The cost of purchasing, and operating, is on a constant rise. Business organizations have started to regard procurement management as their top concern since it will take up a large share their overall spend. Considering most organizations still hold on to the manual procurement methods of theirs, a total revamp of their procurement capabilities is important to keep pace with business demands.
To be able to get the basics right, organizations have to carry out an effective procure-to-pay process and embrace the correct technology solutions. Nonetheless, just revamping the process and employing a high technology product will not create the procurement function best-in-class.
So, what does it take?
The solution may well be different from one organization to another, but there are some procurement best practices that couple of leading companies have adopted over time. Here is an outline of 5 procurement best practices that, when implemented the right way, may appreciably lower costs, improve method 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 solutions assist teams minimize the repetitive operational areas of procurement, freeing up team members to concentrate on strategic roles.
As technology will continue to be an essential part of our everyday activities, a total digital transformation for procurement actions is unavoidable. High-performing organizations are leading the pack on digital procurement habits.
Here’s what skilled digital procurement methods as Gatewit Procurement Cloud Software can handle:
Dealer Management – Onboard, maintain, and handle vendors in an easy-to-use, efficient platform.
Invoice Approval – Approve your invoices on the go & do quick three-way matching.
Purchase Requests – Fluid forms enable you to capture, approve, and keep monitor 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 the procurement cloud of yours with other essential finance software systems.
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2. Spend Transparency
Making procurement capabilities transparent is the baseline to unlock potential savings and make headway into achieving operational excellence. Spend transparency is the key to ensuring accountability and minimizing programs for fraud in the procurement process.
Measures to make certain spend transparency in the procurement process:
Determine and implement procurement policies properly
Monitor as well as document every stage of the procurement process
Identify and handle a summary of approved supplier lists
Create fool proof procurement contracts
Conduct repeated audits By utilizing the power of data analytics and automation, organizations are able to eliminate dim purchasing as well as maverick spend. Procurement engineering has better visibility into the procure-to-pay cycle.
3. Supplier engagement
Every organization has a number of suppliers that provide essential products, provide special services, perform routine maintenance, and complete one time urgent fixes. While calling a particular vendor to buy a merchandise or even repair a faulty machine may seem easy, the task of qualifying and taking care of a supplier is actually anything but.
The technique of determining a potential supplier, onboarding the vendor, scheduling the service, obtaining the invoice, and paying the vendor is overpowering. When managed physically, only a simple process of distributing one vendor invoice can ingest a number of hours.
Dealer management tools provide a set of special features to greatly improve the source-to-contract process and improve supplier engagement. eProcurement tools offer up comprehensive vendor dashboards, pre-made contract templates, digital procurement processes, and extensive integration with accounting management methods.
An organization can boost supplier engagement by:
Generating win win situations as well as trust
Treating suppliers as strategic partners
Monitoring supplier performance with certain KPIs
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4. Optimized inventory
As profit margins shrink in a few industries, businesses are always searching for ways to manage their invest as well as enhance the profits. Their main focus is the procurement process. Thus, procurement teams have to continually examine the inventory of theirs and make an effort to make sure they remain optimal.
Best-in-class organizations pay attention to their inventory since the’ real cost’ of holding inventory is much higher than the cost of purchasing things. The rule of thumb for holding prices is between 20 along with thirty percent. And it is not just consumable items that go bad over a period of time everything from consumer electronics to clothes are actually subject to risks.
The main reason behind out-of-balance inventories is poor planning and forecasting. Procurement managers all over the world are slowly recognizing the strength of more effective data driven insights. Almost fifty % of respondents in 2018 Global CPO survey confided that they are leveraging advanced and intelligent insights for cost and inventory seo.
Below are a few issues organizations have to determine whether their inventory is optimized:
Do you know the ratio of operating inventory in phrases of safety, replenishment, and excess inventory?
Does the procurement staff over or under purchase any products/services?
What is the perfect frequency of purchases?
Are a number of purchase requisitions as well as orders in sync with inventory levels?
5. Contract Management
Although procurement teams attempt to negotiate potential savings in the sourcing stage, they never totally unlock the value. Even though the reasons vary, the most typical problem is a disorganized contract management process.
A recent report on contract management suggests that nearly 81 percent of organizations don’t use some Contract Lifecycle Management (CLM) application. Being a result, they have to deal with a selection of soreness points like lack of consistency throughout contracts (53 percent), cumbersome processing (forty five percent), and supply chain continuity issues (thirty six percent).
Organizations can remain clear of these procurement pitfalls by moving their contract management function to the cloud. When contracts are created, stored, and maintained in a centralized data repository, businesses can leverage their spend well, reduce costs, and mitigate risk.
Agreement management automation is going to provide organizations with:
Central repository: Store all files (riders, amendments, etc.) at a cloud database that is accessible from anywhere
Configurable interface: A very scalable as well as customizable interface that might be tailor-made to fit about business requirements Automated notifications: Trigger automated alerts to emphasize contract milestones, renewals, and chances for renegotiation.
Performance monitoring: Track delivery time, product quality, pricing fluctuations, and adherence to purchasing terms/policies