For businesses of all sizes, efficient procurement is an essential part of daily operations. As you purchase fixed assets to sustain or scale your business, smart procurement practices help ensure that you get the ROI you want on them. Buying equipment and machinery is an important decision and it is crucial to budget and plan well in advance so you can make well- informed decisions.
When you are considering making a significant purchase it may also help to consult a specialist. An equipment specialist can assist you in choosing the right manufacturer and tools according to your requirements. Once you have made the case for new equipment, the next step is to carry out the procurement process.
To help you get started right here is a checklist of procurement best practices:
List down equipment specifications
The first step in buying any sort of equipment is to know what exactly you want to buy and for what purpose? Not every business is the same — there are different types of productivity objectives that a company may want to achieve. Start by making a list of all the projects the equipment is going to be used for.
Once you have the list, pay attention to where the equipment will be used? Is it going to be used at one location, multiple locations or remote areas? Having all this information listed down will help you shortlist the equipment that falls within your needs.
For instance if you need a generator to be used in harsh weather conditions, then you should specifically look out for relevant features. It should be easily portable so that it can be stored properly when not in use. A steel body provides resistance against rains and storms which will ensure that the generator lasts long and is not easily damaged.
It is also important to take feedback from employees and staff workers that are actually going to be using the equipment. Primary usage information will allow you to have a better understanding of the sort of tools to procure for the job.
Plan budget and expenditure
Every business allocates a budget for equipment procurement and it is important to try and stay within that amount to avoid any shortfalls within the year. Since buying machinery and equipment is a substantial investment, a good practice is to preplan the expenditure to get timely approvals. Remember to include the cost of operating and maintaining the equipment as a recurring expense.
Once you have a rough estimate of the costs, you can decide whether you want to purchase new or slightly refurbished equipment. There are plenty of options available in the market for lightly used equipment. Such practices may be suitable when you need equipment for short term or low budget projects.
Prioritize quality over price
The best way to kickstart your equipment procurement process is to carry out market research. A comprehensive search includes reading reviews, looking at industry trends and analyzing competitor choices. The more informed you are about the equipment market, the better decision you can make. Once you have shortlisted possible vendors, you should research who you are buying from. What sort of reviews do they have, do they offer warranties, maintenance or provide demos?
Once you have completed your market research, put together a list of equipment specifications, price, quality and reviews. This will give you a snapshot of all the options available to purchase. There may be tradeoffs, such as between price and quality. But remember, not all low price items are low quality and likewise not all high price items are good quality.
Don’t compromise on quality for long-term investments. Good quality equipment is likely to last longer, have fewer breakdowns and display higher productivity levels.
For example, if you want to buy a portable generator, look for sustainable features that actually benefit your business. A portable generator should have automatic shutoff, low CO engine and alternate fuel capacity. If you can’t get the desired features in your price range, opt for used equipment in good condition.
Ensure availability of spare parts
One of the critical aspects of buying new equipment is to make sure that spare parts are easily available. This makes maintenance events much more streamlined with fewer delays. Undisrupted workflows means higher productivity and efficiency throughout the organization.
Unavailability of spare parts means companies have to spend time looking for vendors who offer replacements. Such practices mean wastage of time and money as well as the possibility of getting the wrong spare parts. In order to avoid such problems, make sure to ask your vendor about the ready availability of spare parts before making the purchase.
Assess and evaluate vendors
47% of companies surveyed in the PwC’s Global Economic Crime and Fraud 2020 survey experienced fraud in the last two years that amounted to $42 billion. These numbers depict the importance of third party risk management. Most common types of third party frauds result from vendors.
To avoid fraudulent instances, it is crucial to devise an assessment plan to evaluate vendors. You can investigate customer reviews of a particular vendor. Satisfactory reviews will give you an idea about a vendor’s commitment to quality and consistency of performance. Next, find out whether the vendor meets your compliance requirements.
Sorting out vital vendor details early in the process enables companies to avoid heavy penalties later. Other important questions to ask a vendor include:
- Can the vendor scale along my business?
- Will the vendor be able to withstand any supply chain disruptions?
- Does the vendor share my business values?
Once you have completed your assessment, you will be able to choose a reliable vendor that will help your business grow and prosper.
Decide to buy or lease
After finalizing the vendor for your purchase, the next big decision is whether to pay upfront or lease the equipment. Start by looking at your business goals, equipment needs and available resources. The most fundamental question is how much you can afford to spend?
When you have a fair idea of the capital available, compare the numbers of both an upfront purchase and lease installments. For leasing equipment, there is comparatively less initial investment but with a higher overall cost with the interest rate.
For buying equipment upfront, you will have to pay the total amount upfront but this will give you sole ownership of the equipment. For companies with smaller yearly budgets, leasing is a suitable option as it allows you to upgrade your equipment on flexible terms.
Train your staff
Getting a new piece of equipment is only useful if your staff knows how to use it. In order to achieve this, add a training module in your procurement checklist. Start off by briefing employees about how and where the equipment will be used. Most importantly, focus on what outcomes you expect to achieve by using the new equipment.
The key to a successful training programme is to provide it at the right time. This means that the workers should have enough time to complete the training before they actually start using the equipment. Assign appropriate resources that are easily accessible if any of the employees have any questions regarding the training programme. Effective training is not a one time investment, make it a continuous process so your employees are up to date with the latest upgrades in the equipment.
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