The cost of buying, and doing business, is on a steady rise. Business enterprises have began to regard procurement management as the top priority of theirs since it takes up a large share their general invest. Considering most businesses still hold on to their hand procurement methods, a total revamp of the procurement functions of theirs is crucial to keep pace with business needs.
In order to get the fundamentals right, organizations have to implement a good procure-to-pay progression and embrace the correct technology solutions. However, just revamping the process and utilizing a premier technology product won’t make the procurement function best-in-class.
Thus, what does it take?
The solution may be different from one organization to another, but there are some procurement best practices which several leading corporations have adopted over time. Here is an outline of 5 procurement best practices which, when implemented the right way, can substantially lower costs, improve process effectiveness, and have a good 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 facets of procurement, freeing up team members to concentrate on strategic roles.
As technology continues to be an essential component of our everyday activities, a complete digital transformation for procurement actions is inevitable. High-performing organizations are leading the pack on digital procurement habits.
Here is what competent digital procurement solutions like Gatewit Procurement Cloud Software can handle:
Supplier Management – Onboard, maintain, and manage vendors in an easy-to-use, efficient platform.
Invoice Approval – Approve the invoices of yours on the go and do quick three way matching.
Buy Requests – Fluid types help you capture, approve, and keep monitor of buy requests.
Purchase Orders – Issue POs and generate orders instantly from approved purchase requests.
Invest Analytics – Generate actionable, data driven insights from the purchasing related data of yours.
Integrations – Connect your procurement cloud along with other essential finance software systems.
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2. Spend Transparency
Making procurement functions transparent would be the baseline to unlock prospective savings and make headway into getting operational excellence. Invest transparency is the key to ensuring accountability and lessening opportunities for fraud in the procurement process.
Measures to make sure spend transparency in the procurement process:
Define and implement procurement policies properly
Monitor and document every phase of the procurement process
Identify as well as handle a listing of approved supplier lists
Establish fool proof procurement contracts
Conduct frequent audits By harnessing the power of data analytics as well as automation, organizations can eliminate dim purchasing as well as maverick spend. Procurement engineering has better visibility into the procure-to-pay cycle.
3. Supplier engagement
Every company has a selection of suppliers who deliver essential items, offer special services, perform regular maintenance, and complete one-time immediate fixes. While calling a particular vendor to buy a merchandise or repair a faulty machine seems simple, the task of qualifying as well as dealing with a supplier is actually anything but.
The process of identifying a potential supplier, onboarding the vendor, scheduling the service, obtaining the invoice, and paying the vendor is overwhelming. If managed manually, just an easy process of submitting one vendor invoice is able to ingest a number of hours.
Supplier management tools offer a set of special options to greatly improve the source-to-contract progression and improve supplier engagement. eProcurement tools offer extensive vendor dashboards, built contract templates, digital procurement processes, and substantial integration with accounting control systems.
An organization is able to enhance supplier engagement by:
Generating win win situations and trust
Treating suppliers as strategic partners
Checking supplier performance with specific KPIs
Enabling collaboration and communication with vendors ☛ Free Guide: The Ultimate Guide to Managing Remote Procurement Teams.
4. Optimized inventory
As profit margins shrink in specific industries, organizations are continually searching for ways to manage their spend and better the profits. Their main focus is actually the procurement process. And so, procurement teams need to continually review the inventory of theirs and try to ensure they remain optimum.
Best-in-class groups pay close attention to the inventory of theirs since the’ real cost’ of holding inventory is way higher than the price of ordering items. The rule of thumb for holding costs is somewhere between 20 along with thirty %. And it isn’t just consumable things that go bad over a period of time everything from consumer electronics to clothing are actually subject to risks.
The main reason behind out-of-balance inventories is very poor planning and forecasting. Procurement managers all over the world are slowly recognizing the power of better data driven insights. Almost fifty % of respondents in 2018 Global CPO survey confided they’re leveraging advanced and intelligent insights for price tag and inventory seo.
Here are a few questions organizations need to check out whether the inventory of theirs is optimized:
Do you know the ratio of operating inventory in terminology of safety, replenishment, and excess inventory?
Does the procurement staff over or even under purchase any products/services?
What’s the best frequency of purchases?
Are many buy requisitions and orders in sync with inventory levels?
5. Contract Management
Although procurement teams try to negotiate potential savings in the sourcing stage, they never totally unlock the value. While the reasons vary, the most common issue is a disorganized arrangement management process.
A recent report on contract relief shows that nearly eighty one % of organizations don’t make use of 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), troublesome processing (45 percent), and supply chain continuity issues (36 percent).
Organizations are able to continue to be clear of these procurement pitfalls by moving their contract management system to the cloud. When contracts are created, stored, and maintained in a centralized data repository, businesses could leverage their spend optimally, reduce costs, as well as mitigate risk.
Agreement management automation will provide organizations with:
Main repository: Store all files (riders, amendments, etc.) in a cloud database that is accessible from anywhere
Configurable interface: A very scalable and customizable interface which might be tailored to fit around business requirements Automated notifications: Trigger automated alerts to highlight contract milestones, renewals, and chances for renegotiation.
Performance monitoring: Track adherence, pricing fluctuations, product quality, and delivery time to purchasing terms/policies