The cost of buying, and working, is on a steady rise. Businesses have started to regard procurement management as their top priority since it will take up a huge share their overall invest. Considering most companies still hold on to their hand procurement practices, the full revamp of the procurement functions of theirs is important to keep pace with business needs.
To be able to obtain the fundamentals right, organizations need to carry out a good procure-to-pay process and embrace the appropriate technology solutions. But, just revamping the process and employing a high engineering item won’t come up with the procurement feature best-in-class.
So, what will it take?
The answer may be different from one organization to the next, but there are several procurement best practices which several leading businesses have used over time. Here is an outline of five procurement best practices which, when implemented properly, may substantially lower costs, improve procedure efficiency, and have a positive impact on the cost-income ratio.
1. Cloud-based procurement tools
Taking procurement digital is a vital step in making procurement tasks future ready. Digital procurement solutions assist teams lessen the repetitive operational facets of procurement, freeing up staff to focus on strategic roles.
As technology continues to be an integral component of our daily activities, an entire digital transformation for procurement activities is inevitable. High-performing companies are leading the pack on digital procurement practices.
Here’s what skilled digital procurement strategies 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 your invoices on the go & conduct fast three-way matching.
Buy Requests – Fluid forms allow you to record, approve, and keep track of purchase requests.
Purchase Orders – Issue POs and produce orders instantly from approved purchase requests.
Spend Analytics – Generate actionable, data-driven insights from your purchasing related data.
Integrations – Connect your procurement cloud with other vital finance software systems.
[Free Webinar] Join us to find out how digital procurement is able to offer effectiveness as well as cost savings. Register Now!
2. Spend Transparency
Making procurement functions transparent would be the baseline to unlock prospective 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.
Steps to make sure spend transparency in the procurement process:
Determine and implement procurement policies properly
Computer monitor and document every step of the procurement process
Identify as well as control a summary of approved supplier lists
Establish fool proof procurement contracts
Conduct frequent audits By utilizing the power of data analytics and automation, organizations can eat away dim purchasing and maverick spend. Procurement technology provides much better visibility into the procure-to-pay cycle.
3. Supplier engagement
Every organization has a selection of suppliers who provide important items, provide specialty services, perform routine maintenance, and finish one-time urgent fixes. Although calling a particular vendor to buy a merchandise or even repair a faulty machine seems simple, the task of qualifying and dealing with a supplier is actually anything but.
The procedure for determining a potential supplier, onboarding the vendor, scheduling the service, obtaining the invoice, and paying the vendor is overwhelming. If managed manually, just a straightforward practice of distributing one vendor invoice can consume various hours.
Supplier management tools offer a set of special options to improve the source-to-contract process and boost supplier engagement. eProcurement tools provide thorough merchant dashboards, built contract templates, digital procurement processes, and intensive integration with accounting control methods.
An organization is able to improve supplier engagement by:
Generating win win situations and trust
Treating suppliers as strategic partners
Checking supplier performance with certain KPIs
Enabling collaboration as well as communication with vendors ☛ Guide that is Free: The Ultimate Guide to Managing Remote Procurement Teams.
4. Optimized inventory
As profit margins shrink in specific industries, businesses are constantly searching for ways to manage their invest as well as help improve the profits. The primary focus of theirs is the procurement process. So, procurement teams have to continually review their inventory and strive to make certain they remain optimum.
Best-in-class groups seriously consider their inventory since the’ real cost’ of holding inventory is significantly higher compared to the cost of purchasing things. The rule of thumb for holding prices is actually somewhere between 20 along with thirty percent. And it isn’t just consumable things that go bad over a period of time-everything from consumer electronics to apparel are subject to risks.
The key reason for out-of-balance inventories is very poor planning and forecasting. Procurement executives all over the world are slowly recognizing the strength of better data driven insights. About 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 check out whether the inventory of theirs is optimized:
Do you know the ratio of operating inventory in phrases of safety, replenishment, and excess inventory?
Does the procurement staff over or perhaps under purchase any products/services?
What’s the best frequency of purchases?
Are several purchase requisitions and orders in sync with inventory levels?
5. Contract Management
Even though procurement teams strive to negotiate potential savings in the sourcing stage, they never totally unlock the value. Even though the reasons vary, the most common concern is a disorganized agreement management process.
A recent report on contract control suggests that nearly eighty one percent of organizations don’t make use of any Contract Lifecycle Management (CLM) application. Being a result, they confront a selection of pain points such as lack of consistency throughout contracts (53 percent), troublesome processing (45 percent), and supply chain continuity issues (36 percent).
Businesses are able to continue to be clear of these procurement pitfalls by moving their contract management function to the cloud. When contracts are made, saved, and maintained in a centralized data repository, businesses could leverage their spend well, reduce expenses, and mitigate risk.
Agreement management automation is going to provide organizations with:
Main repository: Store all documents (riders, amendments, etc.) in a cloud database that’s accessible from anywhere
Configurable interface: A highly scalable and customizable interface that could 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