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The term “centralization” can often be politically polarizing. However, when using the phrase centralized procurement in the environment of your business’s procurement procedures, it is almost always going to be met with positivity.
Yet, centralized procurement is not always easy to achieve. For Tech end-users, finding a reliable supplier who has all the products you need, a good engineering team, decent pricing, and can handle international logistics can be sort of like trying to find a four-leaf clover. There may be something that looks like it, and your uncle swears he once saw one. Still, usually, it’s just a disappointingly ordinary piece of greenery, very seldomly perfect in the three leaves it does possesses.
But what if there is a way to build the perfect reseller partner? One which can do it all and with whom you could create a lasting and lucrative relationship, all while simplifying your procurement process and administration.
Well, with the right partner – one with all the tools, skills, and knowledge to help you turn ordinary associates into a highly sought-after quadruple threat – it is possible.
What is centralized procurement?
Before getting into why you should look into centralized procurement as an option, it is essential to understand what centralized procurement is.
As the name suggests, centralized procurement involves bringing all people and processes involved in procurement to one central point. This can mean one department being responsible for sourcing and purchasing the equipment needed for all the company branches. The procurement staff connects departments, staff, and vendors, collecting internal orders and ensuring they are fulfilled externally, often from vendors close to that branch.
Another way of defining this concept involves centralizing your suppliers and procuring all your supplies from one or two trusted partners. Here, the procurement team still collects orders from different departments and ensures they are filled, but all orders are placed to one trusted supplier. In cases where some branches are in other countries, the goods will need to be shipped to the different international destinations from one central point.
These definitions can be utilized simultaneously or separately, and both come with significant advantages, many of which are similar. This blog will focus specifically on the second definition.
What are the advantages of centralized procurement?
There is a multitude of benefits to centralized procurement for end-users in the Tech space. Besides the obvious benefit of dealing with fewer vendors, reducing administrative tasks, centralizing your procurement efforts can come with significant cost savings and the ability to regulate the engineering work done on hardware before it is shipped. Below are some other significant benefits to centralized procurement:
In companies using a decentralized process, duplication of work and wasted time become major issues. In a company with international branches, the procurement managers must source the same goods from several suppliers. This method not only lends itself to problems with the inconsistency of the quality and price of goods but, also means significantly more administrative work sourcing suppliers, paying invoices, and nurturing supplier relationships.
By using a centralized procurement system, managers need only work with a single trusted supplier. There is more consistency across hardware, pricing, and, importantly, less administrative work. This also lends itself to better overall efficiency. Essentially, this model removes duplicated staff efforts and frees staff from spending time on low-level sourcing tasks.
Better Risk Management
Keeping track of suppliers during a rollout is an extremely challenging task. Different vendors have different strengths and weaknesses, often resulting in each shipment being at various points in the shipping journey. This makes risk management extremely difficult, not to mention leaving plenty of room for essential tasks to slip through the cracks.
When using a centralized procurement model, you will be dealing with only one supplier. This means that keeping track of your shipment’s progress is significantly more straightforward, as well as avoiding maverick spending. If you are using a TecEx enabled process, this is simplified even further as we offer one point of contact for your entire rollout and assist in managing your vendor or vendors. Not only does this model make keeping track of tasks more manageable but using one supplier often means better supplier relationships and so a higher level of accountability.
Better Negotiating Power
One of the biggest downfalls of decentralized procurement is the inability to form mutually beneficial relationships with suppliers. Unless you are a Tech giant whose name alone entitles you to discounts and benefits, your order is unlikely to draw too much attention.
However, with centralized procurement comes larger orders, and with larger orders comes access to the perks volume purchasing affords, mainly greater negotiating power. This negotiating power can be used in several places. The most common of these is price. Volume purchasing often comes with bulk discounts which can be passed on from as high up in the supply chain as the manufacturer, but more often the distributor.
Being an indispensable client to your supplier can also sometimes help when new technologies are introduced. Having an established, trusting relationship can give you the ability to request trials of new technology on better terms than other clients may receive. Negotiating power can also be used to shift Incoterm agreements in your favor or even arrange for better lead times.
Is Centralized Procurement for me?
Centralized procurement has benefits for Tech companies across the supply chain regardless of their size. While the above-mentioned benefits are aimed at end-buyer, many of the same benefits apply to Resellers who offer their clients a central procurement option.
Regardless of your size, using this procurement method will almost certainly come with a cost and administrative advantages. Bigger companies can access significant cost savings and streamline one of the most complex business processes. In addition, smaller companies can establish meaningful relationships with suppliers that can grow with them.
But centralized procurement is not without its downfalls. One of the main problems is finding a supplier who can do it all. Usually, the biggest failure, especially for companies with an international presence, is their partner’s logistics capabilities. That is where TecEx comes in.
Where does TecEx fit in?
Remember that elusive partner mentioned earlier, the one with all the tools and knowledge to turn your three-leafed suppliers into a quadruple threat? Well, that partner is TecEx.
TecEx enables you to turn your limited-scope supplier into a global logistics expert. We offer Importer of Record and compliance services to companies across the Tech industry. Our expert knowledge of import compliance processes and extensive 200+ destination reach make managing your hardware rollouts easy.
TecEx manages your entire shipping process. TecEx will work with you and your supplier to ensure a seamless international delivery or rollout no matter who your chosen partner is. Once your vendor has prepared the goods, TecEx will then take over. We are happy to work with your chosen logistics provider and also have an extensive network of partners who offer us exclusive rates.
Once the goods arrive at customs, TecEx will handle the customs clearance, including arranging all compliance and going down as Importer of Record. This means having the freedom to ship to anywhere in the world, regardless of whether you have a locally registered entity. TecEx also enables you to avoid all the risks or responsibilities associated with international trade.
We manage your shipment right up to final delivery, ensuring each consignment reaches its destination quickly and safely.
Not only does this DDP option minimize the risk and responsibility placed on both you and your supplier, but it also significantly decrease your administrative burden. Before shipping, we will supply you with one comprehensive invoice containing all costs involved, including logistics, duties, and taxes. You can also track all your shipments from one place on our TecEx App.
With all the benefits on offer, it is no wonder many companies are migrating to a centralized procurement process. TecEx enabled procurement further relieves end users of international compliance and IOR burden, streamlining their procurement efforts. If you are interested in exploring our DDP shipping option or would like to hear more about the benefits of TecEx enabled central procurement, contact us now.