While many small businesses seem to run their operations on a day-to-day basis and to manage their supplies as an afterthought, others take a much more proactive approach to managing their supplies. The latter approach can save you time and money, and can help you avert missing important deadlines.
How do you manage supplies for your business? Do you proactively manage your packaging essentials (bubble wrap, cardboard boxes, etc.), printer ink and paper, and filing and storage tools? Or do you leave these items to the last minute or even until they’ve completely run out, setting yourself up for desperate runs to the office supplies store to avert missing a client deadline?
Perhaps your concern lies with cash flow, and to hold back on ordering too much means to retain more capital on hand. Granted, cash flow is a concern. However, by limiting your purchases you may be missing out on potential cost savings for your business as well as wasting valuable time with additional ordering. Regardless of why your business buys the way it does, there are still some effective strategies for managing supplies for any business. By following the guidelines below, you can operate your business more efficiently and can avert panicky situations when the supplies you need simply are not on-hand.
Use Economies of Scale
One truth of managing supplies is that every company has volumes it can use to lower the purchase prices on office supplies. The key is to be willing to amalgamate volumes and use those volumes to negotiate lower prices. Think outside the box. Ask vendors to bulk ship larger volumes of supplies and use those volumes to not only lower prices, but also to lower your per-unit shipping costs.
Analyze the seasonality of your business, and time your purchases so that you have sufficient volumes to get you through your busiest periods without additional ordering.
Or partner with other businesses in your town, or with colleagues and partners who run their own businesses. You can take this idea further by approaching any association or group to which you belong, seeking a purchasing coalition to dramatically lower prices for each business individually through bulk ordering.
Also, ask vendors if they offer recycling services, and if they give a discount in the case that you utilize such services.
Track Inventory Levels
Many businesses rationalize their behavior when it comes to their inability to track their inventory level of supplies. Any business can easily track its supply levels, but unfortunately these businesses simply lack discipline. Don’t allow this to happen to you.
Tracking inventory levels is an essential part of making sure you purchase exactly what you need, and when you need it. The purpose isn’t to “over purchase” supplies, but to use volumes in the right manner and at the right time so that you are productive for more hours of the week, month and year. When you consider the lost opportunity cost of losing half a day simply because you ran out of printer ink at an inopportune time, the impact to your business becomes clear.
To track supplies, use any system that you will be sure to use repeatedly throughout the year. Theres software available to help you keep track, but even simple spreadsheets will do. The most important thing is that its a system that youll actually use, rather than use once or twice and then skip in the future.
Manage Cash Flow Against the Cost of Money
Companies that decide to purchase in bulk do so when their savings on price outweigh their cost of money or their cost of capital. For larger companies that finance the purchase of inventory and supplies with credit lines, you need to include the cost of the credit in your calculations. If the savings accrued on purchasing larger volumes of supplies is larger than the company’s costs of money, then the decision to order more is the right one. Managing a company’s supplies should focus on tracking a company’s volumes and using those volumes to secure lower purchase prices, and freight costs on incoming shipments. However, that should only happen if the savings accrued from these lower prices is more than the financing costs of holding supplies for longer periods. Use your volumes to lower your costs on supplies, but don’t allow your financing costs to take away from those savings.