The cost of purchasing, and operating, is on a stable rise. Commercial enterprises have started to regard procurement management as their top concern since it takes up a big share their general invest. Considering most companies still hold on to their hand procurement practices, the full revamp of the procurement capabilities of theirs is vital to keep pace with company needs.
In order to get the basics right, organizations have to put into practice a good procure-to-pay progression and embrace the right technology solutions. However, just revamping the process and utilizing a high engineering product won’t make the procurement feature best-in-class.
Thus, what will it take?
The answer may well vary from one organization to another, but there are several procurement best practices which couple of leading companies have used over time. Here is an outline of 5 procurement best practices which, when implemented properly, could substantially lower costs, improve procedure efficiency, and have a good effect on the cost-income ratio.
1. Cloud based procurement tools
Taking procurement digital is a vital step in making procurement activities future ready. Digital procurement methods help teams minimize the repetitive operational facets of procurement, freeing up team members to focus on strategic roles.
As technology continues to sign up as an important part of the daily activities of ours, a complete digital transformation for procurement activities is inevitable. High-performing businesses are actually leading the pack on digital procurement habits.
Here is what competent digital procurement techniques as Gatewit Procurement Cloud Software can handle:
Dealer Management – Onboard, maintain, and manage vendors in an easy-to-use, efficient platform.
Invoice Approval – Approve the invoices of yours on the go & perform quick three way matching.
Purchase Requests – Fluid forms help you capture, approve, and keep monitor of purchase requests.
Purchase Orders – Issue POs and create 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 important finance software systems.
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2. Spend Transparency
Making procurement functions 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 ensure spend transparency in the procurement process:
Determine and implement procurement policies properly
Monitor as well as document every phase of the procurement process
Identify and handle a list of approved supplier lists
Establish fool-proof procurement contracts
Conduct repeated audits By using the strength of data analytics as well as automation, organizations are able to eliminate dim purchasing and maverick invest. Procurement technological innovation has better visibility into the procure-to-pay cycle.
3. Supplier engagement
Every company has a number of suppliers that deliver products that are important , offer specialty services, perform routine maintenance, and finish one time urgent repairs. Although calling a specific vendor to purchase a merchandise or even repair a faulty machine may seem easy, the task of qualifying and dealing with a supplier is anything but.
The process of identifying a prospective supplier, onboarding the vendor, scheduling the service, obtaining the invoice, and paying the vendor is actually overwhelming. If managed physically, just a fairly easy practice of distributing one vendor invoice can consume a number of hours.
Dealer management tools provide a set of special options to help improve the source-to-contract progression and boost supplier engagement. eProcurement equipment offer extensive vendor dashboards, built contract templates, digital procurement processes, and extensive integration with accounting control systems.
A business is able to improve supplier engagement by:
Generating win-win situations and trust
Treating suppliers as strategic partners
Monitoring supplier performance with certain KPIs
Enabling interaction as well as collaboration with vendors ☛ Guide which is Free: The Ultimate Guide to Managing Remote Procurement Teams.
4. Optimized inventory
As profit margins shrink in a few industries, organizations are always searching for ways to manage their spend as well as enhance the bottom line. Their main focus is actually the procurement process. So, procurement teams have to continually examine their inventory and try to make certain they remain optimal.
Best-in-class groups pay close attention to their inventory since the’ real cost’ of holding inventory is substantially greater than the price of purchasing items. The rule of thumb for holding costs is between twenty and thirty percent. And it is not just consumable products that go bad over a period of time-everything from consumer electronics to clothes are actually subject to risks.
The key reason for out-of-balance inventories is very poor planning and forecasting. Procurement leaders 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 are leveraging advanced and intelligent insights for price tag as well as inventory optimization.
Below are a few issues organizations need to examine whether their inventory is optimized:
Do you know the ratio of operating inventory in phrases of safety, replenishment, and excess inventory?
Does the procurement staff over or even under-purchase any products/services?
What’s the perfect frequency of purchases?
Are a number of purchase requisitions and orders in sync with inventory levels?
5. Contract Management
Although procurement teams attempt to negotiate potential savings in the sourcing stage, they never totally unlock the value. Although the reasons vary, the most popular issue is a disorganized arrangement management process.
A recent report on contract management shows that nearly 81 percent of organizations do not make use of some Contract Lifecycle Management (CLM) application. As a result, they face a number of soreness points like lack of consistency throughout contracts (53 percent), cumbersome processing (forty five percent), and supply chain continuity problems (36 percent).
Businesses are able to remain clear of these procurement pitfalls by moving their contract management system to the cloud. When contracts are created, stored, and maintained in a centralized data repository, businesses can leverage their spend optimally, reduce expenses, as well as mitigate risk.
Contract 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 scalable and customizable interface that may be tailor-made to fit around company needs Automated notifications: Trigger automated alerts to spotlight contract milestones, renewals, and chances for renegotiation.
Performance monitoring: Track adherence, pricing fluctuations, product quality, and delivery time to purchasing terms/policies