The cost of buying, and conducting business, is on a stable rise. Businesses have began to regard procurement management as their top priority since it takes up a huge share their overall spend. Considering most businesses still hold on to their hand procurement methods, a total revamp of their procurement functions is vital to keep pace with business demands.
In order to receive the basics right, organizations have to carry out a good procure-to-pay process and embrace the correct technology solutions. Nevertheless, simply revamping the task and implementing a high technology product will not make the procurement function best-in-class.
So, what will it take?
The solution may differ from one organization to the next, but there are some procurement best practices that several leading businesses have used over time. Here is an outline of five procurement best practices which, when implemented the right way, could significantly lower costs, improve procedure efficiency, and have a positive impact on the cost-income ratio.
1. Cloud based procurement tools
Taking procurement digital is an essential step in making procurement activities future ready. Digital procurement strategies assist teams lessen the repetitive operational areas of procurement, freeing up team members to focus on strategic roles.
As technology will continue to be an integral part of the everyday activities of ours, an entire 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 strategies as Gatewit Procurement Cloud Software is able to handle:
Dealer Management – Onboard, maintain, and handle vendors in an easy-to-use, effective platform.
Invoice Approval – Approve the invoices of yours on the go and conduct quick three way matching.
Purchase Requests – Fluid forms enable you to record, approve, and keep track of purchase requests.
Buy Orders – Issue POs and create orders automatically from approved purchase requests.
Invest Analytics – Generate actionable, data-driven insights from the purchasing related data of yours.
Integrations – Connect the procurement cloud of yours with other essential finance software systems.
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2. Spend Transparency
Making procurement capabilities transparent would be the baseline to unlock potential savings and make headway into getting operational excellence. Spend transparency is the key to ensuring accountability and minimizing programs for fraud in the procurement process.
Measures to make certain invest transparency in the procurement process:
Determine and implement procurement policies properly
Monitor as well as document every step of the procurement process
Identify as well as control a list of approved supplier lists
Create fool-proof procurement contracts
Conduct frequent audits By utilizing the strength of data analytics and automation, organizations can eat away dim purchasing and maverick spend. Procurement engineering has much better visibility into the procure-to-pay cycle.
3. Supplier engagement
Every company has a number of suppliers that deliver essential products, offer specialty services, perform regular maintenance, and complete one-time immediate repairs. While calling a specific vendor to order a merchandise or even repair a faulty machine seems easy, the process of qualifying as well as managing a supplier is actually 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, just an easy practice of publishing one vendor invoice can take in various hours.
Supplier management tools provide a set of unique features to improve the source-to-contract process and enhance supplier engagement. eProcurement tools offer up extensive merchant dashboards, built contract templates, digital procurement processes, and extensive integration with accounting control methods.
A company is able to boost supplier engagement by:
Generating win win circumstances and trust
Treating suppliers as strategic partners
Monitoring supplier performance with specific KPIs
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4. Optimized inventory
As profit margins shrink in specific industries, businesses are constantly searching for ways to manage their invest and improve the profits. The main focus of theirs is actually the procurement process. So, procurement teams have to continually examine their inventory and make an effort to ensure they remain optimum.
Best-in-class organizations seriously consider the inventory of theirs since the’ real cost’ of holding inventory is a lot higher compared to the cost of ordering things. The rule of thumb for holding costs is actually somewhere between twenty and thirty %. And it is not only consumable things that go bad over a period of time-everything from consumer electronics to clothes are actually subject to risks.
The main reason for out-of-balance inventories is poor planning and forecasting. Procurement executives all over the world are slowly recognizing the power of more effective data driven insights. Almost 50 % of respondents in 2018 Global CPO survey confided they’re leveraging intelligent and advanced insights for cost and inventory optimization.
Here are a few issues organizations have to check whether their inventory is optimized:
Do you know the ratio of operating inventory in terms of safety, replenishment, and extra inventory?
Does the procurement staff over- or perhaps 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
Even though procurement teams attempt to negotiate prospective savings in the sourcing stage, they never completely unlock the importance. While the reasons vary, the most typical problem is a disorganized agreement management process.
A recent report on contract control suggests that about 81 percent of organizations don’t make use of any Contract Lifecycle Management (CLM) application. Being a result, they confront a selection of soreness points like lack of consistency throughout contracts (fifty three percent), troublesome processing (forty five percent), and supply chain continuity troubles (thirty six percent).
Organizations are able to stay clear of these procurement pitfalls by moving their contract management function to the cloud. When contracts are made, saved, and maintained in a centralized information repository, businesses can leverage their invest optimally, reduce costs, and mitigate risk.
Contract management automation is going to provide organizations with:
Main repository: Store all documents (riders, amendments, etc.) at a cloud database that’s accessible from anywhere
Configurable interface: A scalable and customizable interface which may be tailored to fit around business requirements Automated notifications: Trigger automated alerts to highlight contract milestones, renewals, and chances for renegotiation.
Performance monitoring: Track delivery time, product quality, pricing fluctuations, and adherence to purchasing terms/policies