The price of buying, and operating, is on a stable rise. Businesses have began to regard procurement management as their top concern since it will take up a large share their overall spend. Considering most companies still hold on to their manual procurement practices, a full revamp of their procurement capabilities is vital to keep pace with company needs.
In order to receive the fundamentals right, organizations need to implement a highly effective procure-to-pay process and embrace the correct technology strategies. Nevertheless, simply revamping the task and implementing a premier technology product won’t make the procurement feature best-in-class.
Thus, what does it take?
The answer may well be different from one group to another, but there are several procurement best practices that several leading companies have adopted over time. Here’s an outline of five procurement best practices which, when implemented properly, can significantly lower costs, improve process efficiency, and have a positive effect on the cost-income ratio.
1. Cloud based procurement tools
Taking procurement digital is an essential step in making procurement tasks future ready. Digital procurement methods help teams minimize the repetitive operational parts of procurement, freeing up team members to concentrate on strategic roles.
As technology continues to be an important element of the everyday activities of ours, a total digital transformation for procurement actions is inevitable. High-performing businesses are leading the pack on digital procurement habits.
Here’s what skilled digital procurement methods like Gatewit Procurement Cloud Software is able to 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 & perform quick three way matching.
Buy Requests – Fluid forms allow you to capture, approve, and keep track of buy requests.
Purchase 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 the procurement cloud of yours along with other important finance software systems.
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2. Spend Transparency
Making procurement capabilities transparent is the baseline to unlock potential savings and make headway into achieving operational excellence. Invest transparency is the key to ensuring accountability and minimizing programs for fraud in the procurement process.
Measures to make certain spend transparency in the procurement process:
Determine and implement procurement policies properly
Monitor and document every step of the procurement process
Identify as well as manage a list of approved supplier lists
Create fool proof procurement contracts
Conduct frequent audits By utilizing the strength of data analytics and automation, organizations are able to eliminate dim purchasing as well as maverick invest. Procurement technological innovation has better visibility into the procure-to-pay cycle.
3. Supplier engagement
Every organization has a selection of suppliers who deliver items which are essential, provide special services, perform routine maintenance, and finish one time urgent fixes. Although calling a certain vendor to buy a merchandise or perhaps repair a faulty machine may seem easy, the task of qualifying and dealing with 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 actually overpowering. When managed physically, just a simple process of submitting one vendor invoice is able to ingest a number of hours.
Dealer management tools provide a set of special options to better the source-to-contract process and enhance supplier engagement. eProcurement equipment provide comprehensive vendor dashboards, pre-made contract templates, digital procurement processes, and considerable integration with accounting management systems.
An organization can improve supplier engagement by:
Generating win win situations as well as trust
Treating suppliers as strategic partners
Monitoring supplier performance with certain 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 certain industries, organizations are always looking for ways to manage their invest as well as enhance the bottom line. Their primary focus is actually the procurement process. So, procurement teams have to constantly review their inventory and try to make certain they remain optimum.
Best-in-class organizations pay close attention to their inventory since the’ real cost’ of holding inventory is a lot greater than the cost of ordering items. The rule of thumb for holding costs is between 20 as well as 30 %. And it isn’t just consumable items that go bad over a period of time-everything from consumer electronics to apparel are actually subject to risks.
The major reason behind out-of-balance inventories is very poor planning and forecasting. Procurement leaders all over the world are slowly realizing the strength of better data-driven insights. About 50 % of respondents in 2018 Global CPO survey confided they’re leveraging advanced and intelligent insights for price as well as inventory optimization.
Below are a few questions organizations need to investigate whether their inventory is optimized:
What are the ratio of operating inventory in terminology of safety, replenishment, and excess inventory?
Does the procurement staff over or under-purchase any products/services?
What’s the perfect frequency of purchases?
Are all buy requisitions as well as orders in sync with inventory levels?
5. Contract Management
Although procurement teams try to negotiate prospective savings in the sourcing stage, they never completely unlock the importance. Although the reasons vary, the most common issue is a disorganized contract management process.
A recent report on contract management shows that about 81 percent of organizations do not make use of any Contract Lifecycle Management (CLM) software. To be a result, they confront a number of soreness points like lack of consistency throughout contracts (53 percent), cumbersome processing (45 percent), and supply chain continuity problems (36 percent).
Organizations are able to continue to be clear of these procurement pitfalls by moving their contract management system to the cloud. When contracts are created, stored, and maintained in a centralized information repository, organizations can leverage their spend well, reduce expenses, and mitigate risk.
Contract management automation is going to provide organizations with:
Central repository: Store all files (riders, amendments, etc.) in a cloud database that’s accessible from anywhere
Configurable interface: A scalable and customizable interface which may be customized to fit around business requirements 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