The price of purchasing, and conducting business, is on a steady rise. Business organizations have began to regard procurement management as their top concern since it will take up a huge share their overall spend. Considering most businesses still hold on to their manual procurement methods, a total revamp of the procurement functions of theirs is crucial to keep pace with company demands.
In order to get the fundamentals right, organizations need to carry out a good procure-to-pay progression and embrace the right technology strategies. However, just revamping the process and utilizing a premier technology product won’t come up with the procurement feature best-in-class.
Thus, what will it take?
The answer may be different from one group to the next, but there are several procurement best practices which couple of leading businesses have used over time. Here’s an outline of five procurement best practices that, when implemented properly, could substantially lower costs, improve method effectiveness, and have a positive impact on the cost income ratio.
1. Cloud-based procurement tools
Taking procurement digital is a vital step in making procurement tasks future ready. Digital procurement methods assist teams reduce the repetitive operational areas of procurement, freeing up staff to concentrate on strategic roles.
As technology continues to be an integral element of our everyday activities, a complete digital transformation for procurement activities is inevitable. High-performing organizations are actually leading the pack on digital procurement practices.
Here is what skilled 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 & conduct fast three-way matching.
Purchase Requests – Fluid forms allow you to record, 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 your procurement cloud along with other essential finance software systems.
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2. Spend Transparency
Making procurement functions transparent would be the baseline to unlock possible savings and make headway into getting operational excellence. Invest transparency is actually the key to ensuring accountability and minimizing opportunities for fraud in the procurement process.
Steps to ensure spend transparency in the procurement process:
Determine as well as implement procurement policies properly
Computer monitor as well as document every step of the procurement process
Identify and handle a list of approved supplier lists
Establish fool-proof procurement contracts
Conduct regular audits By using the strength of data analytics and automation, organizations can wear away dim purchasing as well as maverick invest. Procurement engineering has better visibility into the procure-to-pay cycle.
3. Supplier engagement
Every organization has a number of suppliers which deliver items which are important, offer specialty services, perform regular maintenance, and finish one time urgent fixes. Although calling a specific vendor to buy a merchandise or even repair a faulty machine seems easy, the task of qualifying as well as dealing with a supplier is anything but.
The procedure for identifying a prospective supplier, onboarding the vendor, scheduling the service, obtaining the invoice, and paying the vendor is overpowering. If managed manually, only a straightforward process of submitting one vendor invoice is able to take in various hours.
Supplier management tools provide a set of unique features to help improve the source-to-contract process and boost supplier engagement. eProcurement equipment offer up comprehensive vendor dashboards, pre-made contract templates, digital procurement processes, and extensive integration with accounting relief methods.
A business can improve 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 invest as well as help improve the profits. The primary focus of theirs is the procurement process. Thus, procurement teams need to constantly review their inventory and try to ensure they stay optimal.
Best-in-class groups pay close attention to the inventory of theirs since the’ real cost’ of holding inventory is much higher compared to the cost of purchasing items. The rule of thumb for holding costs is actually between 20 as well as 30 %. And it isn’t only consumable products that go bad over a period of time everything from consumer electronics to clothes are actually subject to risks.
The main reason behind out-of-balance inventories is very poor planning and forecasting. Procurement managers around the world are slowly recognizing the power of more effective data-driven insights. Nearly 50 % of respondents in 2018 Global CPO survey confided that they are leveraging advanced and intelligent insights for price tag as well as inventory optimization.
Here are a few issues organizations have to determine whether the inventory of theirs is optimized:
What are the ratio of operating inventory in terminology of safety, replenishment, and extra inventory?
Does the procurement staff over or under-purchase any products/services?
What is the best frequency of purchases?
Are several buy requisitions as well as orders in sync with inventory levels?
5. Contract Management
Although procurement teams attempt to negotiate potential savings in the sourcing stage, they never totally unlock the importance. Although the reasons vary, the most common concern is a disorganized contract management process.
A recent report on contract relief suggests that nearly eighty one % of organizations do not use some Contract Lifecycle Management (CLM) application. As a result, they confront a number of pain points such as lack of consistency across contracts (fifty three percent), troublesome processing (45 percent), and supply chain continuity troubles (36 percent).
Businesses can remain clear of these procurement pitfalls by moving their contract management process to the cloud. When contracts are made, saved, and maintained in a centralized information repository, businesses could leverage their spend optimally, reduce costs, as well as mitigate risk.
Agreement management automation is going to provide organizations with:
Central 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 might be personalized to fit about company requirements 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