The cost of purchasing, and doing business, is on a stable rise. Businesses have began to regard procurement management as their top priority since it takes up a huge share their overall spend. Considering most companies still hold on to their manual procurement practices, the full revamp of the procurement capabilities of theirs is important to keep pace with company demands.
In order to get the basics right, organizations need to implement an effective procure-to-pay progression and embrace the appropriate technology strategies. But, just revamping the task and utilizing a high technology item won’t come up with the procurement function best-in-class.
So, what will it take?
The answer might differ from one organization to the next, but there are some procurement best practices that couple of leading companies have adopted over time. Here is an outline of 5 procurement best practices which, when implemented the right way, may appreciably lower costs, improve method efficiency, and have a good 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 solutions help teams minimize the repetitive operational parts of procurement, freeing up team members to focus on strategic roles.
As technology will continue to become an essential component of our everyday activities, a complete digital transformation for procurement activities is unavoidable. High-performing businesses are leading the pack on digital procurement habits.
Here is what competent digital procurement solutions as Gatewit Procurement Cloud Software is able to handle:
Supplier Management – Onboard, maintain, and control vendors in an easy-to-use, effective platform.
Invoice Approval – Approve your invoices on the go & perform fast three way matching.
Buy Requests – Fluid forms enable you to record, approve, and keep monitor 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 with other essential finance software systems.
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2. Spend Transparency
Making procurement functions transparent will be the baseline to unlock possible savings and make headway into obtaining operational excellence. Spend transparency is the key to ensuring accountability and minimizing opportunities for fraud in the procurement process.
Measures to make sure invest transparency in the procurement process:
Determine as well as implement procurement policies properly
Monitor and document every phase of the procurement process
Identify as well as handle a listing of approved supplier lists
Create fool proof procurement contracts
Conduct repeated audits By using the strength of data analytics as well as automation, organizations are able to wear away dim purchasing and maverick invest. Procurement technology provides 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 special services, perform regular maintenance, and finish one time urgent fixes. Although calling a particular vendor to buy a merchandise or perhaps repair a faulty machine sounds simple, the task of qualifying as well as managing a supplier is anything but.
The process of determining a prospective supplier, onboarding the vendor, scheduling the service, obtaining the invoice, and paying the vendor is overpowering. If managed manually, only a fairly easy process of submitting one vendor invoice is able to take in various hours.
Supplier management tools offer a set of unique options to help improve the source-to-contract progression and improve supplier engagement. eProcurement tools offer comprehensive merchant dashboards, built contract templates, digital procurement processes, and substantial integration with accounting relief systems.
A company can improve 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 ☛ Guide which is Free: The Ultimate Guide to Managing Remote Procurement Teams.
4. Optimized inventory
As profit margins shrink in specific industries, organizations are continually looking for ways to control their invest as well as enhance the bottom line. The primary focus of theirs is actually the procurement process. So, procurement teams have to constantly examine their inventory and strive to make certain they stay optimal.
Best-in-class organizations seriously consider their inventory since the’ real cost’ of holding inventory is significantly greater compared to the cost of purchasing things. The rule of thumb for holding costs is actually somewhere between 20 along with thirty percent. And it isn’t just consumable items that go bad over a period of time-everything from consumer electronics to clothes are subject to risks.
The key reason behind out-of-balance inventories is poor planning and forecasting. Procurement executives 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 intelligent and advanced insights for cost as well as inventory optimization.
Here are a few questions organizations need to determine whether their inventory is optimized:
What are the ratio of operating inventory in terms of safety, replenishment, and extra inventory?
Does the procurement staff over- or under purchase any products/services?
What is the perfect frequency of purchases?
Are many purchase requisitions and orders in sync with inventory levels?
5. Contract Management
Although procurement teams try to negotiate potential savings in the sourcing stage, they never completely unlock the value. Even though the reasons vary, the most popular issue is a disorganized arrangement management process.
A recent report on contract control indicates that nearly eighty one percent of organizations do not make use of some Contract Lifecycle Management (CLM) software. To be a result, they confront a selection of pain points such as lack of consistency across contracts (53 percent), troublesome processing (45 percent), and supply chain continuity issues (thirty six percent).
Businesses are able to remain clear of these procurement pitfalls by moving their contract management function to the cloud. When contracts are created, stored, and maintained in a centralized information repository, businesses can leverage their invest well, reduce expenses, and mitigate risk.
Agreement management automation will provide organizations with:
Central repository: Store all files (riders, amendments, etc.) at a cloud database that is accessible from anywhere
Configurable interface: A very scalable and customizable interface that may be tailored to fit around company needs 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