The cost of buying, and doing business, is on a stable rise. Business enterprises have began to regard procurement management as their top concern since it takes up a large share their overall spend. Considering most companies still hold on to their hand procurement methods, a total revamp of their procurement functions is vital to keep pace with company needs.
In order to obtain the fundamentals right, organizations need to carry out a good procure-to-pay process and embrace the right technology solutions. Nevertheless, just revamping the task and utilizing a top technology product will not make the procurement function best-in-class.
Therefore, what will it take?
The answer may well be different from one organization to the next, but there are several procurement best practices which couple of leading corporations have adopted over time. Here is an outline of 5 procurement best practices which, when implemented the right way, may substantially lower costs, improve process efficiency, and have a positive effect on the cost-income ratio.
1. Cloud based procurement tools
Taking procurement digital is a crucial 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 become an important part of the daily activities of ours, an entire digital transformation for procurement routines is unavoidable. High-performing businesses are actually leading the pack on digital procurement habits.
Here’s what competent digital procurement techniques like Gatewit Procurement Cloud Software can 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 and perform fast three-way matching.
Buy Requests – Fluid forms allow you to record, approve, and keep monitor of buy requests.
Purchase 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 the procurement cloud of yours with other important finance software systems.
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2. Spend Transparency
Making procurement capabilities transparent will be the baseline to unlock possible savings and make headway into achieving operational excellence. Invest transparency is actually the key to ensuring accountability and lessening opportunities for fraud in the procurement process.
Measures to make certain spend transparency in the procurement process:
Determine and implement procurement policies properly
Computer monitor and document every step of the procurement process
Identify as well as handle a summary of approved supplier lists
Create fool-proof procurement contracts
Conduct repeated audits By using the strength of data analytics and automation, organizations can eat away dim purchasing and maverick spend. Procurement technology provides much better visibility into the procure-to-pay cycle.
3. Supplier engagement
Every organization has a number of suppliers who deliver products that are important , offer special services, perform regular maintenance, and finish one-time urgent repairs. Although calling a certain vendor to buy a merchandise or repair a faulty machine sounds easy, the process of qualifying and controlling a supplier is anything but.
The procedure for determining a potential supplier, onboarding the vendor, scheduling the service, obtaining the invoice, and paying the vendor is overwhelming. When managed manually, only a straightforward practice of publishing one vendor invoice can take in various hours.
Supplier management tools have a set of unique features to help improve the source-to-contract process and boost supplier engagement. eProcurement tools offer extensive vendor dashboards, built contract templates, digital procurement processes, and substantial integration with accounting relief systems.
A business is able to boost supplier engagement by:
Generating win win situations as well as trust
Treating suppliers as strategic partners
Checking supplier performance with certain KPIs
Enabling collaboration and interaction with vendors ☛ Guide that is Free: The Ultimate Guide to Managing Remote Procurement Teams.
4. Optimized inventory
As profit margins shrink in a few industries, businesses are constantly searching for ways to control their spend as well as increase the bottom line. Their primary focus is the procurement process. Thus, procurement teams have to continually review the inventory of theirs and make an effort to ensure they stay optimal.
Best-in-class groups seriously consider their inventory since the’ real cost’ of holding inventory is significantly higher compared to the cost of ordering items. The rule of thumb for holding prices is actually between twenty along with thirty percent. And it isn’t only consumable things that go bad over a period of time-everything from consumer electronics to clothes are actually subject to risks.
The main reason for out-of-balance inventories is very poor planning and forecasting. Procurement managers around the world are slowly realizing the strength of better data driven insights. Almost fifty % of respondents in 2018 Global CPO survey confided they’re leveraging intelligent and advanced insights for cost and inventory optimization.
Here are a few questions organizations have to examine whether the inventory of theirs is optimized:
What are the ratio of operating inventory in terms of safety, replenishment, and excess stock?
Does the procurement staff over- or perhaps under purchase any products/services?
What is the optimal frequency of purchases?
Are several buy requisitions and orders in sync with inventory levels?
5. Contract Management
Although procurement teams strive to negotiate possible savings in the sourcing stage, they never completely unlock the importance. Even though the reasons vary, the most popular concern is a disorganized contract management process.
A recent report on contract management suggests that nearly 81 percent of organizations do not use some Contract Lifecycle Management (CLM) software. As a result, they confront a number of soreness points including lack of consistency throughout contracts (fifty three percent), troublesome processing (forty five percent), and supply chain continuity troubles (thirty six percent).
Organizations can continue to be clear of these procurement pitfalls by moving their contract management function to the cloud. When contracts are made, stored, and maintained in a centralized information repository, organizations could leverage their invest well, reduce costs, and also mitigate risk.
Contract management automation is going to provide organizations with:
Main repository: Store all documents (riders, amendments, etc.) at a cloud database that’s accessible from anywhere
Configurable interface: A scalable and customizable interface that could be tailor-made to fit around company 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