The price of purchasing, and operating, is on a constant rise. Business organizations have began to regard procurement management as their top priority since it takes up a huge share their overall invest. Considering most businesses still hold on to the manual procurement practices of theirs, a total revamp of the procurement capabilities of theirs is essential to keep pace with company needs.
To be able to receive the fundamentals right, organizations have to implement a good procure-to-pay process and embrace the proper technology solutions. Nevertheless, simply revamping the task and utilizing a top engineering item will not create the procurement function best-in-class.
Thus, what does it take?
The key could vary from one group to another, but there are some procurement best practices that several leading businesses have adopted over time. Here is an outline of five procurement best practices that, when implemented the right way, could appreciably lower costs, improve procedure effectiveness, and have a good effect on the cost income ratio.
1. Cloud based procurement tools
Taking procurement digital is a vital step in making procurement activities future-ready. Digital procurement strategies assist teams minimize the repetitive operational areas of procurement, freeing up team members to center on strategic roles.
As technology continues to become an essential part of our daily activities, a complete digital transformation for procurement routines is unavoidable. High-performing organizations are actually leading the pack on digital procurement habits.
Here is what skilled digital procurement methods like Gatewit Procurement Cloud Software is able to handle:
Dealer Management – Onboard, maintain, and manage vendors in an easy-to-use, efficient platform.
Invoice Approval – Approve your invoices on the go & conduct fast three way matching.
Buy Requests – Fluid forms allow you to capture, approve, and keep monitor of purchase requests.
Buy Orders – Issue POs and create orders automatically from approved purchase requests.
Invest Analytics – Generate actionable, data-driven insights from the purchasing-related data of yours.
Integrations – Connect the procurement cloud of yours with other important finance software systems.
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2. Spend Transparency
Making procurement capabilities transparent would be the baseline to unlock prospective savings and make headway into getting operational excellence. Spend transparency is actually the key to ensuring accountability and minimizing opportunities for fraud in the procurement process.
Steps to ensure invest transparency in the procurement process:
Define and implement procurement policies properly
Computer monitor and document every stage of the procurement process
Identify and handle a list of approved supplier lists
Establish fool-proof procurement contracts
Conduct frequent audits By harnessing the strength of data analytics and automation, organizations are able to wear away dim purchasing and maverick spend. Procurement technological innovation provides much better visibility into the procure-to-pay cycle.
3. Supplier engagement
Every organization has a selection of suppliers that deliver essential products, offer specialty services, perform routine maintenance, and finish one time immediate fixes. Although calling a certain vendor to buy a merchandise or even repair a faulty machine seems simple, the process of qualifying as well as taking care of a supplier is anything but.
The technique of determining a potential supplier, onboarding the vendor, scheduling the service, obtaining the invoice, and paying the vendor is overwhelming. When managed manually, only an easy practice of distributing one vendor invoice can consume several hours.
Supplier management tools have a set of unique options to greatly improve the source-to-contract process and improve supplier engagement. eProcurement tools provide comprehensive vendor dashboards, pre-made contract templates, digital procurement processes, and intensive integration with accounting relief methods.
A company can develop supplier engagement by:
Generating win win situations and trust
Treating suppliers as strategic partners
Monitoring supplier performance with specific KPIs
Enabling interaction as well as collaboration with vendors ☛ Free Guide: The Ultimate Guide to Managing Remote Procurement Teams.
4. Optimized inventory
As profit margins shrink in certain industries, organizations are always searching for ways to manage their spend and enhance the profits. Their main focus is the procurement process. And so, procurement teams have to continually examine their inventory and attempt to make certain they remain optimal.
Best-in-class organizations pay attention to their inventory since the’ real cost’ of holding inventory is far greater compared to the price of purchasing things. The rule of thumb for holding costs is actually between 20 and thirty %. And it is not just consumable things that go bad over a period of time-everything from consumer electronics to apparel are subject to risks.
The major reason for out-of-balance inventories is poor planning and forecasting. Procurement leaders all over the world are slowly realizing the strength of more effective data driven insights. Almost 50 % of respondents in 2018 Global CPO survey confided that they’re leveraging advanced and intelligent insights for cost as well as inventory optimization.
Below are a few questions organizations have to examine whether their inventory 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 is the perfect frequency of purchases?
Are all purchase requisitions and orders in sync with inventory levels?
5. Contract Management
Although procurement teams try to negotiate prospective savings in the sourcing stage, they never totally unlock the importance. While the reasons vary, the most typical issue is a disorganized agreement management process.
A recent report on contract relief indicates that about eighty one % of organizations don’t make use of any Contract Lifecycle Management (CLM) application. To be a result, they face a number of pain points like lack of consistency across contracts (fifty three percent), troublesome processing (forty five percent), and supply chain continuity troubles (thirty six percent).
Organizations are able to stay clear of these procurement pitfalls by moving their contract management function to the cloud. When contracts are created, stored, and maintained in a centralized information repository, organizations could leverage their invest optimally, reduce costs, and mitigate risk.
Agreement management automation will provide organizations with:
Main repository: Store all files (riders, amendments, etc.) at a cloud database that’s accessible from anywhere
Configurable interface: A very scalable as well as customizable interface that may be tailor-made 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