The price of purchasing, and working, is on a constant rise. Business enterprises have started to regard procurement management as the top concern of theirs since it takes up a large share their general spend. Considering most organizations still hold on to the manual procurement practices of theirs, the full revamp of their procurement capabilities is important to keep pace with business demands.
To be able to get the basics right, organizations need to put into practice an effective procure-to-pay process and embrace the right technology solutions. Nevertheless, simply revamping the process and utilizing a premier engineering item won’t make the procurement feature best-in-class.
Therefore, what will it take?
The answer could be different from one organization to the next, but there are some procurement best practices which several leading corporations have adopted over time. Here is an outline of five procurement best practices which, when implemented properly, could substantially 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 reduce the repetitive operational areas of procurement, freeing up team members to concentrate on strategic roles.
As technology will continue to sign up as an essential component of our everyday activities, a total digital transformation for procurement activities is inevitable. High-performing organizations are actually leading the pack on digital procurement practices.
Here is what competent digital procurement solutions like Gatewit Procurement Cloud Software can handle:
Supplier Management – Onboard, maintain, and handle vendors in an easy-to-use, efficient platform.
Invoice Approval – Approve your invoices on the go & do quick three-way matching.
Buy Requests – Fluid forms help you capture, approve, and keep monitor of purchase requests.
Buy Orders – Issue POs and generate orders automatically from approved buy requests.
Spend 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 functions transparent would be the baseline to unlock potential savings and make headway into obtaining operational excellence. Invest transparency is the key to ensuring accountability and lessening opportunities for fraud in the procurement process.
Steps to ensure invest transparency in the procurement process:
Determine as well as implement procurement policies properly
Monitor as well as document every step of the procurement process
Identify and control a summary of approved supplier lists
Create fool-proof procurement contracts
Conduct regular audits By harnessing the power of data analytics and automation, organizations can eat away dim purchasing and maverick invest. Procurement engineering provides better visibility into the procure-to-pay cycle.
3. Supplier engagement
Every company has a number of suppliers who deliver products that are essential , offer specialty services, perform routine maintenance, and finish one time immediate fixes. While calling a certain vendor to purchase a merchandise or repair a faulty machine may seem simple, the process of qualifying and taking care of a supplier is actually anything but.
The procedure for identifying a potential supplier, onboarding the vendor, scheduling the service, obtaining the invoice, and paying the vendor is overpowering. If managed physically, only a simple practice of publishing one vendor invoice is able to ingest a number of hours.
Supplier management tools provide a set of unique features to better the source-to-contract process and enhance supplier engagement. eProcurement tools offer up thorough vendor dashboards, built contract templates, digital procurement processes, and considerable integration with accounting control methods.
An organization is able to boost supplier engagement by:
Generating win win situations as well as trust
Treating suppliers as strategic partners
Monitoring supplier performance with certain KPIs
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4. Optimized inventory
As profit margins shrink in specific industries, organizations are always searching for ways to control their spend and improve the profits. Their primary focus is the procurement process. And so, procurement teams need to constantly examine the inventory of theirs and try to ensure they stay optimal.
Best-in-class organizations seriously consider the inventory of theirs since the’ real cost’ of holding inventory is way larger compared to the cost of ordering items. The rule of thumb for holding costs is between twenty and thirty %. And it isn’t only consumable products that go bad over a period of time everything from consumer electronics to clothes are subject to risks.
The major reason behind out-of-balance inventories is very poor planning and forecasting. Procurement executives around the world are slowly realizing the strength of more effective data-driven insights. Almost 50 % of respondents in 2018 Global CPO survey confided that they’re leveraging advanced and intelligent insights for price tag as well as inventory seo.
Here are a few questions organizations need to check whether the inventory of theirs is optimized:
Do you know the ratio of operating inventory in terms of safety, replenishment, and excess inventory?
Does the procurement team over- or under purchase any products/services?
What is the optimal frequency of purchases?
Are many purchase requisitions as well as orders in sync with inventory levels?
5. Contract Management
Although procurement teams strive to negotiate prospective savings in the sourcing stage, they never totally unlock the importance. Although the reasons vary, the most popular issue is a disorganized agreement management process.
A recent report on contract control indicates that about eighty one % of organizations don’t make use of any Contract Lifecycle Management (CLM) software. To be a result, they have to deal with a selection of soreness points including 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 function to the cloud. When contracts are created, saved, and maintained in a centralized data repository, organizations could 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 that may be customized to fit around company 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