What Are Procurement Best Practices?
With competition as fierce as it is, your company needs every advantage it can get. And waste, especially from something as avoidable as the procurement process, isn’t going to cut it.
But it goes deeper. Without an effective and reliable supply chain, companies risk not getting their services or products on time, resulting in customer dissatisfaction and decreasing bottom lines. To stay competitive, you need to follow procurement best practices.
Implementing the best procurement practices provides endless benefits. Improving established procurement cycles saves money and time. By adapting to changes and promoting efficiency, companies can enhance their ROI and scale better. And businesses are more capable of delivering quality service to customers while minimizing purchasing risks with best procurement practices.
Create Transparent Processes
Transparency in procurement means that your team members can see records, purchase orders, and technical specifications at any stage in their journey. You can also manage purchasing through a common platform. This ensures open communication and accountability during the procurement process for both buyer and seller.
Without data analytics and automation, companies may miss out on discounts, submit multiple requests and risk maverick/dark spending. These issues keep procurement from being profitable and strategic for your business. But transparency guarantees better record management, strategic purchasing practices, and cost reduction, giving you the edge.
To ensure procurement transparency, follow these steps:
- 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.
###Optimize Your Inventory An often-overlooked mistake in the procurement process of organizations is not managing their 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 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.
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.
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 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 competition. Knowing your vendor markets and how your supplier compares to the competition also ensures that your company gets the best.
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.
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 automation in your procurement process.
Digitalization isn’t just a trend. Every company that wants to maximize growth while scaling needs to adapt to the opportunities today’s digital landscape offers. With customizable applications and strategy technologies available, every business has the opportunity to automate.
Automation minimizes repetitive operational processes, amplifying their strategic role. 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.
Integrate Procurement Processes
Integrating the automated procurement process ensures a smooth, streamlined system from start to finish while reducing bottlenecks. By connecting business workflows, you speed up processing time, further ensuring best practices in your procurement strategy.
The procurement cycle is riddled with approval processes that create barriers. Budget requests, quality checks, and dispatch authorization take valuable time away from your business. They put unnecessary breaks in the system, piling up work at certain junctions in the process. This slows down your team and the time it takes for your business to receive their orders. Procurement integration streamlines this.
Digitizing your system through automation is your first step. But the systems are still functioning separately. Integration allows automated procurement processes to communicate efficiently through the process. It connects all the parts of the ordering process from start to finish. And that means rapid results at a discount for your company.
Hire a Procurement Optimization Professional
As vital as procurement is, there are many pitfalls to the process. Automating inefficient processes, for example, can still result in procurement inefficiencies. To get the most out of your procurement system, you need a procurement optimization professional.
With the right procurement professional, you’ll have access to industry insight across the market. This will help you avoid pitfalls in the procurement process and allow your organization to leverage your suppliers to remain competitive.
Quandary Consulting Group excels at leveraging the power of Quick Base and the ease of Workato to build custom e-procurement solutions that greatly reduce P2P pain points. 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!
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