The price of buying, and conducting business, is on a steady rise. Business enterprises have began to regard procurement management as their top concern since it takes up a big share their general spend. Considering most businesses still hold on to their manual procurement practices, a total revamp of their procurement functions 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 progression and embrace the appropriate technology strategies. Nevertheless, just revamping the process and implementing a high engineering product won’t make the procurement function best-in-class.
So, what does it take?
The answer could differ from one organization to another, but there are some procurement best practices which couple of leading corporations have used over time. Here is an outline of five procurement best practices that, when implemented correctly, may appreciably lower costs, improve procedure effectiveness, and have a good effect on the cost-income ratio.
1. Cloud-based procurement tools
Taking procurement digital is a crucial step in making procurement activities future-ready. Digital procurement solutions assist teams minimize the repetitive operational facets of procurement, freeing up associates to focus on strategic roles.
As technology continues to sign up as an essential part of the everyday activities of ours, a complete digital transformation for procurement activities is unavoidable. High-performing organizations are leading the pack on digital procurement habits.
Here’s what competent digital procurement strategies like 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 & do fast three way matching.
Buy Requests – Fluid types allow you to record, approve, and keep track of purchase requests.
Buy Orders – Issue POs and produce orders instantly 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 prospective savings and make headway into achieving operational excellence. Spend transparency is the key to ensuring accountability and minimizing possibilities 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 stage of the procurement process
Identify and handle a list of approved supplier lists
Create fool proof procurement contracts
Conduct frequent audits By harnessing the power of data analytics and automation, organizations can eliminate dim purchasing as well as maverick spend. Procurement technological innovation has much better visibility into the procure-to-pay cycle.
3. Supplier engagement
Every organization has a number of suppliers who provide items which are essential, offer specialty services, perform regular maintenance, and finish one-time urgent repairs. Although calling a certain vendor to purchase a merchandise or even repair a faulty machine may seem simple, the process of qualifying as well as dealing with a supplier is anything but.
The procedure for determining a potential supplier, onboarding the vendor, scheduling the service, obtaining the invoice, and paying the vendor is actually overpowering. If managed physically, only a fairly easy process of distributing one vendor invoice can take in various hours.
Supplier management tools have a set of unique options to boost the source-to-contract process and improve supplier engagement. eProcurement tools offer extensive vendor dashboards, pre-made contract templates, digital procurement processes, and substantial integration with accounting control systems.
A business can enhance 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 a few industries, organizations are constantly searching for ways to control their spend as well as help improve the bottom line. Their primary focus is the procurement process. And so, procurement teams have to continually review their inventory and try to ensure they remain optimum.
Best-in-class groups seriously consider their inventory since the’ real cost’ of holding inventory is much higher than the cost of ordering items. The rule of thumb for holding prices is actually between 20 along with 30 percent. And it isn’t 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 very poor planning and forecasting. Procurement leaders around the world are slowly realizing the power of more effective data-driven insights. Almost 50 % of respondents in 2018 Global CPO survey confided they are leveraging advanced and intelligent insights for cost as well as inventory seo.
Here are a few questions organizations need to check whether their inventory is optimized:
Do you know the ratio of operating inventory in terminology of safety, replenishment, and excess stock?
Does the procurement team over or perhaps under purchase any products/services?
What’s the optimal frequency of purchases?
Are several buy requisitions as well as orders in sync with inventory levels?
5. Contract Management
Even though procurement teams try 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 control suggests that about eighty one % of organizations don’t make use of some Contract Lifecycle Management (CLM) software. To be a result, they have to deal with a number of soreness points such as lack of consistency throughout contracts (53 percent), cumbersome processing (forty five percent), and supply chain continuity problems (36 percent).
Organizations are able to continue to be clear of these procurement pitfalls by moving their contract management function to the cloud. When contracts are created, saved, and maintained in a centralized data repository, organizations could leverage their spend well, reduce costs, as well as mitigate risk.
Contract 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 which might be tailored to fit around company requirements Automated notifications: Trigger automated alerts to emphasize contract milestones, renewals, and chances for renegotiation.
Performance monitoring: Track adherence, pricing fluctuations, product quality, and delivery time to purchasing terms/policies