The price of buying, and conducting business, is on a constant rise. Business enterprises have started to regard procurement management as their top priority since it will take up a huge share their overall spend. Considering most organizations still hold on to the manual procurement methods of theirs, a total revamp of the procurement functions of theirs is vital to keep pace with business demands.
To be able to obtain the basics right, organizations have to carry out a good procure-to-pay process and embrace the appropriate technology solutions. Nonetheless, simply revamping the process and utilizing a top engineering product won’t come up with the procurement function best-in-class.
Thus, what will it take?
The solution might be different from one organization to another, but there are several procurement best practices which couple of leading corporations have adopted over time. Here’s an outline of 5 procurement best practices that, when implemented correctly, can appreciably lower costs, improve process effectiveness, and have a good 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 strategies assist teams minimize the repetitive operational parts of procurement, freeing up staff to concentrate on strategic roles.
As technology continues to become an integral element of the daily activities of ours, an entire digital transformation for procurement routines is inevitable. High-performing companies are actually leading the pack on digital procurement habits.
Here’s what skilled digital procurement strategies 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 & perform fast three-way matching.
Purchase Requests – Fluid types enable you to record, approve, and keep monitor of purchase requests.
Buy Orders – Issue POs and create 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 vital 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 obtaining 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:
Determine and implement procurement policies properly
Computer monitor and document every stage of the procurement process
Identify and handle a listing of approved supplier lists
Establish fool-proof procurement contracts
Conduct frequent audits By harnessing the strength of data analytics and automation, organizations can wear away dim purchasing as well as maverick invest. Procurement technological innovation offers better visibility into the procure-to-pay cycle.
3. Supplier engagement
Every company has a selection of suppliers who provide products which are essential, offer specialty services, perform routine maintenance, and complete one-time urgent fixes. Although calling a specific vendor to order a merchandise or perhaps repair a faulty machine seems easy, the task of qualifying and controlling a supplier is anything but.
The technique of identifying a potential supplier, onboarding the vendor, scheduling the service, obtaining the invoice, and paying the vendor is actually overwhelming. If managed physically, just a straightforward process of distributing one vendor invoice can ingest various hours.
Dealer management tools offer a set of unique features to greatly improve the source-to-contract progression and enhance supplier engagement. eProcurement tools offer extensive vendor dashboards, built contract templates, digital procurement processes, and extensive integration with accounting control methods.
A company can enhance supplier engagement by:
Generating win win situations and trust
Treating suppliers as strategic partners
Monitoring supplier performance with certain KPIs
Enabling collaboration as well as interaction with vendors ☛ Guide that is Free: The Ultimate Guide to Managing Remote Procurement Teams.
4. Optimized inventory
As profit margins shrink in certain industries, businesses are continually looking for ways to control their spend as well as better the profits. The main focus of theirs is the procurement process. Thus, procurement teams have to constantly examine the inventory of theirs and attempt to make sure they stay optimal.
Best-in-class groups pay close attention to the inventory of theirs since the’ real cost’ of holding inventory is substantially larger than the cost of ordering items. The rule of thumb for holding costs is between 20 as well as 30 percent. And it isn’t only consumable items that go bad over a period of time everything from consumer electronics to clothes are subject to risks.
The main reason for out-of-balance inventories is very poor planning and forecasting. Procurement executives all over the world are slowly recognizing 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 seo.
Here are a few issues organizations need to investigate whether the inventory of theirs is optimized:
What are the ratio of operating inventory in terminology of safety, replenishment, and extra stock?
Does the procurement staff over or under-purchase any products/services?
What’s the best frequency of purchases?
Are all purchase requisitions as well as orders in sync with inventory levels?
5. Contract Management
Even though procurement teams try to negotiate potential savings in the sourcing stage, they never completely unlock the importance. While the reasons vary, the most common issue is a disorganized arrangement management process.
A recent report on contract control indicates that nearly eighty one 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 (fifty three percent), troublesome processing (45 percent), and supply chain continuity troubles (36 percent).
Organizations are able to stay clear of these procurement pitfalls by moving their contract management function 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 is going to 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 tailored to fit around business demands 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