The cost of purchasing, and conducting business, is on a steady rise. Businesses have began to regard procurement management as the top priority of theirs since it takes up a huge share their general spend. Considering most businesses still hold on to the manual procurement practices of theirs, a full revamp of their procurement functions is crucial to keep pace with business needs.
In order to receive the basics right, organizations have to implement an effective procure-to-pay progression and embrace the proper technology strategies. But, just revamping the process and implementing a high engineering product will not come up with the procurement feature best-in-class.
Thus, what will it take?
The answer may well be different from one group to another, but there are some procurement best practices which couple of leading companies have adopted over time. Here’s an outline of 5 procurement best practices which, when implemented the right way, could appreciably lower costs, improve process efficiency, and have a good effect on the cost-income ratio.
1. Cloud based procurement tools
Taking procurement digital is a critical step in making procurement activities future ready. Digital procurement techniques assist teams minimize the repetitive operational parts of procurement, freeing up associates to center on strategic roles.
As technology continues to be an important component of the daily activities of ours, an entire digital transformation for procurement routines is unavoidable. High-performing companies are actually leading the pack on digital procurement practices.
Here’s what skilled digital procurement techniques as Gatewit Procurement Cloud Software is able to handle:
Dealer Management – Onboard, maintain, and handle vendors in an easy-to-use, effective platform.
Invoice Approval – Approve your invoices on the go & conduct quick three way matching.
Buy Requests – Fluid types help you record, approve, and keep monitor of purchase requests.
Purchase Orders – Issue POs and produce orders automatically from approved buy requests.
Invest Analytics – Generate actionable, data-driven insights from the purchasing-related data of yours.
Integrations – Connect your procurement cloud along with other vital finance software systems.
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2. Spend Transparency
Making procurement capabilities transparent will be the baseline to unlock prospective savings and make headway into obtaining operational excellence. Spend transparency is the key to ensuring accountability and lessening programs for fraud in the procurement process.
Measures to make sure invest transparency in the procurement process:
Determine as well as implement procurement policies properly
Computer monitor and document every step of the procurement process
Identify as well as control a listing of approved supplier lists
Establish fool-proof procurement contracts
Conduct regular audits By harnessing the power of data analytics and automation, organizations can eliminate dim purchasing as well as maverick spend. Procurement technological innovation provides much better visibility into the procure-to-pay cycle.
3. Supplier engagement
Every organization has a number of suppliers that provide essential items, provide specialty services, perform regular maintenance, and finish one-time urgent repairs. Although calling a certain vendor to buy a merchandise or even repair a faulty machine sounds easy, the task of qualifying and taking care of a supplier is anything but.
The technique of determining a prospective supplier, onboarding the vendor, scheduling the service, obtaining the invoice, and paying the vendor is overwhelming. If managed physically, only an easy process of publishing one vendor invoice is able to ingest several hours.
Dealer management tools have a set of special options to enhance the source-to-contract progression and enhance supplier engagement. eProcurement tools offer up comprehensive vendor dashboards, pre-made contract templates, digital procurement processes, and considerable integration with accounting control methods.
An organization is able to develop supplier engagement by:
Generating win win situations as well as trust
Treating suppliers as strategic partners
Checking supplier performance with certain KPIs
Enabling collaboration as well as communication with vendors ☛ Guide which is Free: The Ultimate Guide to Managing Remote Procurement Teams.
4. Optimized inventory
As profit margins shrink in specific industries, businesses are always looking for ways to control their invest as well as enhance the bottom line. Their primary focus is the procurement process. And so, procurement teams need to frequently review their inventory and try to ensure they stay optimum.
Best-in-class groups pay close attention to their inventory since the’ real cost’ of holding inventory is much higher compared to the cost of ordering items. The rule of thumb for holding prices is actually between twenty and 30 percent. And it is not only consumable products that go bad over a period of time everything from consumer electronics to clothes are subject to risks.
The major reason for out-of-balance inventories is very poor planning and forecasting. Procurement managers around the world are slowly recognizing the strength 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 tag as well as inventory optimization.
Below are a few issues organizations need to investigate whether their inventory is optimized:
What are the ratio of operating inventory in terms of safety, replenishment, and excess stock?
Does the procurement team over or perhaps under purchase any products/services?
What is the optimal frequency of purchases?
Are a number of purchase requisitions as well as orders in sync with inventory levels?
5. Contract Management
Even though procurement teams strive to negotiate possible savings in the sourcing stage, they never totally unlock the importance. While the reasons vary, the most common issue is a disorganized arrangement management process.
A recent report on contract management indicates that nearly 81 % of organizations don’t use some Contract Lifecycle Management (CLM) software. As a result, they face a number of pain points such as lack of consistency throughout contracts (53 percent), cumbersome processing (45 percent), and supply chain continuity problems (thirty six percent).
Organizations 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 data repository, organizations could leverage their spend optimally, reduce costs, and mitigate risk.
Contract management automation will provide organizations with:
Central repository: Store all documents (riders, amendments, etc.) in a cloud database that is accessible from anywhere
Configurable interface: A scalable as well as customizable interface that may be tailored to fit about company requirements Automated notifications: Trigger automated alerts to emphasize contract milestones, renewals, and chances for renegotiation.
Performance monitoring: Track adherence, pricing fluctuations, product quality, and delivery time to purchasing terms/policies