The price of buying, and conducting business, is on a stable rise. Businesses have began to regard procurement management as the top concern of theirs since it takes up a large share their overall invest. Considering most businesses still hold on to their manual procurement methods, a full revamp of their procurement capabilities is vital to keep pace with business demands.
To be able to obtain the fundamentals right, organizations have to carry out a highly effective procure-to-pay progression and embrace the correct technology strategies. But, simply revamping the task and implementing a top technology item won’t make the procurement function best-in-class.
Thus, what does it take?
The solution might be different from one organization to the next, but there are several procurement best practices which couple of leading corporations have used over time. Here’s an outline of 5 procurement best practices which, when implemented correctly, can significantly lower costs, improve procedure efficiency, 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 activities future-ready. Digital procurement strategies assist teams minimize the repetitive operational parts of procurement, freeing up team members to center on strategic roles.
As technology continues to be an essential part of the everyday activities of ours, an entire digital transformation for procurement routines is unavoidable. High-performing businesses are leading the pack on digital procurement practices.
Here’s what competent digital procurement techniques like Gatewit Procurement Cloud Software is able to handle:
Dealer Management – Onboard, maintain, and handle vendors in an easy-to-use, effective platform.
Invoice Approval – Approve your invoices on the go & perform fast three-way matching.
Buy Requests – Fluid types enable you to record, approve, and keep monitor of buy requests.
Buy Orders – Issue POs and create orders automatically from approved purchase requests.
Invest Analytics – Generate actionable, data-driven insights from your purchasing-related data.
Integrations – Connect your procurement cloud with other vital finance software systems.
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2. Spend Transparency
Making procurement functions transparent is the baseline to unlock potential savings and make headway into obtaining operational excellence. Invest transparency is actually the key to ensuring accountability and minimizing programs for fraud in the procurement process.
Measures to make certain invest transparency in the procurement process:
Define and implement procurement policies properly
Computer monitor and document every stage of the procurement process
Identify as well as control a list of approved supplier lists
Create fool proof procurement contracts
Conduct frequent audits By using the power of data analytics and automation, organizations are able to eliminate dim purchasing as well as maverick spend. Procurement technological innovation has much better visibility into the procure-to-pay cycle.
3. Supplier engagement
Every organization has a number of suppliers who deliver items which are important, offer specialty services, perform routine maintenance, and finish one time urgent fixes. Although calling a particular vendor to purchase a merchandise or repair a faulty machine may seem easy, the task of qualifying as well as handling a supplier is actually 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. If managed physically, only a straightforward process of submitting one vendor invoice is able to consume several hours.
Dealer management tools provide a set of unique options to boost the source-to-contract progression and enhance supplier engagement. eProcurement equipment provide extensive vendor dashboards, built contract templates, digital procurement processes, and extensive integration with accounting management systems.
A business is able to develop supplier engagement by:
Generating win win situations and trust
Treating suppliers as strategic partners
Monitoring supplier performance with specific KPIs
Enabling interaction and collaboration 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 continually searching for ways to control their invest as well as greatly improve the profits. The main focus of theirs is the procurement process. And so, procurement teams have to frequently examine the inventory of theirs and make an effort to make certain they stay optimal.
Best-in-class groups pay close attention to the inventory of theirs since the’ real cost’ of holding inventory is significantly greater compared to the cost of purchasing items. The rule of thumb for holding costs is somewhere between 20 along with 30 %. And it is not only consumable products that go bad over a period of time-everything from consumer electronics to clothes are actually subject to risks.
The major reason behind out-of-balance inventories is very poor planning and forecasting. Procurement leaders around the world are slowly recognizing the strength of more effective data-driven insights. Almost fifty % of respondents in 2018 Global CPO survey confided they are leveraging advanced and intelligent insights for price tag as well as inventory optimization.
Here are a few questions organizations have to examine whether their inventory is optimized:
What are the ratio of operating inventory in terms 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 several buy requisitions and orders in sync with inventory levels?
5. Contract Management
Although procurement teams attempt to negotiate possible savings in the sourcing stage, they never completely unlock the value. Even though the reasons vary, the most popular problem is a disorganized arrangement management process.
A recent report on contract control suggests that about 81 % of organizations don’t make use of some Contract Lifecycle Management (CLM) software. Being a result, they have to deal with a selection of pain points such as lack of consistency throughout contracts (53 percent), cumbersome processing (forty five percent), and supply chain continuity problems (36 percent).
Organizations are able to stay clear of these procurement pitfalls by moving their contract management function to the cloud. When contracts are made, saved, and maintained in a centralized information repository, businesses could leverage their spend optimally, reduce costs, and mitigate risk.
Contract management automation will provide organizations with:
Central repository: Store all documents (riders, amendments, etc.) at a cloud database that is accessible from anywhere
Configurable interface: A highly scalable as well as customizable interface that may be customized to fit about company 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