The cost of purchasing, and operating, is on a constant rise. Business enterprises have started to regard procurement management as their top priority since it takes up a big share their general spend. Considering most organizations still hold on to the hand procurement practices of theirs, a total revamp of their procurement functions is vital to keep pace with business needs.
In order to get the basics right, organizations need to carry out a good procure-to-pay process and embrace the right technology strategies. Nonetheless, just revamping the process and implementing a high technology product won’t come up with the procurement feature best-in-class.
Thus, what does it take?
The key might differ from one group to another, but there are several procurement best practices which several leading companies have adopted over time. Here is an outline of 5 procurement best practices which, when implemented properly, can appreciably lower costs, improve procedure efficiency, and have a positive effect on the cost-income ratio.
1. Cloud based procurement tools
Taking procurement digital is an essential step in making procurement tasks future-ready. Digital procurement solutions assist teams lessen the repetitive operational facets of procurement, freeing up team members to focus on strategic roles.
As technology continues to sign up as an integral part of the everyday activities of ours, an entire digital transformation for procurement actions is unavoidable. High-performing businesses are leading the pack on digital procurement habits.
Here’s what skilled digital procurement solutions like Gatewit Procurement Cloud Software is able to handle:
Supplier Management – Onboard, maintain, and control vendors in an easy-to-use, effective platform.
Invoice Approval – Approve your invoices on the go and conduct quick three-way matching.
Purchase Requests – Fluid types help you record, approve, and keep monitor of purchase requests.
Buy Orders – Issue POs and create orders instantly 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 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 obtaining operational excellence. Invest transparency is actually the key to ensuring accountability and minimizing possibilities for fraud in the procurement process.
Measures to make certain invest transparency in the procurement process:
Define as well as 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 regular audits By harnessing the strength of data analytics as well as automation, organizations can eliminate dim purchasing and maverick invest. Procurement engineering offers much better visibility into the procure-to-pay cycle.
3. Supplier engagement
Every company has a selection of suppliers who deliver important products, provide special services, perform routine maintenance, and complete one time immediate fixes. While calling a specific vendor to purchase a merchandise or repair a faulty machine sounds simple, the task of qualifying as well as controlling a supplier is actually anything but.
The procedure for identifying a potential supplier, onboarding the vendor, scheduling the service, obtaining the invoice, and paying the vendor is overwhelming. When managed physically, only an easy process of publishing one vendor invoice can consume various hours.
Supplier management tools provide a set of unique options to enhance the source-to-contract progression and improve supplier engagement. eProcurement tools offer up comprehensive vendor dashboards, built contract templates, digital procurement processes, and intensive integration with accounting control methods.
An organization can enhance supplier engagement by:
Generating win win circumstances and trust
Treating suppliers as strategic partners
Checking supplier performance with specific KPIs
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4. Optimized inventory
As profit margins shrink in certain industries, organizations are constantly looking for ways to control their spend as well as increase the profits. The primary focus of theirs is the procurement process. So, procurement teams need to frequently review the inventory of theirs and make an effort to make sure they remain optimum.
Best-in-class groups pay close attention to their inventory since the’ real cost’ of holding inventory is far higher than the cost of ordering things. The rule of thumb for holding costs is actually somewhere between 20 and 30 %. And it is not only consumable things that go bad over a period of time everything from consumer electronics to apparel are subject to risks.
The main reason behind out-of-balance inventories is very poor planning and forecasting. Procurement managers all over the world are slowly recognizing the strength of better data driven insights. Almost fifty % of respondents in 2018 Global CPO survey confided that they’re leveraging advanced and intelligent insights for price as well as inventory seo.
Here are a few questions organizations have to examine whether their inventory is optimized:
What are the ratio of operating inventory in terminology of safety, replenishment, and extra stock?
Does the procurement team over- or under purchase any products/services?
What’s the best frequency of purchases?
Are all buy requisitions as well as orders in sync with inventory levels?
5. Contract Management
Although procurement teams attempt to negotiate potential savings in the sourcing stage, they never totally unlock the importance. While the reasons vary, the most common problem is a disorganized contract management process.
A recent report on contract control suggests that nearly 81 % of organizations do not make use of any Contract Lifecycle Management (CLM) software. As a result, they face a selection of pain points like lack of consistency across contracts (53 percent), cumbersome processing (45 percent), and supply chain continuity problems (36 percent).
Organizations can remain clear of these procurement pitfalls by moving their contract management system to the cloud. When contracts are made, saved, and maintained in a centralized data repository, organizations can leverage their spend well, reduce costs, as well as mitigate risk.
Agreement management automation will 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 which may be tailored to fit around company requirements Automated notifications: Trigger automated alerts to spotlight contract milestones, renewals, and chances for renegotiation.
Performance monitoring: Track adherence, pricing fluctuations, product quality, and delivery time to purchasing terms/policies