The price of buying, and operating, is on a constant rise. Business enterprises have started to regard procurement management as the top priority of theirs since it takes up a big share their overall spend. Considering most companies still hold on to the manual procurement methods of theirs, a full revamp of their procurement functions is essential to keep pace with company demands.
To be able to receive the basics right, organizations have to implement a highly effective procure-to-pay process and embrace the appropriate technology strategies. However, just revamping the process and implementing a top engineering product won’t come up with the procurement function best-in-class.
So, what does it take?
The answer could vary from one group to the next, but there are several procurement best practices which several leading corporations have adopted over time. Here is an outline of 5 procurement best practices that, when implemented correctly, can substantially lower costs, improve process effectiveness, and have a positive effect on the cost-income ratio.
1. Cloud-based procurement tools
Taking procurement digital is an important step in making procurement activities future-ready. Digital procurement methods assist teams reduce the repetitive operational facets of procurement, freeing up team members to focus on strategic roles.
As technology continues to become an important element of the everyday activities of ours, an entire digital transformation for procurement activities is inevitable. High-performing organizations are leading the pack on digital procurement practices.
Here is what skilled digital procurement solutions as Gatewit Procurement Cloud Software is able to handle:
Supplier Management – Onboard, maintain, and manage vendors in an easy-to-use, effective platform.
Invoice Approval – Approve the invoices of yours on the go & perform quick three way matching.
Purchase Requests – Fluid forms enable you to capture, approve, and keep monitor of buy requests.
Buy Orders – Issue POs and generate orders automatically from approved buy requests.
Spend Analytics – Generate actionable, data driven insights from the purchasing-related data of yours.
Integrations – Connect your procurement cloud with other important finance software systems.
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2. Spend Transparency
Making procurement capabilities transparent is the baseline to unlock prospective savings and make headway into achieving operational excellence. Invest transparency is actually the key to ensuring accountability and lessening opportunities for fraud in the procurement process.
Steps to make certain invest transparency in the procurement process:
Determine and implement procurement policies properly
Computer monitor and document every phase of the procurement process
Identify and manage a summary of approved supplier lists
Establish fool proof procurement contracts
Conduct regular audits By utilizing the power of data analytics and automation, organizations can eat away dark purchasing and maverick spend. Procurement technology provides better visibility into the procure-to-pay cycle.
3. Supplier engagement
Every organization has a selection of suppliers who deliver items that are important , offer special services, perform regular maintenance, and complete one-time immediate repairs. While calling a specific vendor to purchase a merchandise or repair a faulty machine may seem easy, the task of qualifying and controlling a supplier is actually anything but.
The procedure for identifying a prospective supplier, onboarding the vendor, scheduling the service, obtaining the invoice, and paying the vendor is overwhelming. If managed physically, just a fairly easy process of distributing one vendor invoice is able to take in a number of hours.
Supplier management tools have a set of special features to better the source-to-contract progression and boost supplier engagement. eProcurement tools provide extensive vendor dashboards, pre-made contract templates, digital procurement processes, and intensive integration with accounting control methods.
A company is able to boost supplier engagement by:
Generating win-win situations and trust
Treating suppliers as strategic partners
Monitoring supplier performance with certain KPIs
Enabling collaboration and communication with vendors ☛ Guide which is Free: The Ultimate Guide to Managing Remote Procurement Teams.
4. Optimized inventory
As profit margins shrink in a few industries, organizations are continually looking for ways to manage their spend as well as increase the profits. Their primary focus is actually the procurement process. Thus, procurement teams have to frequently examine the inventory of theirs and attempt to make certain they stay optimal.
Best-in-class groups seriously consider the inventory of theirs since the’ real cost’ of holding inventory is substantially higher compared to the price of ordering things. The rule of thumb for holding prices is somewhere between 20 and thirty %. And it isn’t only consumable products that go bad over a period of time-everything from consumer electronics to apparel are actually subject to risks.
The major reason behind out-of-balance inventories is very poor planning and forecasting. Procurement leaders all over the world are slowly realizing the power of more effective data driven insights. Nearly fifty % of respondents in 2018 Global CPO survey confided they are leveraging intelligent and advanced insights for price and inventory optimization.
Below are a few issues organizations need to determine whether the inventory of theirs is optimized:
What are the ratio of operating inventory in phrases of safety, replenishment, and extra inventory?
Does the procurement team over or even under-purchase any products/services?
What’s the best frequency of purchases?
Are many purchase requisitions as well as orders in sync with inventory levels?
5. Contract Management
Even though procurement teams attempt to negotiate potential savings in the sourcing stage, they never completely unlock the importance. While the reasons vary, the most common problem is a disorganized agreement management process.
A recent report on contract relief shows that about 81 percent of organizations don’t use any Contract Lifecycle Management (CLM) software. Being a result, they have to deal with a selection of pain points like lack of consistency across contracts (53 percent), cumbersome processing (forty five percent), and supply chain continuity problems (thirty six percent).
Businesses are able to remain clear of these procurement pitfalls by moving their contract management process to the cloud. When contracts are made, stored, and maintained in a centralized information repository, organizations could leverage their invest optimally, reduce expenses, and also mitigate risk.
Contract management automation will provide organizations with:
Main repository: Store all documents (riders, amendments, etc.) at a cloud database that is accessible from anywhere
Configurable interface: A very scalable as well as customizable interface which might be personalized to fit about business needs Automated notifications: Trigger automated alerts to spotlight contract milestones, renewals, and chances for renegotiation.
Performance monitoring: Track adherence, pricing fluctuations, product quality, and delivery time to purchasing terms/policies