The cost of buying, and working, is on a steady rise. Business enterprises 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 practices of theirs, a complete revamp of their procurement capabilities is important to keep pace with business demands.
To be able to obtain the basics right, organizations have to implement an effective procure-to-pay progression and embrace the proper technology strategies. But, just revamping the task and utilizing a high technology product will not come up with the procurement feature best-in-class.
So, what does it take?
The solution may differ from one group to another, but there are several procurement best practices which several leading companies have adopted over time. Here is an outline of five procurement best practices that, when implemented the right way, may substantially lower costs, improve procedure efficiency, and have a good impact 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 help teams lessen the repetitive operational areas of procurement, freeing up team members to center on strategic roles.
As technology will continue to be an important part of our daily activities, a total digital transformation for procurement actions is unavoidable. High-performing organizations are actually leading the pack on digital procurement practices.
Here’s what skilled digital procurement techniques like Gatewit Procurement Cloud Software can handle:
Dealer Management – Onboard, maintain, and control vendors in an easy-to-use, effective platform.
Invoice Approval – Approve your invoices on the go and do fast three way matching.
Purchase Requests – Fluid types allow you to capture, approve, and keep track of purchase requests.
Purchase Orders – Issue POs and generate orders automatically from approved buy requests.
Invest Analytics – Generate actionable, data-driven insights from your purchasing related data.
Integrations – Connect the procurement cloud of yours along with other important finance software systems.
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2. Spend Transparency
Making procurement capabilities transparent is the baseline to unlock possible savings and make headway into obtaining 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
Computer monitor and document every phase of the procurement process
Identify and handle a listing of approved supplier lists
Establish fool proof procurement contracts
Conduct regular audits By utilizing the strength of data analytics as well as automation, organizations are able to eat away dim purchasing and maverick invest. Procurement technological innovation offers much better visibility into the procure-to-pay cycle.
3. Supplier engagement
Every company has a number of suppliers which provide important items, provide special services, perform regular maintenance, and complete one time immediate fixes. Although calling a particular vendor to purchase a merchandise or even repair a faulty machine seems easy, the task of qualifying and dealing with a supplier is actually anything but.
The procedure for identifying a potential supplier, onboarding the vendor, scheduling the service, obtaining the invoice, and paying the vendor is actually overpowering. If managed manually, only a straightforward process of submitting one vendor invoice is able to take in several hours.
Supplier management tools provide a set of unique features to improve the source-to-contract progression and boost supplier engagement. eProcurement equipment provide extensive merchant dashboards, pre-made contract templates, digital procurement processes, and substantial integration with accounting relief systems.
A company is able to develop supplier engagement by:
Generating win win situations as well as trust
Treating suppliers as strategic partners
Monitoring supplier performance with specific KPIs
Enabling interaction and collaboration with vendors ☛ Free Guide: The Ultimate Guide to Managing Remote Procurement Teams.
4. Optimized inventory
As profit margins shrink in certain industries, businesses are always looking for ways to control their spend as well as better the profits. Their main focus is actually the procurement process. Thus, procurement teams have to continually review the inventory of theirs and make an effort to make certain they stay optimal.
Best-in-class organizations pay close 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 prices is somewhere between twenty and 30 %. And it isn’t just consumable things that go bad over a period of time-everything from consumer electronics to clothing are actually subject to risks.
The key reason for out-of-balance inventories is poor planning and forecasting. Procurement managers around the world are slowly recognizing the strength of more effective data driven insights. Almost 50 % of respondents in 2018 Global CPO survey confided that they are leveraging intelligent and advanced insights for price and inventory optimization.
Here are a few issues organizations have to check 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 team over- or under-purchase any products/services?
What is the optimal frequency of purchases?
Are a number of purchase requisitions as well as orders in sync with inventory levels?
5. Contract Management
Although procurement teams try to negotiate prospective savings in the sourcing stage, they never completely unlock the value. Although the reasons vary, the most common problem is a disorganized arrangement management process.
A recent report on contract relief indicates that about 81 percent of organizations do not use any Contract Lifecycle Management (CLM) application. Being a result, they have to deal with 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).
Businesses are able to stay clear of these procurement pitfalls by moving their contract management process to the cloud. When contracts are created, stored, and maintained in a centralized information repository, businesses could leverage their invest optimally, reduce expenses, and also mitigate risk.
Agreement management automation is going to provide organizations with:
Central repository: Store all files (riders, amendments, etc.) in a cloud database that is accessible from anywhere
Configurable interface: A highly scalable as well as customizable interface which 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 delivery time, product quality, pricing fluctuations, and adherence to purchasing terms/policies