The cost of purchasing, and doing business, is on a stable rise. Businesses have started to regard procurement management as their top priority since it will take up a big share their general invest. Considering most businesses still hold on to the manual procurement practices of theirs, a total revamp of their procurement capabilities is essential to keep pace with company demands.
In order to obtain the basics right, organizations need to put into practice an effective procure-to-pay process and embrace the proper technology solutions. Nevertheless, simply revamping the process and employing a high technology item won’t come up with the procurement function best-in-class.
Therefore, what will it take?
The solution may well differ from one group to the next, but there are several procurement best practices that several leading corporations have used over time. Here’s an outline of 5 procurement best practices which, when implemented properly, could significantly lower costs, improve process effectiveness, and have a good impact 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 methods help teams reduce the repetitive operational parts of procurement, freeing up team members to concentrate on strategic roles.
As technology will continue to become an integral part of our daily activities, a complete digital transformation for procurement actions is unavoidable. High-performing businesses are actually leading the pack on digital procurement habits.
Here’s what competent digital procurement strategies as Gatewit Procurement Cloud Software can handle:
Dealer Management – Onboard, maintain, and handle vendors in an easy-to-use, effective platform.
Invoice Approval – Approve the invoices of yours on the go & perform fast three way matching.
Buy Requests – Fluid forms help you record, approve, and keep monitor of purchase requests.
Purchase Orders – Issue POs and create 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 vital 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 getting operational excellence. Invest transparency is actually the key to ensuring accountability and minimizing opportunities for fraud in the procurement process.
Steps to ensure invest transparency in the procurement process:
Determine as well as implement procurement policies properly
Computer monitor as well as document every step of the procurement process
Identify and handle a listing of approved supplier lists
Create fool-proof procurement contracts
Conduct repeated audits By harnessing the strength of data analytics as well as automation, organizations can wear away dim purchasing and maverick invest. Procurement technology offers much better visibility into the procure-to-pay cycle.
3. Supplier engagement
Every organization has a number of suppliers who provide important items, provide specialty services, perform regular maintenance, and finish one time immediate repairs. Although calling a specific vendor to buy a merchandise or perhaps repair a faulty machine seems simple, the process of qualifying as well as handling 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 manually, only an easy process of submitting one vendor invoice can consume several hours.
Supplier management tools offer a set of unique features to better the source-to-contract process and improve supplier engagement. eProcurement tools offer extensive merchant dashboards, built contract templates, digital procurement processes, and extensive integration with accounting control systems.
A company can boost supplier engagement by:
Generating win-win circumstances as well as trust
Treating suppliers as strategic partners
Checking supplier performance with specific KPIs
Enabling interaction as well as collaboration with vendors ☛ Free Guide: The Ultimate Guide to Managing Remote Procurement Teams.
4. Optimized inventory
As profit margins shrink in certain industries, businesses are continually searching for ways to manage their spend as well as help improve the bottom line. Their main focus is the procurement process. Thus, procurement teams need to continually review their inventory and attempt to ensure they stay optimal.
Best-in-class groups pay close attention to the inventory of theirs since the’ real cost’ of holding inventory is significantly higher compared to the price of purchasing things. The rule of thumb for holding costs is somewhere between twenty as well as 30 percent. And it isn’t only consumable things that go bad over a period of time everything from consumer electronics to clothing are subject to risks.
The main reason behind out-of-balance inventories is poor planning and forecasting. Procurement leaders around the world are slowly recognizing the power of more effective data-driven insights. Almost 50 % of respondents in 2018 Global CPO survey confided that they’re leveraging intelligent and advanced insights for price tag as well as inventory optimization.
Here are a few issues organizations need to investigate whether their inventory is optimized:
What are the ratio of operating inventory in phrases of safety, replenishment, and excess inventory?
Does the procurement team over- or even under-purchase any products/services?
What is the perfect frequency of purchases?
Are a number of buy requisitions and orders in sync with inventory levels?
5. Contract Management
Even though procurement teams try to negotiate potential savings in the sourcing stage, they never totally unlock the importance. Although the reasons vary, the most common problem is a disorganized contract management process.
A recent report on contract control suggests that nearly eighty one percent of organizations don’t use some Contract Lifecycle Management (CLM) application. To be a result, they have to deal with a selection of soreness points such as lack of consistency across contracts (53 percent), cumbersome processing (45 percent), and supply chain continuity issues (thirty six percent).
Organizations are able to continue to be clear of these procurement pitfalls by moving their contract management process to the cloud. When contracts are made, stored, and maintained in a centralized information repository, businesses could leverage their spend optimally, reduce expenses, 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 might be tailored to fit around business demands Automated notifications: Trigger automated alerts to highlight contract milestones, renewals, and chances for renegotiation.
Performance monitoring: Track delivery time, product quality, pricing fluctuations, and adherence to purchasing terms/policies