The price of purchasing, and operating, is on a steady rise. Business enterprises have began to regard procurement management as their top concern since it will take up a large share their general spend. Considering most businesses still hold on to the manual procurement practices of theirs, the full revamp of their procurement functions is essential to keep pace with business needs.
To be able to obtain the basics right, organizations have to carry out a highly effective procure-to-pay process and embrace the correct technology strategies. Nonetheless, simply revamping the process and employing a high technology product will not make the procurement feature best-in-class.
Thus, what does it take?
The key might be different from one organization to another, but there are several procurement best practices that several leading companies have used over time. Here is an outline of 5 procurement best practices that, when implemented the right way, can appreciably lower costs, improve method effectiveness, and have a good impact on the cost income ratio.
1. Cloud based procurement tools
Taking procurement digital is an important step in making procurement tasks future-ready. Digital procurement techniques assist teams minimize the repetitive operational parts of procurement, freeing up team members to concentrate on strategic roles.
As technology will continue to become an essential element 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 skilled digital procurement solutions as Gatewit Procurement Cloud Software can handle:
Supplier Management – Onboard, maintain, and manage vendors in an easy-to-use, effective platform.
Invoice Approval – Approve the invoices of yours on the go and perform quick three-way matching.
Buy Requests – Fluid forms help you capture, approve, and keep track of purchase requests.
Purchase Orders – Issue POs and create orders instantly from approved buy requests.
Invest Analytics – Generate actionable, data-driven insights from the purchasing related data of yours.
Integrations – Connect your procurement cloud along with other essential 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. Spend transparency is the key to ensuring accountability and minimizing possibilities for fraud in the procurement process.
Steps to make certain spend transparency in the procurement process:
Determine as well as implement procurement policies properly
Computer monitor and document every step of the procurement process
Identify and manage a list of approved supplier lists
Establish fool-proof procurement contracts
Conduct regular audits By using the power of data analytics as well as automation, organizations can eliminate dim purchasing as well as maverick invest. Procurement technology offers better visibility into the procure-to-pay cycle.
3. Supplier engagement
Every organization has a selection of suppliers that provide essential products, offer specialty services, perform routine maintenance, and complete one-time immediate fixes. While calling a particular vendor to order a merchandise or perhaps repair a faulty machine may seem easy, the task of qualifying as well as taking care of 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 overpowering. If managed physically, only a straightforward process of submitting one vendor invoice is able to take in several hours.
Dealer management tools provide a set of unique options to help improve the source-to-contract progression and enhance supplier engagement. eProcurement tools offer up comprehensive vendor dashboards, pre-made contract templates, digital procurement processes, and intensive integration with accounting control methods.
An organization is able to develop supplier engagement by:
Generating win win situations 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 certain industries, businesses are always searching for ways to control their spend as well as better the profits. Their primary focus is actually the procurement process. Thus, procurement teams need to frequently review their inventory and make an effort to make certain they stay optimum.
Best-in-class organizations seriously consider the inventory of theirs since the’ real cost’ of holding inventory is far higher compared to the price of purchasing items. The rule of thumb for holding costs is between 20 as well as 30 %. And it isn’t just consumable things that go bad over a period of time-everything from consumer electronics to clothing are actually subject to risks.
The main reason behind out-of-balance inventories is very poor planning and forecasting. Procurement managers around the world are slowly realizing the strength of more effective data driven insights. Nearly 50 % of respondents in 2018 Global CPO survey confided they’re leveraging advanced and intelligent insights for cost and inventory seo.
Here are a few issues organizations have to check whether their inventory is optimized:
What are the ratio of operating inventory in terminology of safety, replenishment, and extra stock?
Does the procurement team over or even under purchase any products/services?
What is the perfect frequency of purchases?
Are all buy requisitions and orders in sync with inventory levels?
5. Contract Management
Although procurement teams strive to negotiate potential savings in the sourcing stage, they never completely unlock the importance. Even though the reasons vary, the most common issue is a disorganized agreement management process.
A recent report on contract control indicates that nearly eighty one % of organizations do not use some Contract Lifecycle Management (CLM) application. Being a result, they confront a number of pain points such as lack of consistency throughout contracts (fifty three percent), cumbersome processing (forty five percent), and supply chain continuity issues (thirty six percent).
Businesses can continue to be clear of these procurement pitfalls by moving their contract management function to the cloud. When contracts are made, stored, and maintained in a centralized information repository, businesses can leverage their spend well, reduce expenses, and also mitigate risk.
Agreement management automation is going to provide organizations with:
Main repository: Store all documents (riders, amendments, etc.) in a cloud database that is 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 highlight contract milestones, renewals, and chances for renegotiation.
Performance monitoring: Track adherence, pricing fluctuations, product quality, and delivery time to purchasing terms/policies