achieved through effective procurement management. The most common type of procurement savings is cost reduction, which can be achieved through a variety of methods such as negotiating better prices with suppliers, improving purchasing processes, and reducing waste. Other types of procurement savings include improved quality, shorter lead times, and reduced risks.
How can procurement savings be achieved?
When it comes to procurement, savings can be achieved in a variety of ways. Below are some common methods for achieving procurement savings:
1. Negotiating with suppliers – One way to achieve procurement savings is by negotiating better terms with suppliers. This could include negotiating lower prices, discounts, or extended payment terms.
2. Leveraging volume discounts – Another way to achieve procurement savings is by leveraging volume discounts. If a company orders large quantities of goods from a supplier, they may be able to receive a discount off the total order.
3. Reducing waste – Yet another way to achieve procurement savings is by reducing waste. This could involve streamlining the purchasing process to eliminate unnecessary steps or wasteful spending.
4. Implementing strategic sourcing – A fourth method for achieving procurement savings is through implementing strategic sourcing initiatives. This could involve working with fewer suppliers, consolidating spend, or using e-sourcing tools to get the best prices.
Conclusion
Procurement savings types are an important concept in procurement and supply chain management. When properly understood, they can be used to ensure that companies get the best value for their money when making purchases. It is also important to understand what type of cost savings you should target in order to maximize your return on investment. By understanding how each of these types works and taking into consideration both short-term and long-term costs, businesses can take full advantage of all the benefits that come with successful procurement strategies.