The price of purchasing, and working, is on a stable rise. Business enterprises have began to regard procurement management as their top concern since it will take up a big share their general spend. Considering most companies still hold on to their manual procurement methods, a total revamp of the procurement functions of theirs is important to keep pace with company demands.
In order to obtain the basics right, organizations need to carry out an effective procure-to-pay process and embrace the correct technology strategies. Nevertheless, simply revamping the process and utilizing a high engineering item will not create the procurement function best-in-class.
Thus, what will it take?
The key may differ from one group to another, but there are some procurement best practices that several leading companies have used over time. Here’s an outline of five procurement best practices which, when implemented the right way, could significantly lower costs, improve method effectiveness, and have a good effect on the cost income ratio.
1. Cloud based procurement tools
Taking procurement digital is a vital step in making procurement activities future-ready. Digital procurement strategies assist teams lessen the repetitive operational areas of procurement, freeing up team members to concentrate on strategic roles.
As technology continues to sign up as an essential component of the daily activities of ours, a complete digital transformation for procurement actions is inevitable. High-performing companies are leading the pack on digital procurement practices.
Here’s what skilled digital procurement methods as Gatewit Procurement Cloud Software can 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.
Purchase Requests – Fluid forms enable you to capture, 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 the purchasing-related data of yours.
Integrations – Connect your procurement cloud with other important finance software systems.
[Free Webinar] Join us to find out just how digital procurement can offer efficiency and cost savings. Register Now!
2. Spend Transparency
Making procurement capabilities transparent will be the baseline to unlock potential savings and make headway into obtaining operational excellence. Invest transparency is the key to ensuring accountability and lessening possibilities for fraud in the procurement process.
Steps to make sure invest transparency in the procurement process:
Define as well as implement procurement policies properly
Computer monitor and document every stage of the procurement process
Identify as well as manage a summary of approved supplier lists
Create fool-proof procurement contracts
Conduct frequent audits By harnessing the power of data analytics and automation, organizations can eat away dark purchasing as well as maverick invest. Procurement technology has better visibility into the procure-to-pay cycle.
3. Supplier engagement
Every organization has a number of suppliers that provide products which are important, offer special services, perform regular maintenance, and finish one time immediate fixes. While calling a specific vendor to buy a merchandise or repair a faulty machine may seem simple, the task of qualifying as well as managing a supplier is anything but.
The process of identifying a prospective supplier, onboarding the vendor, scheduling the service, obtaining the invoice, and paying the vendor is overpowering. When managed manually, only a straightforward process of submitting one vendor invoice can take in a number of hours.
Dealer management tools have a set of unique features to better the source-to-contract progression and enhance supplier engagement. eProcurement tools offer up extensive vendor dashboards, pre-made contract templates, digital procurement processes, and extensive integration with accounting relief systems.
A company can develop supplier engagement by:
Generating win-win situations and trust
Treating suppliers as strategic partners
Monitoring supplier performance with specific KPIs
Enabling collaboration as well as interaction 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 continually looking for ways to control their spend as well as help improve the profits. The main focus of theirs is actually the procurement process. And so, procurement teams have to continually review their inventory and try to make certain they stay optimal.
Best-in-class groups pay attention to their inventory since the’ real cost’ of holding inventory is far higher compared to the price of ordering things. The rule of thumb for holding costs is actually somewhere between twenty as well as thirty %. 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 key reason behind out-of-balance inventories is poor planning and forecasting. Procurement leaders all over the world are slowly recognizing the strength of better data-driven insights. Almost 50 % of respondents in 2018 Global CPO survey confided that they’re leveraging intelligent and advanced insights for cost and inventory seo.
Below are a few questions organizations need to investigate whether the inventory of theirs is optimized:
What are the ratio of operating inventory in terms of safety, replenishment, and extra stock?
Does the procurement team over- or under purchase any products/services?
What is the optimal frequency of purchases?
Are a number of buy requisitions as well as orders in sync with inventory levels?
5. Contract Management
Even though procurement teams strive to negotiate prospective savings in the sourcing stage, they never completely unlock the importance. While the reasons vary, the most popular concern is a disorganized contract management process.
A recent report on contract control suggests that nearly 81 % of organizations don’t make use of some Contract Lifecycle Management (CLM) application. Being a result, they have to deal with a number of pain points such as lack of consistency across contracts (53 percent), cumbersome processing (45 percent), and supply chain continuity troubles (thirty six percent).
Businesses are able to continue to be clear of these procurement pitfalls by moving their contract management process to the cloud. When contracts are created, stored, and maintained in a centralized data repository, businesses could leverage their spend well, reduce costs, as well as mitigate risk.
Contract management automation will provide organizations with:
Main repository: Store all documents (riders, amendments, etc.) at a cloud database that is accessible from anywhere
Configurable interface: A very scalable as well as customizable interface which might be customized to fit around company requirements Automated notifications: Trigger automated alerts to spotlight contract milestones, renewals, and chances for renegotiation.
Performance monitoring: Track delivery time, product quality, pricing fluctuations, and adherence to purchasing terms/policies