Business costs continue to increase, and supply chain vulnerabilities become more visible. More organizations recognize the need to streamline their procurement processes. But it’s not about cutting costs. It’s about reimagining your supply chain as an enabler for business growth. So, how can you make your procurement function top-of-the-line? The answer may differ from organization to organization. The world’s leading companies have adopted a few procurement best practices. Let’s look at some of these procurement best practices.
What Does Procurement Mean?
Before going on the best practices in procurement, let’s review what procurement is. It is obtaining and collecting all the materials necessary to produce a product or service. Professionals define procurement as the identification, selection, and acquisition of goods or services required by the organization.
- Create frameworks for procurement management.
You need to establish a solid framework. It will help you tackle the issues in your procurement process. This won’t happen overnight. So, take your time and map out workflows and establish standard procedures.Here are the processes for your framework should establish guidelines for:
- monitoring and approving purchase requests
- managing your suppliers
- quality assurance
- payment and invoice
- keeping records
- hiring new team members
- email finder extension for easy contact with candidates
- training your staff on products and processes
- Ensure Transparency
Here are a few ways you can ensure transparency during procurement.
- Create strategic procurement policies: Develop a procurement strategy that maximizes return on investment (ROI). Also, share these policies with your entire organization.
- Document all steps of the procurement process: Always document essential information about the progress of each order. More data is always better.
- Update approved supplier lists: Keep track of the contact information of trusted sellers while searching for new contacts.
- Make procurement contracts foolproof: Develop comprehensive agreements and save them electronically so they are easy to use.
- Audit suppliers: Keep even the most trusted suppliers to check. Test their performance to ensure they meet your competitive needs.
- Optimize Your Inventory
One of the most overlooked aspects of procurement is inventory. But it’s more important than you might think. One of your procurement best practices is to keep your inventory at optimal levels.Taxes, warehouse fees, obsolete products, and insurance increase over time. When you hold inventory for a short time, it reduces your return on investment. Rotate your inventory to minimize these risks and unnecessary costs.
- Supplier Engagement
Your supplier’s relationship is essential to your organization’s success. Ensuring timely delivery and quality assurance of your products necessitates a strategic relationship.Understand your suppliers’ performance to assess their performance and relationship with your organization.If you know your suppliers well, you can engage them to collaborate based on the information you gather from their performance data.Organizations can enhance supplier engagement by:
- Creating win-win opportunities
- treating suppliers like strategic partners
- Tracking supplier performance with key performance indicators (KPIs)
- Enabling collaboration and communications with vendors.
- Create Dashboards
Data dashboards give your team real-time supply chain data in an easy-to-understand format. This eliminates the confusion and red tape when different departments try to cobble together data.When you have clear data dashboards in your procurement, you can show actual spending relative to budget, product, service price changes, and vendor performance, your sourcing will become much more efficient.The best part? Real-time, easy-to-read data facilitates collaboration. Data dashboards allow your organization to take advantage of procurement.
- Know Your Corporate Responsibility
In today’s world, many customers care about their social responsibility. That’s why you must consider how your supply chain impacts the economy and the planet. Your organization must know all customers’ expectations as the cancellation culture grows. If you don’t or if you make a mistake, you could end up hurting your reputation in ways that you can’t undo.
- Robotic Process Automation
Robotic process automation (RPA) is a popular tool for automating organizations’ procurement processes. RPA can automate repetitive, rule-based transactional tasks. It also offers a very high return on investment (from 30% to 200%) in the first year.RPA bots are skilled. Using artificial intelligence (AI), they can do everything, from data extraction to file and folder migration. They can even read text, engage in dialogue, and comprehend unstructured information.Automating repetitive tasks allows your staff to focus on other essential tasks. It includes focusing on vendor relations or adding value.
- Simplify your Procurement Process
The procurement process is full of approvals, which creates bottlenecks. Even with automation, you’ll still have these bottlenecks in your processes.That’s why it’s essential that you can integrate your procurement processes. Connect your procurement systems to process data. Also, avoid moving data manually.
- Automating the Procurement Process
Automating your procurement process saves you time and money. It gives you more time to listen to your customers’ needs and feedback.You’ll need to automate procurement processes to achieve this level of automation. Automating your procurement process will remove repetitive tasks. This lets your employees focus on other tasks.Another advantage of automation is the lack of human error. Sometimes employees can’t avoid making mistakes, and automation helps simplify workflows. Below are a few critical processes you can automate:
Payment reconciliation compares your accounting with your payments to ensure that they match. This ensures your cash flow is secure. It lets your team concentrate on other tasks instead of manually processing each transaction.
Account payable automation platforms
With it, you can automate everything from invoice coding and purchase orders. Allowing you to manage your accounts payable processes without human interaction easily.
What is Invoice Automation?
It is often called “accounts payable automation. ” It’s an entire department in its own right. It’s responsible for the following:
- Price matching
- Data entry
- order processing
- Reducing Late Fees
Automating your invoice process helps you reduce late fees. It will also make your suppliers happy enough to offer you discounts.
Implementing these best practices in procurement impacts your cost-to-income ratio and improves productivity. It also helps you minimize wastage and enhances process efficiencies. It also reduces costs and gives you greater strategic insight into your sourcing. It also allows you to outperform your competitors and increase your procurement capabilities.