The price of buying, and doing business, is on a constant rise. Business enterprises have began to regard procurement management as the top concern of theirs since it takes up a large share their overall invest. Considering most companies still hold on to their manual procurement methods, a full revamp of the procurement functions of theirs is essential to keep pace with company needs.
In order to get the basics right, organizations need to put into practice an effective procure-to-pay process and embrace the correct technology strategies. However, simply revamping the task and employing a top engineering product will not create the procurement feature best-in-class.
So, what will it take?
The solution may well be different from one group to the next, but there are several procurement best practices that couple of leading corporations have used over time. Here is an outline of 5 procurement best practices that, when implemented correctly, could appreciably lower costs, improve process efficiency, 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 methods assist teams reduce the repetitive operational facets of procurement, freeing up staff to focus on strategic roles.
As technology continues to become an important part of our daily activities, an entire digital transformation for procurement activities is unavoidable. High-performing companies are leading the pack on digital procurement habits.
Here is what competent digital procurement strategies as Gatewit Procurement Cloud Software can handle:
Dealer Management – Onboard, maintain, and control vendors in an easy-to-use, effective platform.
Invoice Approval – Approve the invoices of yours on the go and perform quick three way matching.
Buy Requests – Fluid types allow you to capture, approve, and keep track of purchase requests.
Purchase Orders – Issue POs and generate orders instantly from approved purchase requests.
Spend Analytics – Generate actionable, data-driven insights from your purchasing related data.
Integrations – Connect the procurement cloud of yours with other essential finance software systems.
[Free Webinar] Join us to find out just how digital procurement can offer efficiency as well as cost savings. Register Now!
2. Spend Transparency
Making procurement capabilities transparent would be the baseline to unlock possible savings and make headway into obtaining operational excellence. Invest transparency is the key to ensuring accountability and minimizing programs 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 and document every phase of the procurement process
Identify as well as manage a summary of approved supplier lists
Create fool proof procurement contracts
Conduct regular audits By utilizing the power of data analytics as well as automation, organizations can eat away dim purchasing as well as maverick invest. Procurement technology has much better visibility into the procure-to-pay cycle.
3. Supplier engagement
Every organization has a number of suppliers who provide essential products, provide specialty services, perform regular maintenance, and complete one time urgent repairs. While calling a particular vendor to purchase a merchandise or repair a faulty machine may seem simple, the process of qualifying as well as controlling a supplier is anything but.
The process of figuring out a prospective supplier, onboarding the vendor, scheduling the service, obtaining the invoice, and paying the vendor is actually overwhelming. When managed physically, just an easy process of submitting one vendor invoice can ingest several hours.
Dealer management tools offer a set of special options to improve the source-to-contract progression and improve supplier engagement. eProcurement equipment offer extensive vendor dashboards, pre-made contract templates, digital procurement processes, and extensive integration with accounting relief systems.
A business is able to improve supplier engagement by:
Generating win win situations and trust
Treating suppliers as strategic partners
Monitoring supplier performance with certain 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 specific industries, businesses are constantly looking for ways to control their invest as well as greatly improve the bottom line. The primary focus of theirs is actually the procurement process. Thus, procurement teams need to constantly examine the inventory of theirs and strive to make certain they remain optimal.
Best-in-class organizations seriously consider the inventory of theirs since the’ real cost’ of holding inventory is way higher than the price of ordering things. The rule of thumb for holding prices 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 clothes are actually subject to risks.
The key reason for out-of-balance inventories is very poor planning and forecasting. Procurement executives all over the world are slowly recognizing the strength of more effective data driven insights. Nearly fifty % of respondents in 2018 Global CPO survey confided that they’re leveraging advanced and intelligent insights for price tag as well as inventory optimization.
Here are a few questions organizations need to investigate whether the inventory of theirs is optimized:
Do you know the ratio of operating inventory in phrases of safety, replenishment, and excess stock?
Does the procurement team over or even under-purchase any products/services?
What is the best frequency of purchases?
Are all purchase requisitions and orders in sync with inventory levels?
5. Contract Management
Although procurement teams attempt to negotiate possible savings in the sourcing stage, they never totally unlock the value. Even though the reasons vary, the most common issue is a disorganized agreement management process.
A recent report on contract control suggests that nearly 81 % of organizations don’t make use of any Contract Lifecycle Management (CLM) software. As a result, they have to deal with a number of soreness points including lack of consistency throughout contracts (53 percent), troublesome processing (forty five percent), and supply chain continuity problems (thirty six percent).
Businesses can remain clear of these procurement pitfalls by moving their contract management process to the cloud. When contracts are made, stored, and maintained in a centralized information repository, businesses can leverage their spend optimally, reduce costs, and also mitigate risk.
Agreement management automation is going to provide organizations with:
Main repository: Store all files (riders, amendments, etc.) in a cloud database that is accessible from anywhere
Configurable interface: A very scalable as well as customizable interface which 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