Procurement best practices to help agribusiness spend smarter and save more
As the agriculture industry faces challenges such as fluctuating input and operational costs, labor shortages, unpredictable weather patterns and yields, managing spending and procurement efficiently is more crucial than ever. Procurement, which involves acquiring goods and services needed for operations, directly impacts spending and profitability. Adopting best procurement practices can help agribusinesses not only streamline their processes but also save money and improve overall efficiency.
With rising costs for fertilizers, pesticides, fuel, transport, and machinery—agriculture businesses must find ways to optimize their spending. Strategic procurement allows agribusinesses to reduce waste, negotiate better prices, and ensure that every dollar spent brings the maximum value. By leveraging modern tools and best practices, agribusinesses can avoid unnecessary spending and make more informed decisions that contribute to long-term sustainability and growth.
Why procurement is a strategic priority for agribusinesses
Uncontrollable factors such as weather variability, market volatility, and labor availability can impact yields and ultimately, profitability. Procurement and spend management play a central role in helping agribusinesses navigate the uncertainty caused by these factors. By implementing strategic procurement practices—such as diversifying suppliers, locking in favorable prices, embracing automation, and using analytics to optimize spending—agribusinesses can mitigate these risks, control costs, and ultimately safeguard profitability.
Proactive spend management in procurement is not just about acquiring goods; it’s about building resilience in the face of external uncertainties and ensuring long-term business sustainability. Agribusinesses need to prioritize procurement as a strategic lever for cost control. Whether it’s through smarter purchasing strategies, improved supplier relationships, or enhanced visibility and control over spending, agribusinesses can protect budgets and margins.
5 Procurement best practices that are helping agribusinesses spend smarter and save more
1. Centralize procurement to maximize purchasing power
- Impact: Centralizing procurement processes across multiple departments or locations allows agribusinesses to consolidate their purchasing volumes. This enables the business to negotiate better prices with suppliers and take advantage of bulk buying discounts.
- Savings opportunity: By purchasing in larger quantities, agribusinesses can secure lower prices per unit, leading to cost savings on essential inputs and operational needs.
2. Automate and streamline procurement processes
- Impact: Implementing procurement software that automates tasks such as purchase requisitioning, approvals, purchase orders, and invoicing reduces administrative overhead and ensures more accurate and efficient procurement operations. Additionally, leveraging solutions with mobile apps to manage field purchasing enables accountable spending by streamlining on-the-go purchasing processes and providing instant approvals and orders for purchases made by field teams.
- Savings opportunity: Automation not only reduces the risk of errors and delays but also accelerates the procurement cycle, resulting in timely purchases and better cash flow management. With mobile apps, field teams can make purchases and get instant approval, improving responsiveness and eliminating bottlenecks. This streamlined approach helps reduce costs associated with inefficiencies and manual processing, leading to greater savings.
3. Gain spend visibility and leverage analytics
- Impact: Gaining visibility into spending data through procurement and analytics tools allows agribusinesses to track spending trends, identify cost inefficiencies, and uncover areas for improvement. This includes providing insights by different operational segments such as orchards, packing houses, farms, ranches, or other locations. With this level of granularity, businesses can gain a clearer view of spending patterns and performance across various areas of the operation, allowing them to make targeted adjustments and assess profitability.
- Savings opportunity: By implementing efficient cost allocation structures and tracking spend by specific locations or operational blocks, agribusinesses can pinpoint high-cost areas and identify where waste or inefficiencies are occurring. This data-driven approach helps in reducing unnecessary spending, whether it’s by renegotiating supplier contracts, consolidating purchases, or finding more cost-effective alternatives. Moreover, analytics can help uncover underperforming areas, enabling businesses to take corrective actions—whether it’s optimizing resources, reducing waste, or streamlining procurement processes at specific locations to boost profitability.
4. Consolidate supplier base
- Impact: Reducing the number of suppliers by consolidating purchases with fewer vendors can help build stronger relationships, streamline ordering processes, and achieve better terms. This is especially beneficial when dealing with common inputs or services.
- Savings opportunity: Consolidation enables better pricing through volume discounts, reduces administrative costs associated with managing multiple suppliers, and improves negotiation leverage.
5. Manage Total Cost of Ownership (TCO) and maintenance costs
- Impact: Managing the Total Cost of Ownership (TCO) involves evaluating the long-term costs associated with machinery and equipment, including purchase price, maintenance, repairs, and the cost of downtime. In agriculture, where machinery and equipment are heavily relied upon, it’s crucial to assess whether it’s more cost-effective to replace aging equipment rather than continually repairing and servicing it.
- Savings opportunity: By analyzing TCO, agribusinesses can identify when the ongoing costs of repairs, servicing, and downtime outweigh the cost of purchasing new or more efficient equipment. Implementing a strategic maintenance schedule and making data-driven decisions about when to replace versus repair equipment helps prevent escalating maintenance costs and avoid unplanned downtime. This proactive approach ensures that agribusinesses can avoid costly repairs that are inefficient, optimize asset life cycles, and reduce overall operational costs, ultimately improving profitability.
By implementing these procurement best practices, agribusinesses can save money by improving efficiency, negotiating better prices, and reducing unnecessary costs. Centralizing key procurement processes and using technology to gain visibility, control, and streamline processes enable companies to make smarter purchasing decisions, ultimately leading to better financial outcomes and optimized spending.
Build resilience in agriculture
In agriculture, many factors are beyond our control. But by focusing on what you can control—such as your spending and operational processes—you can build greater resilience in an industry shaped by constant uncertainty. Manual, paper, and spreadsheet-based processes are inadequate for managing procurement, budgets, and spending effectively. They lack the visibility and control needed to make informed decisions, facilitate change, or optimize spending. These outdated methods often result in inefficiencies, errors, and missed opportunities for savings. By prioritizing smarter procurement strategies and embracing automated spend management, you can reduce unnecessary expenses, improve efficiency, and better adapt to changing conditions—ultimately leading to significant savings that protect your bottom line.
At Fraxion, we’re committed to helping agribusinesses optimize procure-to-pay processes and spend management. Our intuitive procurement solution empowers growers, packers, and shippers to take control of spending, improve operational efficiency, and make data-driven decisions that foster long-term success.
See how Monson Fruit Company transformed procurement and spending across multiple orchards and their packing house with Fraxion.
We’d like to understand your organization’s procurement challenges. Get in touch with a Fraxion product specialist for a needs analysis, and software demo, tailored to your requirements.