The cost of buying, and conducting business, is on a stable rise. Business enterprises have began to regard procurement management as the top priority of theirs since it will take up a big share their overall spend. Considering most organizations still hold on to the manual procurement practices of theirs, a full revamp of their procurement functions is vital to keep pace with business needs.
To be able to obtain the basics right, organizations need to carry out a good procure-to-pay progression and embrace the proper technology strategies. However, simply revamping the process and implementing a high technology item won’t come up with the procurement function best-in-class.
Therefore, what will it take?
The key could be different from one group to another, but there are several procurement best practices that couple of leading businesses have adopted over time. Here’s an outline of 5 procurement best practices which, when implemented the right way, could appreciably lower costs, improve procedure effectiveness, and have a positive effect 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 solutions help teams reduce the repetitive operational areas of procurement, freeing up associates to concentrate on strategic roles.
As technology will continue to become an integral component of our everyday activities, a complete digital transformation for procurement actions is inevitable. High-performing businesses are actually leading the pack on digital procurement habits.
Here is what skilled digital procurement methods as Gatewit Procurement Cloud Software is able to 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 & conduct fast three-way matching.
Purchase Requests – Fluid forms help you record, approve, and keep track of purchase requests.
Buy Orders – Issue POs and generate orders instantly from approved buy requests.
Spend Analytics – Generate actionable, data-driven insights from your purchasing related data.
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 possible savings and make headway into achieving operational excellence. Invest transparency is actually the key to ensuring accountability and minimizing programs for fraud in the procurement process.
Measures to make sure spend transparency in the procurement process:
Define and implement procurement policies properly
Monitor as well as document every step of the procurement process
Identify as well as control a summary of approved supplier lists
Create fool-proof procurement contracts
Conduct regular audits By harnessing the power of data analytics and automation, organizations can wear away dark purchasing and maverick spend. Procurement technology provides better visibility into the procure-to-pay cycle.
3. Supplier engagement
Every company has a number of suppliers who provide essential products, offer special services, perform regular maintenance, and complete one time urgent repairs. Although calling a specific vendor to order a merchandise or even repair a faulty machine may seem easy, the process of qualifying and taking care of a supplier is anything but.
The process of determining a potential supplier, onboarding the vendor, scheduling the service, obtaining the invoice, and paying the vendor is actually overwhelming. When managed physically, just a simple practice of submitting one vendor invoice is able to take in a number of hours.
Supplier management tools have a set of special features to help improve the source-to-contract progression and enhance supplier engagement. eProcurement tools provide comprehensive vendor dashboards, pre-made contract templates, digital procurement processes, and extensive integration with accounting control systems.
A company is able to improve supplier engagement by:
Generating win-win situations as well as trust
Treating suppliers as strategic partners
Checking supplier performance with specific KPIs
Enabling communication and collaboration with vendors ☛ Guide which is Free: The Ultimate Guide to Managing Remote Procurement Teams.
4. Optimized inventory
As profit margins shrink in specific industries, businesses are always searching for ways to control their spend and increase the bottom line. The primary focus of theirs is actually the procurement process. So, procurement teams have to frequently examine the inventory of theirs and try to make sure they stay optimal.
Best-in-class groups pay close attention to their inventory since the’ real cost’ of holding inventory is way higher than the price of ordering things. The rule of thumb for holding costs is between 20 and 30 %. And it isn’t just consumable items that go bad over a period of time everything from consumer electronics to clothing are subject to risks.
The major reason for out-of-balance inventories is very poor planning and forecasting. Procurement executives around the world are slowly recognizing the power of better data-driven insights. About fifty % of respondents in 2018 Global CPO survey confided that they are leveraging advanced and intelligent insights for cost and inventory optimization.
Here are a few issues organizations need to check whether the inventory of theirs is optimized:
Do you know the ratio of operating inventory in phrases of safety, replenishment, and excess inventory?
Does the procurement team over or perhaps under-purchase any products/services?
What is the perfect frequency of purchases?
Are all purchase 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 value. Although the reasons vary, the most popular issue is a disorganized arrangement management process.
A recent report on contract relief indicates that about 81 % of organizations don’t use some Contract Lifecycle Management (CLM) application. Being a result, they face a selection of pain points including lack of consistency across contracts (53 percent), troublesome processing (forty five percent), and supply chain continuity issues (thirty six percent).
Businesses can stay clear of these procurement pitfalls by moving their contract management system to the cloud. When contracts are made, saved, and maintained in a centralized information repository, businesses could leverage their spend optimally, reduce expenses, and also mitigate risk.
Contract management automation will provide organizations with:
Main repository: Store all files (riders, amendments, etc.) at a cloud database that’s accessible from anywhere
Configurable interface: A highly scalable and customizable interface that may be tailored to fit around business needs 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