The cost of buying, and working, is on a stable rise. Business enterprises have began to regard procurement management as their top priority since it will take up a huge share their overall invest. Considering most businesses still hold on to their hand procurement practices, a total revamp of their procurement functions is essential to keep pace with company needs.
In order to receive the basics right, organizations need to put into practice a good procure-to-pay process and embrace the appropriate technology solutions. Nevertheless, just revamping the process and utilizing a high technology product will not come up with the procurement function best-in-class.
Therefore, what does it take?
The answer may well differ from one organization to the next, but there are some procurement best practices that couple of leading businesses have used over time. Here is an outline of 5 procurement best practices which, when implemented correctly, may appreciably lower costs, improve method efficiency, and have a good effect on the cost income ratio.
1. Cloud-based procurement tools
Taking procurement digital is an essential step in making procurement activities future-ready. Digital procurement methods help teams lessen the repetitive operational parts of procurement, freeing up team members to concentrate on strategic roles.
As technology continues to sign up as an integral component of our everyday activities, a total digital transformation for procurement activities is inevitable. High-performing businesses are actually leading the pack on digital procurement habits.
Here is what skilled digital procurement strategies as Gatewit Procurement Cloud Software can handle:
Supplier Management – Onboard, maintain, and manage vendors in an easy-to-use, efficient platform.
Invoice Approval – Approve the invoices of yours on the go and do fast three-way matching.
Purchase Requests – Fluid forms allow you to record, approve, and keep monitor of purchase requests.
Buy Orders – Issue POs and generate orders automatically from approved purchase requests.
Spend 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.
[Free Webinar] Join us to find out just how digital procurement is able to provide efficiency and cost savings. Register Now!
2. Spend Transparency
Making procurement functions transparent would be the baseline to unlock possible savings and make headway into achieving operational excellence. Spend transparency is actually the key to ensuring accountability and lessening opportunities for fraud in the procurement process.
Measures to ensure spend transparency in the procurement process:
Define and implement procurement policies properly
Computer monitor as well as document every step of the procurement process
Identify as well as handle a list of approved supplier lists
Establish fool proof procurement contracts
Conduct repeated audits By utilizing the strength of data analytics as well as automation, organizations are able to wear away dark purchasing as well as maverick invest. Procurement technology offers much better visibility into the procure-to-pay cycle.
3. Supplier engagement
Every company has a number of suppliers that deliver products that are important , offer special services, perform regular maintenance, and finish one time urgent fixes. Although calling a certain vendor to buy a merchandise or repair a faulty machine seems simple, the process of qualifying as well as taking care of a supplier is actually anything but.
The process of figuring out a potential supplier, onboarding the vendor, scheduling the service, obtaining the invoice, and paying the vendor is overwhelming. When managed manually, just a fairly easy practice of distributing one vendor invoice is able to consume several hours.
Dealer management tools offer a set of unique features to greatly improve the source-to-contract process and enhance supplier engagement. eProcurement equipment offer comprehensive merchant dashboards, pre-made contract templates, digital procurement processes, and substantial integration with accounting relief systems.
A company can boost supplier engagement by:
Generating win win situations as well as trust
Treating suppliers as strategic partners
Checking supplier performance with specific KPIs
Enabling collaboration and communication 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 constantly looking for ways to control their invest and help improve the profits. Their primary focus is actually the procurement process. So, procurement teams need to frequently examine their inventory and try to ensure they stay optimal.
Best-in-class groups seriously consider the inventory of theirs since the’ real cost’ of holding inventory is far greater compared to the cost of ordering things. The rule of thumb for holding prices is somewhere between 20 and 30 percent. And it isn’t just consumable things that go bad over a period of time everything from consumer electronics to clothing are subject to risks.
The main reason for out-of-balance inventories is very poor planning and forecasting. Procurement executives all over the world are slowly recognizing the strength of more effective data-driven insights. Almost 50 % of respondents in 2018 Global CPO survey confided that they are leveraging intelligent and advanced insights for price tag as well as inventory optimization.
Below are a few questions organizations have to check out whether the inventory of theirs is optimized:
Do you know the ratio of operating inventory in terminology of safety, replenishment, and excess inventory?
Does the procurement team over- or under-purchase any products/services?
What’s the best frequency of purchases?
Are several purchase requisitions as well as orders in sync with inventory levels?
5. Contract Management
Although procurement teams try to negotiate possible savings in the sourcing stage, they never completely unlock the value. While the reasons vary, the most popular issue is a disorganized agreement management process.
A recent report on contract management shows that nearly 81 percent of organizations don’t use any Contract Lifecycle Management (CLM) application. As a result, they confront a selection of soreness points like lack of consistency throughout contracts (53 percent), cumbersome processing (45 percent), and supply chain continuity problems (36 percent).
Businesses can continue to be clear of these procurement pitfalls by moving their contract management system to the cloud. When contracts are made, stored, and maintained in a centralized data repository, organizations could leverage their spend optimally, reduce expenses, and mitigate risk.
Contract management automation will provide organizations with:
Main repository: Store all files (riders, amendments, etc.) at a cloud database that is accessible from anywhere
Configurable interface: A very scalable as well as customizable interface which may be tailor-made to fit about business demands 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