The price of buying, and conducting business, is on a steady rise. Business organizations have began to regard procurement management as their top priority since it takes up a huge share their general spend. Considering most organizations still hold on to their manual procurement methods, a total revamp of the procurement capabilities of theirs is important to keep pace with business needs.
To be able to get the basics right, organizations have to carry out a highly effective procure-to-pay process and embrace the right technology solutions. Nevertheless, simply revamping the process and employing a top engineering product won’t make the procurement feature best-in-class.
Thus, what does it take?
The key might differ from one group to another, but there are some procurement best practices which several leading companies have used over time. Here is an outline of five procurement best practices which, when implemented the right way, could significantly lower costs, improve method effectiveness, and have a positive effect on the cost-income ratio.
1. Cloud-based procurement tools
Taking procurement digital is a critical step in making procurement tasks future-ready. Digital procurement solutions assist teams minimize the repetitive operational areas of procurement, freeing up staff to focus on strategic roles.
As technology continues to be an integral part of the everyday activities of ours, a complete digital transformation for procurement routines is inevitable. High-performing organizations are leading the pack on digital procurement practices.
Here is what competent digital procurement solutions as 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 the invoices of yours on the go & do fast three-way matching.
Purchase Requests – Fluid forms enable you to record, approve, and keep track of buy requests.
Buy Orders – Issue POs and produce 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 along with other essential finance software systems.
[Free Webinar] Join us to find out exactly how digital procurement can give efficiency as well as cost savings. Register Now!
2. Spend Transparency
Making procurement capabilities transparent will be the baseline to unlock possible savings and make headway into obtaining operational excellence. Invest transparency is actually the key to ensuring accountability and minimizing possibilities for fraud in the procurement process.
Steps to ensure invest transparency in the procurement process:
Define as well as implement procurement policies properly
Computer monitor and document every stage of the procurement process
Identify as well as manage a summary of approved supplier lists
Create fool-proof procurement contracts
Conduct frequent audits By utilizing the strength of data analytics as well as automation, organizations can eat away dark purchasing as well as maverick invest. Procurement technological innovation has much better visibility into the procure-to-pay cycle.
3. Supplier engagement
Every organization has a selection of suppliers who deliver items that are essential , provide specialty services, perform regular maintenance, and complete one time urgent fixes. Although calling a specific vendor to buy a merchandise or even repair a faulty machine may seem easy, the process of qualifying and dealing with a supplier is anything but.
The process of figuring out a prospective supplier, onboarding the vendor, scheduling the service, obtaining the invoice, and paying the vendor is actually overpowering. If managed manually, only an easy practice of distributing one vendor invoice can consume several hours.
Supplier management tools have a set of special options to help improve the source-to-contract process and boost supplier engagement. eProcurement tools provide comprehensive vendor dashboards, built contract templates, digital procurement processes, and intensive integration with accounting management methods.
An organization can enhance supplier engagement by:
Generating win-win circumstances as well as trust
Treating suppliers as strategic partners
Checking supplier performance with certain KPIs
Enabling communication as well as 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 constantly searching for ways to control their spend and help improve the bottom line. The main focus of theirs is the procurement process. Thus, procurement teams need to continually examine the inventory of theirs and attempt to make sure they stay optimum.
Best-in-class groups seriously consider the inventory of theirs since the’ real cost’ of holding inventory is a lot higher than the price of purchasing items. The rule of thumb for holding prices is between 20 as well as 30 percent. And it is not just consumable items that go bad over a period of time-everything from consumer electronics to apparel are actually subject to risks.
The main reason behind out-of-balance inventories is very poor planning and forecasting. Procurement managers all over the world are slowly recognizing the power of better data driven insights. Nearly 50 % of respondents in 2018 Global CPO survey confided that they’re leveraging advanced and intelligent insights for price as well as inventory seo.
Below are a few questions organizations need to determine whether their inventory is optimized:
Do you know the ratio of operating inventory in phrases of safety, replenishment, and extra inventory?
Does the procurement team over- or perhaps under purchase any products/services?
What’s the optimal frequency of purchases?
Are a number of buy requisitions and orders in sync with inventory levels?
5. Contract Management
Even though procurement teams strive to negotiate possible savings in the sourcing stage, they never completely unlock the value. Although the reasons vary, the most popular problem is a disorganized arrangement management process.
A recent report on contract management indicates that nearly 81 percent of organizations don’t make use of some Contract Lifecycle Management (CLM) application. As a result, they face a selection of pain points like lack of consistency throughout contracts (fifty three percent), cumbersome processing (forty five percent), and supply chain continuity issues (thirty six percent).
Businesses are able to stay clear of these procurement pitfalls by moving their contract management process to the cloud. When contracts are created, saved, and maintained in a centralized information repository, businesses could leverage their invest optimally, reduce expenses, and also mitigate risk.
Agreement 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 scalable and customizable interface which could be tailored to fit around company requirements 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