The price of buying, and conducting business, is on a steady rise. Businesses have started to regard procurement management as the top concern of theirs since it takes up a big share their general spend. Considering most businesses still hold on to their hand procurement practices, the full revamp of the procurement functions of theirs is vital to keep pace with business demands.
To be able to receive the fundamentals right, organizations have to implement a good procure-to-pay process and embrace the appropriate technology solutions. Nevertheless, just revamping the task and employing a premier technology item will not come up with the procurement feature best-in-class.
So, what does it take?
The key may well be different from one organization to the next, but there are some procurement best practices which couple of leading corporations have used over time. Here is an outline of 5 procurement best practices which, when implemented properly, may appreciably lower costs, improve process efficiency, and have a positive effect on the cost-income ratio.
1. Cloud based procurement tools
Taking procurement digital is a crucial step in making procurement tasks future-ready. Digital procurement strategies help teams lessen the repetitive operational parts of procurement, freeing up staff to focus on strategic roles.
As technology continues to be an essential part of the everyday activities of ours, a complete digital transformation for procurement activities is inevitable. High-performing organizations are leading the pack on digital procurement habits.
Here’s what skilled digital procurement strategies as Gatewit Procurement Cloud Software can handle:
Dealer Management – Onboard, maintain, and handle vendors in an easy-to-use, effective platform.
Invoice Approval – Approve your invoices on the go & conduct fast three-way matching.
Purchase Requests – Fluid types enable you to record, approve, and keep track of buy requests.
Buy Orders – Issue POs and create orders instantly from approved buy requests.
Spend Analytics – Generate actionable, data-driven insights from your purchasing-related data.
Integrations – Connect your procurement cloud with other important finance software systems.
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2. Spend Transparency
Making procurement functions transparent would be the baseline to unlock potential savings and make headway into obtaining operational excellence. Invest transparency is actually the key to ensuring accountability and minimizing possibilities for fraud in the procurement process.
Steps to make sure invest transparency in the procurement process:
Define as well as implement procurement policies properly
Monitor as well as document every stage of the procurement process
Identify and handle a list of approved supplier lists
Establish fool proof procurement contracts
Conduct regular audits By harnessing the strength of data analytics as well as automation, organizations can wear away dim purchasing and maverick spend. Procurement technology provides much better visibility into the procure-to-pay cycle.
3. Supplier engagement
Every company has a number of suppliers who provide products which are important, provide special services, perform routine maintenance, and finish one time immediate repairs. Although calling a particular vendor to purchase a merchandise or repair a faulty machine may seem easy, the task of qualifying as well as handling a supplier is actually anything but.
The technique of identifying a prospective supplier, onboarding the vendor, scheduling the service, obtaining the invoice, and paying the vendor is actually overpowering. When managed manually, only a simple practice of distributing one vendor invoice can ingest a number of hours.
Dealer management tools offer a set of unique options to better the source-to-contract process and boost supplier engagement. eProcurement equipment offer extensive merchant dashboards, built contract templates, digital procurement processes, and extensive integration with accounting management methods.
A company can enhance supplier engagement by:
Generating win win situations and trust
Treating suppliers as strategic partners
Checking supplier performance with specific KPIs
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4. Optimized inventory
As profit margins shrink in a few industries, organizations are continually searching for ways to control their spend as well as better the bottom line. The primary focus of theirs is the procurement process. Thus, procurement teams have to continually examine the inventory of theirs and try to make certain they remain optimal.
Best-in-class groups pay close attention to their inventory since the’ real cost’ of holding inventory is significantly higher compared to the price of purchasing things. The rule of thumb for holding costs is between 20 as well as 30 %. And it isn’t only consumable things that go bad over a period of time everything from consumer electronics to clothes are subject to risks.
The key reason behind out-of-balance inventories is poor planning and forecasting. Procurement executives all over the world are slowly realizing the power of more effective data-driven insights. Nearly 50 % of respondents in 2018 Global CPO survey confided they’re leveraging intelligent and advanced insights for cost and inventory optimization.
Here are a few questions organizations have to investigate whether the inventory of theirs is optimized:
Do you know the ratio of operating inventory in terms of safety, replenishment, and extra stock?
Does the procurement team over or under purchase any products/services?
What’s the perfect frequency of purchases?
Are all purchase requisitions as well as orders in sync with inventory levels?
5. Contract Management
Although procurement teams attempt to negotiate possible savings in the sourcing stage, they never completely unlock the value. While the reasons vary, the most typical issue is a disorganized arrangement management process.
A recent report on contract management indicates that nearly eighty one % of organizations don’t use any Contract Lifecycle Management (CLM) software. Being a result, they confront a selection of pain points like lack of consistency throughout contracts (53 percent), cumbersome processing (45 percent), and supply chain continuity issues (36 percent).
Businesses can continue to be clear of these procurement pitfalls by moving their contract management process to the cloud. When contracts are made, saved, and maintained in a centralized data repository, organizations could leverage their spend optimally, reduce costs, as well as mitigate risk.
Contract management automation is going to provide organizations with:
Main repository: Store all files (riders, amendments, etc.) in a cloud database that is accessible from anywhere
Configurable interface: A highly scalable as well as customizable interface which might be personalized to fit about company needs Automated notifications: Trigger automated alerts to highlight contract milestones, renewals, and chances for renegotiation.
Performance monitoring: Track delivery time, product quality, pricing fluctuations, and adherence to purchasing terms/policies