Top 7 Procurement Best Practices You Should Be Following
What Are Procurement Best Practices?
Competition is fierce. Your company needs every advantage it can get. And needless waste from your procurement processes only eats up valuable resources and holds you back.
Without an effective and reliable supply chain, your business risks unnecessary delays. Your customers and clients will wait longer for goods and services (or they may not receive them at all). You'll lose out on valuable discounts. And you could end up damaging vendor relationships you need to stay competitive.
Luckily, you can drastically reduce procurement inefficiencies easily by following best practices. Here's what you need to do to make that happen.
1. Prioritize Transparency in Procurement
Your team members need to have the ability to see records, purchase orders, and technical specifications at any stage in their journey in real-time. Without a procurement system that provides that, your teams will remain in the dark.
You should manage your purchasing, invoicing, and vendor monitoring through a single platform. This ensures open communication and accountability during each stage of procurement, for both buyer and seller.
With one system, your team will get the data analytics they need to take advantage of discounts, avoid late or double payments, and keep vendors happy. You'll also reduce maverick/dark spending.
Transparency guarantees better record management, strategic purchasing practices, and cost reduction overall. But you can't make it happen with several disparate systems working incongruently. You need a single procurement platform to make that happen.
How to Ensure Transparency in Procurement:
- Plan and implement strategic procurement policies: Create a procurement strategy to maximize ROI, and share these rules with everyone in your organization.
- Properly document every step of the process: Always write down key information about the progression of every order. The more data, the better.
- Manage and update the approved supplier lists often: Keep contact information of reliable sellers while staying on the lookout for new contacts and opportunities.
- Create fool-proof procurement contracts: Store contracts electronically so implementing them is as simple as drag, drop, and complete.
- Conduct audits frequently: Hold even the most reliable suppliers to high standards. Evaluate their performance regularly to ensure they’re meeting your demands at competitive rates.
2. Optimize Your Inventory
An often-overlooked area in the procurement process is not managing current inventory efficiently. Controlling spend and maintaining bottom lines while managing stock and intake can be a daunting challenge.
[Keeping inventory at an optimal level] (https://quandarycg.com/the-minimalist-guide-to-frustrating-procurement-processes) is one of the best procurement practices. Planning purchase quantities to minimize waste while delivering on customer expectations is a careful balancing game.
It’s worthwhile to remember that holding inventory for long periods of time can jeopardize ROI. The cost of warehouse fees, taxes, obsolescence, and insurance add up over time. Your inventory should rotate smoothly and regularly, lowering your overall risk and unnecessary expenses.
3. Engage Suppliers
Building a solid relationship with suppliers is vital to your organization’s success. Essential product delivery and routine maintenance are key components to running a business strategically.
But ensuring vendors deliver reliable, high-quality goods and services on time (and at the best rate) requires a strategic relationship with your suppliers.
You need to have better insight into your suppliers, so you can track performance and evaluate relationships. With more data on vendors' performance, you can engage them in a meaningful way that will ensure your business needs are being met.
How to Engage Suppliers Strategically to Secure Procurement
- Maintain clear, open communication. Clearly communicate purchase orders and requirements to your supplier. Have a system in place to ensure the delivery of invoices.
- Establish expectations with vendors early on. Leverage your knowledge of the market so you can hold your vendors to that standard.
- Evaluate vendor performance regularly. By evaluating the quality of goods and services delivered, you ensure your company receives the best value for their investment.
- Pay vendors on time. Leverage your company's ability and desire to pay quickly. Your vendors will prioritize your company if you prioritize theirs.
- Stay aware of the competition. Knowing your vendor markets and how your supplier compares to the competition also ensures that your company gets the best.
4. Digital Contract Management
Contract management is at the heart of the procurement cycle. Purchase orders, invoicing, and reviews all come with a trail. But this trail doesn’t always have to be paper.
By moving the contract management process to the cloud, companies can minimize risk and maximize transparency. The cloud allows for a centralized and easily accessible system that can save your organization money while storing your procurement documents safely.
There’s a variety of software available for contract management on the market. These vary by design or services provided.
Find the one that fits your business needs the best.
5. Automate Your Procurement
Inefficient procurement costs businesses $1.5B annually. Efficiency will save your business time and money, giving you time to focus on your customers.
As a result, customer satisfaction increases. But to reach levels of efficiency that will yield a substantial ROI, you need to automate your procurement process.
Every company that wants to maximize growth while scaling needs every single advantage it can get. With customizable applications and strategy technologies available, your business can easily automate systems.
Automation minimizes repetitive operational processes, giving your employees more time to contribute strategically to the growth of your business.
There are immediate benefits to automation as well.
Without the human component in data entry, costly errors can be avoided. Employee satisfaction improves with streamlined workflows. And your organization can save money with strategic sourcing.
All in all, the benefits of automation are profound.
6. Integrate Procurement Processes
The procurement cycle is riddled with approval processes that create barriers. Even if you automate some aspects of your overall procurement process, you'll inevitably hit these gaps in your systems.
Because people will have to manually transfer data between your disparate procurement systems. Usually, that means spreadsheets.
Budget requests, quality checks, dispatch authorization, all these actions traditionally demand manual action. As a result, your procurement automation becomes more of a stop and start a system of haphazardly connected workflows riddled with bottlenecks.
And these bottlenecks cost you time and money.
Integrating various procurement processes ensures a smooth, streamlined system from start to finish while reducing bottlenecks. By connecting your procurement workflows, you'll speed up processing time, further ensuring best practices in your procurement strategy.
System integration bridges the gaps between various systems. They move data seamlessly from system to system. They also make running quality assurance and verifications across the procurement process much faster. (And they make it possible without manual checks and endless spreadsheets.)
7. Work with Procurement Professionals
The procurement process is a dynamic, complex web of systems that overlaps. Deploying improvements can be challenging.
Where do you start? Which procurement system works best for your business? Where should you automate? What systems can be integrated? And which improvements should be prioritized?
The difficulties in streamlining the procurement process make it difficult for growing businesses to scale their systems. As a result, they often continue with inefficient, manual processes (using things like spreadsheets and paper invoicing) to handle procurement while putting of critical system upgrades.
That's why we work with businesses to streamline their procurement processes. At Quandary Consulting Group, we excel at leveraging the power of Quick Base and the ease of Workato to build custom procurement solutions for growing businesses without the custom cost.
And with a 100 percent adoption rate, our results speak for themselves.
For more information on the types of tools and strategies available to start reducing waste meeting demands, contact us today!
- Process Improvement