The price of purchasing, and conducting business, is on a steady rise. Business enterprises have started to regard procurement management as the top priority of theirs since it takes up a large share their general spend. Considering most organizations still hold on to their hand procurement methods, a complete revamp of the procurement functions of theirs is crucial to keep pace with business demands.
To be able to get the fundamentals right, organizations have to put into practice a highly effective procure-to-pay process and embrace the appropriate technology strategies. Nevertheless, just revamping the task and utilizing a top technology item will not make the procurement feature best-in-class.
So, what will it take?
The answer might vary from one organization to the next, but there are several procurement best practices which couple of leading corporations have used over time. Here is an outline of 5 procurement best practices which, when implemented correctly, may significantly lower costs, improve procedure efficiency, and have a good impact on the cost-income ratio.
1. Cloud-based procurement tools
Taking procurement digital is an important step in making procurement tasks future-ready. Digital procurement strategies assist teams minimize the repetitive operational parts of procurement, freeing up staff to concentrate on strategic roles.
As technology will continue to sign up as an essential component of the daily activities of ours, an entire digital transformation for procurement routines is inevitable. High-performing businesses are leading the pack on digital procurement habits.
Here’s what skilled digital procurement solutions 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.
Purchase Requests – Fluid forms help you record, approve, and keep monitor of buy requests.
Buy Orders – Issue POs and generate orders automatically from approved buy requests.
Spend Analytics – Generate actionable, data driven insights from your purchasing related data.
Integrations – Connect the procurement cloud of yours along with other essential finance software systems.
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2. Spend Transparency
Making procurement functions transparent will be the baseline to unlock possible savings and make headway into getting operational excellence. Invest transparency is the key to ensuring accountability and lessening programs for fraud in the procurement process.
Measures to ensure spend transparency in the procurement process:
Define as well as implement procurement policies properly
Monitor and document every phase of the procurement process
Identify as well as control a list of approved supplier lists
Establish fool proof procurement contracts
Conduct repeated audits By harnessing the power of data analytics and automation, organizations can eat away dim purchasing and maverick invest. Procurement technological innovation has better visibility into the procure-to-pay cycle.
3. Supplier engagement
Every company has a selection of suppliers who provide items that are important , offer specialty services, perform routine maintenance, and finish one-time immediate fixes. While calling a certain vendor to order a merchandise or even repair a faulty machine seems simple, the task of qualifying and dealing with 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 overpowering. If managed manually, just a straightforward practice of submitting one vendor invoice is able to consume various hours.
Dealer management tools have a set of unique features to improve the source-to-contract progression and boost supplier engagement. eProcurement tools provide extensive merchant dashboards, built contract templates, digital procurement processes, and substantial integration with accounting control systems.
An organization can boost supplier engagement by:
Generating win win circumstances as well as trust
Treating suppliers as strategic partners
Checking supplier performance with certain KPIs
Enabling communication and collaboration with vendors ☛ Free Guide: The Ultimate Guide to Managing Remote Procurement Teams.
4. Optimized inventory
As profit margins shrink in specific industries, organizations are constantly looking for ways to manage their spend and help improve the profits. The primary focus of theirs is actually the procurement process. So, procurement teams have to frequently review their inventory and make an effort to make sure they stay optimal.
Best-in-class organizations seriously consider their inventory since the’ real cost’ of holding inventory is far larger compared to the cost of purchasing things. The rule of thumb for holding prices is somewhere between twenty and 30 %. And it is not just consumable things that go bad over a period of time everything from consumer electronics to apparel are actually subject to risks.
The major reason behind out-of-balance inventories is very poor planning and forecasting. Procurement managers around the world are slowly recognizing the power of better data-driven insights. Nearly 50 % of respondents in 2018 Global CPO survey confided that they’re leveraging advanced and intelligent insights for price and inventory optimization.
Below are a few questions organizations have to check out whether the inventory of theirs is optimized:
What are the ratio of operating inventory in phrases of safety, replenishment, and extra inventory?
Does the procurement staff over- or perhaps under purchase any products/services?
What’s the optimal frequency of purchases?
Are a number of buy requisitions and orders in sync with inventory levels?
5. Contract Management
Although procurement teams attempt to negotiate potential savings in the sourcing stage, they never completely unlock the importance. Although the reasons vary, the most popular concern is a disorganized contract management process.
A recent report on contract management indicates that nearly eighty one percent of organizations do not make use of any Contract Lifecycle Management (CLM) application. To be a result, they have to deal with a number of soreness points including lack of consistency across contracts (53 percent), troublesome processing (forty five percent), and supply chain continuity issues (thirty six percent).
Businesses can continue to be clear of these procurement pitfalls by moving their contract management system to the cloud. When contracts are created, stored, and maintained in a centralized information repository, organizations could leverage their spend optimally, reduce expenses, as well as mitigate risk.
Agreement 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 highly scalable as well as customizable interface that could be personalized to fit around business needs Automated notifications: Trigger automated alerts to emphasize contract milestones, renewals, and chances for renegotiation.
Performance monitoring: Track delivery time, product quality, pricing fluctuations, and adherence to purchasing terms/policies