The price of buying, and conducting business, is on a constant rise. Business enterprises have started to regard procurement management as the top concern of theirs since it takes up a big share their overall spend. Considering most businesses still hold on to their manual procurement practices, the full revamp of their procurement functions is essential to keep pace with company demands.
To be able to get the basics right, organizations have to put into practice an effective procure-to-pay process and embrace the correct technology solutions. Nonetheless, just revamping the process and implementing a top engineering product won’t make the procurement function best-in-class.
Therefore, what will it take?
The solution might differ from one organization to the next, but there are some procurement best practices which couple of leading companies have used over time. Here’s an outline of 5 procurement best practices which, when implemented correctly, can substantially lower costs, improve procedure effectiveness, and have a positive impact on the cost income ratio.
1. Cloud-based procurement tools
Taking procurement digital is a critical step in making procurement tasks future ready. Digital procurement strategies assist teams lessen the repetitive operational facets of procurement, freeing up staff to focus on strategic roles.
As technology will continue to become an integral component of the everyday activities of ours, a complete digital transformation for procurement actions is unavoidable. High-performing businesses are actually leading the pack on digital procurement habits.
Here is what competent digital procurement solutions as Gatewit Procurement Cloud Software can handle:
Supplier Management – Onboard, maintain, and handle vendors in an easy-to-use, effective platform.
Invoice Approval – Approve your invoices on the go and do quick three way matching.
Buy Requests – Fluid types help you capture, approve, and keep track of buy requests.
Purchase Orders – Issue POs and produce orders automatically 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 vital finance software systems.
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2. Spend Transparency
Making procurement functions transparent will be the baseline to unlock potential savings and make headway into obtaining operational excellence. Spend transparency is the key to ensuring accountability and minimizing possibilities for fraud in the procurement process.
Measures to make sure spend transparency in the procurement process:
Define as well as implement procurement policies properly
Computer monitor as well as document every stage of the procurement process
Identify as well as control a list of approved supplier lists
Establish fool proof procurement contracts
Conduct regular audits By utilizing the strength of data analytics as well as automation, organizations can wear away dark purchasing and maverick spend. Procurement technology offers better visibility into the procure-to-pay cycle.
3. Supplier engagement
Every company has a number of suppliers that deliver items which are important, provide specialty services, perform regular maintenance, and finish one time immediate repairs. While calling a particular vendor to buy a merchandise or even repair a faulty machine may seem easy, the process of qualifying and managing a supplier is anything but.
The process of identifying a prospective supplier, onboarding the vendor, scheduling the service, obtaining the invoice, and paying the vendor is actually overwhelming. When managed manually, just an easy practice of distributing one vendor invoice is able to ingest various hours.
Supplier management tools have a set of special options to enhance the source-to-contract progression and enhance supplier engagement. eProcurement equipment offer up thorough merchant dashboards, pre-made contract templates, digital procurement processes, and substantial integration with accounting management systems.
A business is able to develop supplier engagement by:
Generating win win situations and trust
Treating suppliers as strategic partners
Checking supplier performance with certain KPIs
Enabling communication as well as collaboration 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 constantly looking for ways to manage their invest and greatly improve the profits. The main focus of theirs is the procurement process. Thus, procurement teams need to continually examine their inventory and attempt to make certain they remain optimum.
Best-in-class organizations seriously consider their inventory since the’ real cost’ of holding inventory is far larger compared to the cost of ordering things. The rule of thumb for holding prices is actually between twenty along with thirty percent. And it isn’t only consumable things that go bad over a period of time-everything from consumer electronics to clothes are actually subject to risks.
The key reason for out-of-balance inventories is poor planning and forecasting. Procurement leaders all over the world are slowly realizing the power of more effective data driven insights. Nearly 50 % of respondents in 2018 Global CPO survey confided they’re leveraging advanced and intelligent insights for price and inventory seo.
Below are a few questions organizations need to determine whether the inventory of theirs is optimized:
What are the ratio of operating inventory in terminology of safety, replenishment, and excess stock?
Does the procurement staff over or perhaps under purchase any products/services?
What is the perfect frequency of purchases?
Are many purchase requisitions and orders in sync with inventory levels?
5. Contract Management
Even though procurement teams attempt to negotiate possible savings in the sourcing stage, they never completely unlock the importance. While the reasons vary, the most typical problem is a disorganized agreement management process.
A recent report on contract management shows that about 81 % of organizations don’t use any Contract Lifecycle Management (CLM) software. To be a result, they face a number of pain points including lack of consistency throughout contracts (53 percent), cumbersome processing (forty five percent), and supply chain continuity problems (thirty six percent).
Organizations can remain clear of these procurement pitfalls by moving their contract management function to the cloud. When contracts are made, saved, and maintained in a centralized information repository, organizations can leverage their spend well, reduce costs, and also mitigate risk.
Contract 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 highly scalable and customizable interface which could be customized to fit about company demands Automated notifications: Trigger automated alerts to highlight contract milestones, renewals, and chances for renegotiation.
Performance monitoring: Track delivery time, product quality, pricing fluctuations, and adherence to purchasing terms/policies