The cost of buying, and conducting business, is on a stable rise. Commercial enterprises have started to regard procurement management as the top concern of theirs since it will take up a big share their overall spend. Considering most companies still hold on to their hand procurement methods, a complete revamp of their procurement capabilities is vital to keep pace with business demands.
In order to receive the basics right, organizations need to put into practice a good procure-to-pay progression and embrace the appropriate technology solutions. However, simply revamping the task and implementing a high technology item will not create the procurement function best-in-class.
Therefore, what does it take?
The key might differ from one organization to the next, but there are several procurement best practices that several leading corporations have used over time. Here is an outline of 5 procurement best practices that, when implemented the right way, may significantly lower costs, improve process efficiency, and have a good 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 methods help teams minimize the repetitive operational facets of procurement, freeing up team members to focus on strategic roles.
As technology will continue to become an integral component of our everyday activities, an entire digital transformation for procurement actions is inevitable. High-performing organizations are leading the pack on digital procurement practices.
Here’s what skilled digital procurement strategies like Gatewit Procurement Cloud Software is able to handle:
Dealer Management – Onboard, maintain, and handle vendors in an easy-to-use, efficient platform.
Invoice Approval – Approve your invoices on the go & perform quick three way matching.
Buy Requests – Fluid forms enable you to record, approve, and keep monitor of purchase requests.
Buy Orders – Issue POs and produce orders instantly from approved purchase 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 functions transparent is the baseline to unlock prospective savings and make headway into obtaining operational excellence. Invest transparency is the key to ensuring accountability and lessening opportunities for fraud in the procurement process.
Steps to make sure spend transparency in the procurement process:
Determine as well as implement procurement policies properly
Computer monitor and document every phase of the procurement process
Identify as well as manage a listing of approved supplier lists
Create fool proof procurement contracts
Conduct frequent audits By utilizing the power of data analytics and automation, organizations can eliminate dark 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 which provide items which are important, offer specialty services, perform regular maintenance, and finish one time urgent repairs. Although calling a specific vendor to order a merchandise or perhaps repair a faulty machine sounds easy, the task of qualifying as well as managing a supplier is actually anything but.
The procedure for determining a potential supplier, onboarding the vendor, scheduling the service, obtaining the invoice, and paying the vendor is actually overwhelming. When managed manually, just a straightforward practice of publishing one vendor invoice can take in several hours.
Dealer management tools offer a set of unique options to improve the source-to-contract process and enhance supplier engagement. eProcurement equipment offer extensive vendor dashboards, built contract templates, digital procurement processes, and extensive integration with accounting management methods.
A company is able to boost supplier engagement by:
Generating win win situations as well as trust
Treating suppliers as strategic partners
Monitoring supplier performance with specific KPIs
Enabling communication 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, businesses are continually looking for ways to control their spend and enhance the profits. Their primary focus is the procurement process. Thus, procurement teams need to continually examine their inventory and make an effort to make certain they stay optimum.
Best-in-class organizations seriously consider the inventory of theirs since the’ real cost’ of holding inventory is far greater than the cost of purchasing things. The rule of thumb for holding costs is actually between twenty along with thirty percent. And it isn’t just consumable items that go bad over a period of time everything from consumer electronics to clothing are actually subject to risks.
The key reason for out-of-balance inventories is poor planning and forecasting. Procurement leaders all over the world are slowly recognizing the power of better data driven insights. Nearly 50 % of respondents in 2018 Global CPO survey confided they’re leveraging advanced and intelligent insights for price as well as inventory optimization.
Here are a few questions organizations need to check out whether the inventory of theirs is optimized:
What are the ratio of operating inventory in terms of safety, replenishment, and excess inventory?
Does the procurement staff over or even under-purchase any products/services?
What’s the optimal frequency of purchases?
Are many buy requisitions as well as orders in sync with inventory levels?
5. Contract Management
Even though procurement teams attempt to negotiate potential savings in the sourcing stage, they never totally unlock the importance. Although the reasons vary, the most popular problem is a disorganized agreement management process.
A recent report on contract control indicates that nearly 81 % of organizations do not use any Contract Lifecycle Management (CLM) application. As a result, they have to deal with a selection of soreness points such as lack of consistency across contracts (fifty three percent), cumbersome processing (forty five percent), and supply chain continuity issues (36 percent).
Businesses are able to stay clear of these procurement pitfalls by moving their contract management function to the cloud. When contracts are created, saved, and maintained in a centralized information repository, businesses can leverage their invest optimally, reduce costs, and mitigate risk.
Agreement management automation will provide organizations with:
Main repository: Store all files (riders, amendments, etc.) in a cloud database that is accessible from anywhere
Configurable interface: A highly scalable as well as customizable interface which might be personalized to fit around company 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