The importance of strategic procurement in start-ups and scale-ups
Strategic procurement is often overlooked in start-ups as the focus is predominantly on product development, marketing, and raising investments. However, this can and often does cause considerable issues for companies, particularly those producing products and/or reliant on suppliers, when scaling-up. Strategic procurement is vital to secure future growth and profitability.
Scale-Up for the future
For start-ups, the scale-up phase is a make-or-break period. Scaling up can often be a challenge, with production capacity at suppliers becoming a bottleneck in the supply chain. However, strategic procurement can be a game-changer, addressing these issues early on by identifying and building relations with suppliers capable of meeting future demand. This proactive approach ensures smooth and efficient scalability, instilling confidence in the start-up’s long-term success.
Short and Long-term Flexibility
Another important aspect is flexibility. It’s key:
- at the initial design stage, when developing prototypes
- when nearing production, as the ability to change and adapt components can be crucial to optimize the final product
- in the long term, when alternative suppliers can help reduce costs or meet increased capacity demands
Being“locked in ” by a design comprising of many tailored components leaves a company with few alternatives, and it becomes very expensive to change suppliers. Flexibility in design and strategic procurement is essential.
Cost optimization
The third aspect of strategic procurement is cost optimization. Typically, start-ups have a limited budget, and one major challenge is optimizing cost without compromising quality. A structured approach to procuring components will ensure the most competitive pricing. Additionally, it will be a support when negotiating favorable terms with suppliers to reduce the total cost and improve cash flows.
Significant Benefits
These are just a few of the benefits of involving strategic procurement at an early stage. Other areas that will benefit from a strategic approach include supplier chain risk management, cost controls, and cost reduction of the BOM (Bill of Materials).
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Contact us today to learn more about the importance of strategic procurement and how to work with it in start-ups and scale-ups. We have a number of experts who have helped start-ups in various industries become established organizations.
