The price of purchasing, and conducting business, is on a steady rise. Business organizations have started to regard procurement management as the top concern of theirs since it will take up a big share their overall invest. Considering most businesses still hold on to their manual procurement practices, the full revamp of their procurement functions is vital to keep pace with company demands.
To be able to receive the fundamentals right, organizations need to carry out an effective procure-to-pay process and embrace the right technology solutions. Nevertheless, just revamping the process and implementing a top engineering product will not create the procurement feature best-in-class.
So, what does it take?
The solution may vary from one organization to another, but there are some procurement best practices that couple of leading businesses have used over time. Here is an outline of 5 procurement best practices that, when implemented properly, can 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 critical step in making procurement activities future ready. Digital procurement strategies assist teams minimize the repetitive operational parts of procurement, freeing up staff to center on strategic roles.
As technology continues to be an important part of the everyday activities of ours, a total digital transformation for procurement routines is unavoidable. High-performing companies are actually leading the pack on digital procurement practices.
Here is what competent digital procurement strategies as Gatewit Procurement Cloud Software is able to handle:
Dealer Management – Onboard, maintain, and manage vendors in an easy-to-use, effective platform.
Invoice Approval – Approve your invoices on the go & perform quick three way matching.
Purchase Requests – Fluid forms enable you to record, approve, and keep monitor of purchase requests.
Purchase 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 your procurement cloud along with other essential finance software systems.
[Free Webinar] Join us to find out just how digital procurement is able to give efficiency as well as cost savings. Register Now!
2. Spend Transparency
Making procurement capabilities transparent will be the baseline to unlock potential savings and make headway into obtaining operational excellence. Spend transparency is the key to ensuring accountability and lessening possibilities for fraud in the procurement process.
Steps to make certain invest transparency in the procurement process:
Determine as well as implement procurement policies properly
Computer monitor and document every phase of the procurement process
Identify as well as manage a list of approved supplier lists
Establish fool proof procurement contracts
Conduct frequent audits By harnessing the strength of data analytics and automation, organizations are able to wear away dark purchasing as well as maverick spend. Procurement engineering has much better visibility into the procure-to-pay cycle.
3. Supplier engagement
Every company has a selection of suppliers who deliver products that are important , provide special services, perform routine maintenance, and finish one-time urgent fixes. While calling a certain vendor to buy a merchandise or perhaps repair a faulty machine sounds simple, the task of qualifying and controlling a supplier is actually anything but.
The technique of figuring out a prospective supplier, onboarding the vendor, scheduling the service, obtaining the invoice, and paying the vendor is overpowering. When managed physically, just a simple process of distributing one vendor invoice is able to consume a number of hours.
Dealer management tools have a set of unique options to improve the source-to-contract process and boost supplier engagement. eProcurement tools provide comprehensive merchant dashboards, pre-made contract templates, digital procurement processes, and considerable integration with accounting control systems.
A company is able to boost 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 interaction with vendors ☛ Guide which is Free: The Ultimate Guide to Managing Remote Procurement Teams.
4. Optimized inventory
As profit margins shrink in certain industries, organizations are constantly searching for ways to manage their spend as well as increase the bottom line. Their main focus is actually the procurement process. And so, procurement teams have to frequently review the inventory of theirs and try to make certain they stay optimal.
Best-in-class organizations seriously consider their inventory since the’ real cost’ of holding inventory is a lot larger compared to the cost of ordering items. The rule of thumb for holding prices is actually somewhere between twenty as well as thirty %. And it is not only consumable products 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 very poor planning and forecasting. Procurement managers all over the world are slowly recognizing the power of better data-driven insights. Almost fifty % of respondents in 2018 Global CPO survey confided that they’re leveraging intelligent and advanced insights for cost as well as inventory seo.
Below are a few questions organizations have to determine whether their inventory is optimized:
Do you know the ratio of operating inventory in terms of safety, replenishment, and extra inventory?
Does the procurement staff over- or perhaps under purchase any products/services?
What is the optimal frequency of purchases?
Are several 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 importance. Even though the reasons vary, the most popular issue is a disorganized agreement management process.
A recent report on contract control indicates that about eighty one % of organizations do not make use of any Contract Lifecycle Management (CLM) software. As a result, they face a number of pain points such as lack of consistency throughout contracts (53 percent), troublesome processing (45 percent), and supply chain continuity troubles (thirty six percent).
Organizations can continue to be clear of these procurement pitfalls by moving their contract management system to the cloud. When contracts are created, saved, and maintained in a centralized data repository, businesses can leverage their invest well, reduce costs, 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 scalable as well as customizable interface which might be tailored to fit around business 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