The price of buying, and operating, is on a constant rise. Business organizations have started to regard procurement management as the top concern of theirs since it takes up a large share their overall spend. Considering most companies still hold on to their manual procurement methods, a complete revamp of the procurement functions of theirs is vital to keep pace with company needs.
In order to get the basics right, organizations have to put into practice an effective procure-to-pay progression and embrace the right technology solutions. However, simply revamping the process and implementing a premier technology product will not make the procurement function best-in-class.
Therefore, what does it take?
The solution may vary from one organization to the next, but there are some procurement best practices which several leading companies have used over time. Here’s an outline of five procurement best practices that, when implemented properly, could significantly lower costs, improve method efficiency, and have a positive impact on the cost-income ratio.
1. Cloud-based procurement tools
Taking procurement digital is a crucial step in making procurement tasks future-ready. Digital procurement techniques assist teams reduce the repetitive operational areas of procurement, freeing up team members to center on strategic roles.
As technology will continue to sign up as an integral part of our everyday activities, a complete digital transformation for procurement actions is inevitable. High-performing businesses are actually leading the pack on digital procurement practices.
Here is what skilled digital procurement techniques like Gatewit Procurement Cloud Software is able to handle:
Dealer Management – Onboard, maintain, and manage vendors in an easy-to-use, effective platform.
Invoice Approval – Approve your invoices on the go & do fast three way matching.
Purchase Requests – Fluid types allow you to record, approve, and keep monitor of purchase requests.
Buy Orders – Issue POs and create orders automatically from approved buy requests.
Invest Analytics – Generate actionable, data driven insights from the purchasing-related data of yours.
Integrations – Connect your procurement cloud along with other important finance software systems.
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2. Spend Transparency
Making procurement capabilities transparent is the baseline to unlock prospective savings and make headway into achieving operational excellence. Invest transparency is the key to ensuring accountability and minimizing possibilities for fraud in the procurement process.
Measures to ensure invest transparency in the procurement process:
Define and implement procurement policies properly
Monitor and document every phase of the procurement process
Identify and handle a summary of approved supplier lists
Create fool proof procurement contracts
Conduct repeated audits By harnessing the strength of data analytics and automation, organizations can eat away dim purchasing as well as maverick spend. Procurement technology provides much better visibility into the procure-to-pay cycle.
3. Supplier engagement
Every company has a selection of suppliers who deliver items that are essential , provide specialty services, perform routine maintenance, and complete one-time urgent fixes. While calling a certain vendor to order a merchandise or perhaps repair a faulty machine may seem simple, the task of qualifying and handling 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 physically, only a simple process of publishing one vendor invoice can ingest various hours.
Supplier management tools offer a set of unique features to greatly improve the source-to-contract progression and boost supplier engagement. eProcurement tools provide extensive merchant dashboards, pre-made contract templates, digital procurement processes, and extensive integration with accounting relief systems.
A company can develop supplier engagement by:
Generating win-win situations and trust
Treating suppliers as strategic partners
Checking supplier performance with certain 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, businesses are constantly searching for ways to manage their spend and enhance the profits. The primary focus of theirs is actually the procurement process. And so, procurement teams need to constantly examine their inventory and strive to make certain they remain optimal.
Best-in-class groups pay close attention to their inventory since the’ real cost’ of holding inventory is significantly higher than the price of purchasing items. The rule of thumb for holding costs is actually somewhere between twenty and 30 percent. And it is not just consumable things that go bad over a period of time-everything from consumer electronics to clothing are subject to risks.
The major reason for out-of-balance inventories is poor planning and forecasting. Procurement managers around the world are slowly recognizing the strength of better data-driven insights. Nearly fifty % of respondents in 2018 Global CPO survey confided they’re leveraging advanced and intelligent insights for price tag as well as inventory seo.
Below are a few issues organizations need to check whether the inventory of theirs is optimized:
Do you know the ratio of operating inventory in terms of safety, replenishment, and extra stock?
Does the procurement team over- or under purchase any products/services?
What is the perfect frequency of purchases?
Are a number of purchase requisitions and orders in sync with inventory levels?
5. Contract Management
Although procurement teams attempt to negotiate prospective savings in the sourcing stage, they never completely unlock the importance. Even though the reasons vary, the most common problem is a disorganized contract management process.
A recent report on contract control indicates that about 81 % of organizations don’t make use of some Contract Lifecycle Management (CLM) software. As a result, they face a selection of pain points such as lack of consistency throughout contracts (fifty three percent), cumbersome processing (45 percent), and supply chain continuity issues (36 percent).
Businesses are able to 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 could leverage their spend optimally, reduce costs, as well as mitigate risk.
Agreement management automation will provide organizations with:
Central repository: Store all documents (riders, amendments, etc.) in a cloud database that’s accessible from anywhere
Configurable interface: A scalable as well as customizable interface that may be personalized to fit around business requirements Automated notifications: Trigger automated alerts to highlight contract milestones, renewals, and chances for renegotiation.
Performance monitoring: Track adherence, pricing fluctuations, product quality, and delivery time to purchasing terms/policies