The cost of buying, and doing business, is on a constant rise. Business organizations have began to regard procurement management as the top priority of theirs since it takes up a big share their general spend. Considering most businesses still hold on to their manual procurement practices, the full revamp of their procurement capabilities is essential to keep pace with business needs.
To be able to receive the fundamentals right, organizations need to put into practice a highly effective procure-to-pay progression and embrace the right technology strategies. But, simply revamping the process and utilizing a premier technology product will not make the procurement function best-in-class.
Therefore, what does it take?
The solution could differ from one organization to the next, but there are some procurement best practices which several leading companies have adopted over time. Here’s an outline of 5 procurement best practices that, when implemented the right way, may significantly lower costs, improve procedure effectiveness, and have a good impact on the cost-income ratio.
1. Cloud based procurement tools
Taking procurement digital is an important step in making procurement tasks future ready. Digital procurement strategies help teams minimize the repetitive operational facets of procurement, freeing up associates to center on strategic roles.
As technology will continue to sign up as an essential component of the everyday activities of ours, a total digital transformation for procurement actions is inevitable. High-performing businesses are actually leading the pack on digital procurement habits.
Here is what competent digital procurement strategies like Gatewit Procurement Cloud Software can handle:
Dealer Management – Onboard, maintain, and control vendors in an easy-to-use, efficient platform.
Invoice Approval – Approve your invoices on the go and do fast three way matching.
Buy Requests – Fluid forms help you record, approve, and keep monitor of purchase requests.
Buy Orders – Issue POs and produce orders instantly from approved buy requests.
Invest 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 will be the baseline to unlock possible savings and make headway into obtaining operational excellence. Invest transparency is actually the key to ensuring accountability and minimizing opportunities for fraud in the procurement process.
Measures to ensure invest transparency in the procurement process:
Define and implement procurement policies properly
Monitor as well as document every step of the procurement process
Identify as well as control a list of approved supplier lists
Create fool-proof procurement contracts
Conduct regular audits By harnessing the power of data analytics as well as automation, organizations are able to eliminate dim purchasing and maverick spend. Procurement technological innovation offers much better visibility into the procure-to-pay cycle.
3. Supplier engagement
Every organization has a number of suppliers which deliver essential products, provide special services, perform regular maintenance, and finish one-time immediate repairs. Although calling a particular vendor to purchase a merchandise or even repair a faulty machine seems simple, the task of qualifying as well as controlling a supplier is anything but.
The procedure for determining a prospective supplier, onboarding the vendor, scheduling the service, obtaining the invoice, and paying the vendor is actually overwhelming. When managed manually, only an easy process of publishing one vendor invoice is able to consume a number of hours.
Supplier management tools provide a set of special features to improve the source-to-contract process and boost supplier engagement. eProcurement equipment offer comprehensive merchant dashboards, pre-made contract templates, digital procurement processes, and substantial integration with accounting relief methods.
A company is able to improve supplier engagement by:
Generating win win circumstances 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 specific industries, organizations are continually searching for ways to control their invest and better the bottom line. Their main focus is the procurement process. And so, procurement teams need to constantly examine their inventory and make an effort to make sure they remain optimal.
Best-in-class organizations seriously consider their inventory since the’ real cost’ of holding inventory is significantly higher than the cost of ordering things. The rule of thumb for holding costs is somewhere between twenty along with 30 %. And it isn’t only consumable products that go bad over a period of time everything from consumer electronics to clothing are subject to risks.
The major reason behind out-of-balance inventories is very poor planning and forecasting. Procurement executives around the world are slowly realizing the strength of better data driven insights. About 50 % of respondents in 2018 Global CPO survey confided that they’re leveraging intelligent and advanced insights for price and inventory optimization.
Below are a few questions organizations need to check out whether the inventory of theirs is optimized:
Do you know 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’s the perfect frequency of purchases?
Are all buy requisitions and orders in sync with inventory levels?
5. Contract Management
Even though procurement teams try to negotiate possible savings in the sourcing stage, they never totally unlock the value. Although the reasons vary, the most typical problem is a disorganized arrangement management process.
A recent report on contract control shows that about 81 percent of organizations do not use some Contract Lifecycle Management (CLM) application. Being a result, they confront a selection of pain points including lack of consistency across contracts (53 percent), troublesome processing (45 percent), and supply chain continuity issues (36 percent).
Organizations are able to 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 could leverage their spend well, reduce expenses, as well as mitigate risk.
Agreement management automation will provide organizations with:
Central repository: Store all files (riders, amendments, etc.) in a cloud database that’s accessible from anywhere
Configurable interface: A highly scalable as well as customizable interface which could be customized to fit around company needs 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