A good procurement department(As we are) knows the importance of understanding where and whom they are buying from, what each agreement stands for, and the rates every purchase takes.
But at the same time, it’s difficult to keep eye on all of these matters, secure the best rates, and lower risks, particularly when you’re managing a portfolio of thousands of suppliers. Not to mention that deciding who to spend with can be an extremely time-consuming process.
Till now, what I suggest is we need to establish a preferred supplier list(PSL), for simplifying decision-making when you facing so much complexity on daily work. A right PSL should be
- Saving cost — It’s simple and easy to get a reasonable price from PSL.
- Easy communication— Because you have a history of working together with your PSL, they will be better at understanding your business goal without extra words at the beginning stage.
- Providing confidence— A PSL will bring to your business confidence, especially on supplier chain management, deciding how much inventory should you keep or give.
- Long-term partnership— When you do not decide to replace your vendors frequently, they will be loyal to you in return, and you and your vendors will achieve some chemistry that goes long-term.
Step by step, to establish your own PSL
- Evaluating your current buying behavior, knowing which aspect spending the most money on, then building a preference based on the spending.
- Figuring out your specific requirements, talk to anyone and find out the answers, give your vendors a correct direction, then decide if the vendor is the one you looking for.
- Providing your potential PSL with some additional benefits, attracting your vendors, let them understand being one of PSL will increase the value of both sides, and it’s a win-win action.
- Keep assessing the whole PSL progress, keep updating the PSL for your business, cutting down and adding in your list to make sure everyone follows the right pace.