Procurement professionals are concerned about cost reduction in the company’s acquisition of supplies. Moreover, they ensure all of the supplies arrive on time so the company can use them based on their original purpose. Depending on the business size, the procurement department could be a one-man team or consist of multiple members.
Like any other department in a business, the procurement team should always keep up with the latest trends about the job. Given that new technologies are making business processes more efficient, procurement teams are also benefactors.
To know more about modern ways to expedite the procurement process, we have prepared a guide to help you.
1. Centralize Your Procurement
Centralizing your procurement means designating one department or system to manage all the procurement tasks. If your procurement is centralized, you can track expenses and determine who purchased what. Moreover, you will find it easy to spot duplication in the procurement, signaling reduced overhead expenses.
Of course, with a centralized procurement, you can be eligible for bulk orders and get a possible discount since you will be making collective purchases. Moreover, purchasing bulk orders means saving on shipping and delivery costs.
You will be ordering all items all at once, so you won’t need to ship them one by one and pay for each transaction. What’s more, your accounting department doesn’t have to reconcile multiple invoices from different orders you have made. This means that both the procurement and accounting team can realign the time they have saved from the centralized procurement and attend to tasks that need more focus.
2. Automate Your Procurement Process
Digital procurement systems enable businesses to automate their purchasing activities. You can choose from different advanced automated procurement tools like purchasing software. These tools can cut costs on manpower since there will be no need to hire multiple people to man the procurement department. More than boosting productivity within the company, the right procurement software can also help your company avoid misfiled procurement documents, making future audits easier.
With automated procurement, you can also expedite the process since the papers will be processed digitally. Hence, there will be no need to deliver these documents physically, thus also eliminating redundant tasks in the process.
One part of the procurement process that is often repetitive and consumes valuable time is purchase ordering processing. Many businesses execute frequent purchase order approvals, going back and forth. The good thing is that it doesn’t have to be a complex workflow, so you can rely on purchase order software. You can also automate other parts like record-keeping, invoice approvals, and purchase requisitions.
Before investing in digital automation solutions, map out your existing procurement process so you can audit it and identify which parts need to speed up and which parts did just fine. Once you have identified the key areas that require automation, look for reliable procurement automation software that’s user-friendly and efficient.
3. Streamline Your Procurement Policies
One must follow a series of steps in the procurement process. Depending on the size and nature of the business, the procurement process may differ. You can choose to improve internal documentation or go as big as altering the process with the help of digitization. You can also focus on maintaining good supplier collaboration, managing regulatory compliance, encouraging visibility into your procurement process, and automating manual processes to avoid human errors.
4. Implement Supplier Relationship Management
Like how customer relationship management (CRM) improves communication between businesses and customers, supplier relationship management helps businesses improve and streamline processes between them and their suppliers.
Moreover, with supplier relationship management, you can determine ways to maximize suppliers’ contribution to the business’ growth. For both parties, this is important because it leads to developing a mutually beneficial relationship, resulting in a more streamlined and reliable supply chain.
More than these, CRM leads to cost savings and reduced delays, quality issues, and other potential challenges since both parties are cooperative in the partnership. Because you have a good relationship with the supplier, you can certainly try to negotiate and save money from price fluctuations in the long term. Plus, you can outsource time-consuming tasks like managing inventory levels. This will help you focus and redirect your efforts on more valuable tasks like administrative duties.
5. Utilize Procurement Analytics
Supply chain disruptions are the worst cases for businesses. At some point, operations get halted, resulting in a huge loss. With procurement analytics, businesses can get an overview of the entire procurement process and the potential areas where they could save.
Based on the data produced by procurement analytics, businesses can promote better supplier performance, reduce risk and drive compliance, conduct better benchmarking, and improve stakeholder relationships, among many other benefits.
When you ask suppliers about the information on their risk profiles, it could be hard to trust the information rendered since it’s considered subjective. However, with procurement analytics, you can collect and analyze existing data from the web, evaluate social media sentiment, and get ideas from brand perception.
Moreover, through procurement analytics, you can analyze market trends and predict potential changes in supply and demand by the information on consumer behavior of the data provider. Procurement analytics also allows businesses to compare real-time pricing and availability of goods and services, making it one of the most helpful and cost-effective data solutions today .
6. Implement Effective Contract Management
Effective contract management is essential once you have chosen a supplier. With this, you can guarantee that suppliers will deliver all of the expected services or products from them. Without effective contract management in place, your operations might suffer from missed deadlines and compliance issues.
An effective contract management system ensures that the suppliers follow everything in the contractual arrangement. You can’t just blame your suppliers for the inefficient delivery of products and services. You must also set up efficient contract management to monitor all the engagements with suppliers and avoid potential issues concerning arrangements with existing suppliers.
Hence, to ensure transparency and accountability, practice record-keeping throughout the contract management process so you can keep track of terms that didn’t work well and find solutions to make them work the next time around. Also, make sure to review the contract regularly in case of potential changes to legislation, key personnel, supplier costs, and other factors beyond the supplier’s control. This way, you could make necessary amendments while the contract is in effect.
7. Streamline Your Vendor Selection Process
Vendor selection can be a tasking phase in the procurement process. This is because you aren’t just picking any vendor out there. You need to select the best from your options so you can procure the ideal products and services that the company needs.
Of course, you will be soliciting bids from potential suppliers. This is called the request for proposal (RFP). In this stage, you can narrow down your options through a proposal evaluation team. Asking for input from colleagues can help you gain valuable perspectives on potential suppliers.
Next is to build a vendor selection scorecard. The scorecard should reflect the RFP so you can stay true to your criteria. Make sure to provide clear and uniform guidance to the evaluators. If you think that there are equally qualified vendors for your project, you can continue the evaluation.
You can inform the other vendors who haven’t made the cut. If the vendor asks for your feedback on why they weren’t selected, you can provide insights about your decision to help them win their bid next time.
8. Empower Procurement Team
Your company’s procurement team has its fair share of responsibilities in boosting financial returns. With this, see that your procurement team has access to helpful resources that could expedite their daily tasks. You can create a training plan with a predefined program to equip the entire team and personalized development plans that focus on each member’s skill-building.
Moreover, one way to empower the procurement team is to hire people with extensive experience in the field, significantly contributing to the performance of your existing team. You can also develop a reward and recognition system to encourage them to take the initiative, further motivating them to perform well in the job.
You can also invest in continuous learning and encourage the team to participate in it. It could be in the form of coaching and training. Give out rewards since this is an effective way to appreciate the team and encourage them to do better.
9. Continuously Review and Improve the Procurement Process
You can’t take action unless you have determined which areas need improvement. By conducting a periodic review system in the procurement team, you can pinpoint areas that need changes and build positive relationships with suppliers.
Note that suppliers get more responsive if they know you are conducting periodic reviews. This will boost supplier performance and ensure a reliable supply chain.
Procurement teams are significant drivers of potential returns and essential players in ensuring the business’ daily processes are uninterrupted. While sticking to the traditional procurement process is more convenient, going through change by adapting digitization can better help the business thrive in the competitive market. Equip your procurement team with the resources they need, so they can help you save costs and manage operations efficiently.