The cost of buying, and doing business, is on a stable rise. Commercial enterprises have started to regard procurement management as the top priority of theirs since it takes up a huge share their overall spend. Considering most companies still hold on to the manual procurement practices of theirs, a total revamp of the procurement capabilities of theirs is essential to keep pace with company demands.
To be able to get the basics right, organizations need to implement an effective procure-to-pay progression and embrace the proper technology solutions. However, simply revamping the process and employing a premier technology item will not make the procurement feature best-in-class.
Therefore, what will it take?
The solution may be different 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 five procurement best practices that, when implemented properly, may appreciably lower costs, improve method effectiveness, 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 activities future-ready. Digital procurement techniques help teams lessen the repetitive operational parts of procurement, freeing up associates to center on strategic roles.
As technology continues to be an essential part of our daily activities, a complete digital transformation for procurement activities is unavoidable. High-performing organizations are leading the pack on digital procurement habits.
Here’s what competent digital procurement techniques as Gatewit Procurement Cloud Software is able to handle:
Dealer 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 help you record, approve, and keep track of buy requests.
Buy Orders – Issue POs and create orders automatically from approved buy requests.
Invest Analytics – Generate actionable, data-driven insights from your purchasing-related data.
Integrations – Connect the procurement cloud of yours with other vital finance software systems.
[Free Webinar] Join us to find out just how digital procurement can give effectiveness as well as cost savings. Register Now!
2. Spend Transparency
Making procurement capabilities transparent is the baseline to unlock prospective savings and make headway into getting operational excellence. Invest transparency is actually the key to ensuring accountability and lessening programs for fraud in the procurement process.
Steps to make certain spend transparency in the procurement process:
Determine and implement procurement policies properly
Monitor and document every phase of the procurement process
Identify and control a list of approved supplier lists
Establish fool proof procurement contracts
Conduct frequent audits By utilizing the power of data analytics and automation, organizations are able to wear away dark purchasing and maverick invest. Procurement technology has much better visibility into the procure-to-pay cycle.
3. Supplier engagement
Every company has a number of suppliers who deliver important products, provide special services, perform regular maintenance, and complete one time immediate repairs. While calling a specific vendor to order a merchandise or repair a faulty machine sounds easy, the process of qualifying and dealing with a supplier is anything but.
The procedure for identifying a potential supplier, onboarding the vendor, scheduling the service, obtaining the invoice, and paying the vendor is overpowering. When managed physically, only a simple practice of publishing one vendor invoice is able to take in various hours.
Supplier management tools have a set of special options to greatly improve the source-to-contract progression and boost supplier engagement. eProcurement equipment offer up comprehensive merchant dashboards, built contract templates, digital procurement processes, and intensive integration with accounting management systems.
A business is able to boost supplier engagement by:
Generating win-win circumstances and trust
Treating suppliers as strategic partners
Monitoring supplier performance with specific KPIs
Enabling collaboration as well as communication with vendors ☛ Free Guide: The Ultimate Guide to Managing Remote Procurement Teams.
4. Optimized inventory
As profit margins shrink in specific industries, organizations are always searching for ways to manage their spend as well as better the profits. The main focus of theirs is actually the procurement process. Thus, procurement teams have to continually examine the inventory of theirs and attempt to ensure they stay optimum.
Best-in-class organizations pay close attention to their inventory since the’ real cost’ of holding inventory is significantly higher compared to the cost of ordering things. The rule of thumb for holding costs is actually somewhere between twenty along with thirty percent. And it is not just consumable things that go bad over a period of time-everything from consumer electronics to clothing 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 power of better data driven insights. Nearly 50 % of respondents in 2018 Global CPO survey confided they’re leveraging intelligent and advanced insights for price as well as inventory seo.
Here are a few questions organizations have to examine whether their inventory is optimized:
What are the ratio of operating inventory in terminology of safety, replenishment, and extra stock?
Does the procurement staff over- or under purchase any products/services?
What’s the optimal frequency of purchases?
Are a number of purchase requisitions and orders in sync with inventory levels?
5. Contract Management
Even though procurement teams attempt to negotiate possible savings in the sourcing stage, they never totally unlock the value. While the reasons vary, the most popular concern is a disorganized arrangement management process.
A recent report on contract management suggests that nearly 81 % of organizations do not use some Contract Lifecycle Management (CLM) software. Being a result, they confront a number of pain points like lack of consistency across contracts (fifty three percent), troublesome processing (45 percent), and supply chain continuity troubles (thirty six percent).
Businesses can continue to be clear of these procurement pitfalls by moving their contract management system to the cloud. When contracts are made, saved, and maintained in a centralized data repository, organizations can leverage their spend optimally, reduce expenses, and mitigate risk.
Contract management automation will provide organizations with:
Main repository: Store all files (riders, amendments, etc.) at a cloud database that is accessible from anywhere
Configurable interface: A highly scalable as well as customizable interface that might be personalized to fit about company demands 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