Implementing a Formal Procurement Process for Rental Equipment
Arielle Cox
An organized, formal procurement process for your rental equipment is essential for keeping your business running smoothly. Knowing what you’re spending your money on – and how those investments support your long-term strategy – is a must as you grow.
Formalizing Your Rental Equipment Procurement Process
When rental companies first start out, one or two people usually make all the decisions about what to buy, when to buy it, and from which vendors. This may work for a while but it can become disorganized when dealing with hundreds or thousands of rental assets and a larger internal team.
Defining your process makes your decisions more controllable. A formalized procurement process also helps with:
- Cost Control – Do you know what you’re spending on each asset you add to your fleet? Do you know how prices have changed over time? A detailed procurement process can give you better data for competitive bidding and rate negotiation.
- Risk Management – When you choose equipment, does it meet safety and compliance standards? Do you have a way to keep documentation on hand for audits or internal review requests?
- Operational Efficiency – If you have a tiered system where managers need to approve expenditures over a certain dollar amount, how do you manage those approvals? Does each employee know what they are responsible for and when? Do you have a way to track bottlenecks?
- Vendor Reliability – It’s not always as easy as saying you need X machine from manufacturer Y. You may need to compare prices, lead times, warranties, and other factors. Using one system to manage long-term relationships and service level agreements (SLAs) can make this process more manageable.
What Does an Efficient Purchasing Process Look Like?
Efficient purchasing can look different from one rental business to the next. However, it’s important to consider:
Make Sure Each Investment is Right for Your Rental Business
Before deciding to buy a specific category or class of equipment, pay attention to what is working for your business. Check recent utilization trends as well. Look at your ROI and make sure you’re deploying your capital strategically. If you are doing great business on bulldozers, consider adding another to your fleet to meet the demand. If you’ve never rented out aerial equipment before, make sure your market can support the new type of asset.
Shop Around
Approach your vendors and get quotes, then compare – this can save you a lot of money. Ask about ARA discounts or volume discounts for even better pricing. From there, save your quotes in your ERP system for historical tracking purposes.
Create Formal Purchase Orders
In a small organization, your purchase may be as simple as hearing management give approval to purchase a specific item, then calling the manufacturer to place the order. As you grow, however, it’s important to be more thorough with your documentation. Creating a formal purchase order with the agreed-upon pricing, delivery dates, shipping methods, and other key data helps you cross your Ts and dot your Is.
Tier Your Approvals
Spending $100 on a part is one thing; spending six figures on a bulldozer is another. The higher the value of a purchase, the more you should review it for accuracy. Develop a tiered system. Low-dollar purchases can go through a minimal approval process, while managers or directors should be asked to sign off on larger investments.
Queue up New Assets to be Added to Your Rental Fleet
Congratulations – you’ve bought a new machine! That’s not even close to the end of the road.
Who will add it to your inventory once it’s delivered and ready to start renting out? What daily, weekly, or monthly rates do you plan to charge? If it’s an entirely new category or class of machine, how do you plan to let your customers know you have a new option available? Proactively start working on each of these next steps before you take delivery of the new purchase so you can hit the ground running.
Discover a More Efficient Approach to Purchasing and Procurement
The right rental software can make your procurement process scalable and repeatable. InTempo can help you manage everything from quotes to post-purchase warranties with a fully integrated system. Track your assets from purchase through depreciation and disposal, streamlining the entire equipment lifecycle.
Want to see it in action? Contact InTempo for an in-depth look at our rental solutions.
