The cost of purchasing, and doing business, is on a steady rise. Business enterprises have began to regard procurement management as their top priority since it will take up a huge share their overall invest. Considering most businesses still hold on to the hand procurement methods of theirs, a full revamp of the procurement capabilities of theirs is important to keep pace with company needs.
In order to get the fundamentals right, organizations have to put into practice a good procure-to-pay progression and embrace the right technology strategies. But, simply revamping the task and utilizing a premier technology product will not create the procurement function best-in-class.
So, what will it take?
The solution might differ from one group to the next, but there are several procurement best practices that couple of leading businesses have used over time. Here is an outline of five procurement best practices which, when implemented the right way, may substantially lower costs, improve process 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 help teams lessen the repetitive operational parts of procurement, freeing up staff to concentrate on strategic roles.
As technology continues to sign up as an essential component of the everyday activities of ours, a complete digital transformation for procurement activities is unavoidable. High-performing organizations are actually leading the pack on digital procurement practices.
Here is what competent digital procurement methods like Gatewit Procurement Cloud Software can handle:
Dealer Management – Onboard, maintain, and manage vendors in an easy-to-use, effective platform.
Invoice Approval – Approve your invoices on the go and do fast three-way matching.
Buy Requests – Fluid forms help you capture, approve, and keep track of buy requests.
Purchase Orders – Issue POs and produce 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 vital finance software systems.
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2. Spend Transparency
Making procurement functions transparent is the baseline to unlock possible savings and make headway into achieving operational excellence. Invest transparency is the key to ensuring accountability and minimizing programs for fraud in the procurement process.
Steps to ensure invest transparency in the procurement process:
Define 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 frequent audits By utilizing the power of data analytics and automation, organizations are able to eat away dark purchasing as well as maverick spend. Procurement technology offers much better visibility into the procure-to-pay cycle.
3. Supplier engagement
Every company has a selection of suppliers which deliver items that are essential , provide specialty services, perform regular maintenance, and complete one-time urgent repairs. While calling a certain vendor to purchase a merchandise or even repair a faulty machine sounds easy, the task of qualifying as well as controlling a supplier is anything but.
The technique of determining a prospective supplier, onboarding the vendor, scheduling the service, obtaining the invoice, and paying the vendor is overwhelming. If managed manually, just a straightforward process of distributing one vendor invoice is able to consume several hours.
Dealer management tools offer a set of unique options to enhance the source-to-contract progression and improve supplier engagement. eProcurement equipment offer comprehensive merchant dashboards, pre-made contract templates, digital procurement processes, and extensive integration with accounting control methods.
An organization can develop supplier engagement by:
Generating win win situations as well as trust
Treating suppliers as strategic partners
Checking supplier performance with specific KPIs
Enabling interaction and collaboration with vendors ☛ Guide which is Free: The Ultimate Guide to Managing Remote Procurement Teams.
4. Optimized inventory
As profit margins shrink in certain industries, organizations are constantly searching for ways to control their spend as well as enhance the bottom line. Their main focus is actually the procurement process. Thus, procurement teams need to frequently examine their inventory and make an effort to make certain they remain optimal.
Best-in-class organizations pay attention to their inventory since the’ real cost’ of holding inventory is a lot larger than the price of ordering things. The rule of thumb for holding prices is somewhere between twenty and 30 %. And it is not only consumable products that go bad over a period of time-everything from consumer electronics to apparel are subject to risks.
The main reason behind out-of-balance inventories is poor planning and forecasting. Procurement managers around the world are slowly recognizing the power of better data-driven insights. Almost 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.
Below are a few questions organizations need to determine whether the inventory of theirs is optimized:
Do you know 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’s the perfect frequency of purchases?
Are many purchase requisitions as well as 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. While the reasons vary, the most typical problem is a disorganized agreement management process.
A recent report on contract management indicates that about eighty one % 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), troublesome processing (forty five percent), and supply chain continuity troubles (36 percent).
Businesses can remain clear of these procurement pitfalls by moving their contract management system to the cloud. When contracts are made, saved, and maintained in a centralized information repository, businesses can leverage their spend well, reduce expenses, and also mitigate risk.
Contract management automation will provide organizations with:
Main repository: Store all documents (riders, amendments, etc.) in a cloud database that’s accessible from anywhere
Configurable interface: A highly scalable and customizable interface which might be personalized to fit around business requirements Automated notifications: Trigger automated alerts to spotlight contract milestones, renewals, and chances for renegotiation.
Performance monitoring: Track delivery time, product quality, pricing fluctuations, and adherence to purchasing terms/policies