Do you want to avoid constantly dealing with rising costs in your business? One area that's taking up a large share of your spending is procurement management. It's time to prioritize this function and take it to the next level.
Don't lack outdated manual practices; instead, revamp your procurement process with our free e-book on going digital. But wait, there's more to it than just implementing technology. You need to adopt the right practices to become a best-in-class procurement function.
The top 8 procurement best practices that leading companies have adopted have been identified as effective measures to reduce expenses, enhance productivity, and positively impact the cost-income ratio.
Ready to take your procurement game to the next level? Let's dive in!
1. Contract Management
While the sourcing stage offers a prime opportunity for procurement teams to negotiate potential savings, the disorganization in contract management processes often hinders the ability to unlock their full value. A recent report revealed that Contract Lifecycle Management (CLM) software is not used by 81% of organizations, leading to many challenges, such as inconsistency across contracts, slow processing times, and supply chain continuity problems.
Such procurement pitfalls can be avoided by moving an organization's contract administration process to the cloud and offering a unified data base for generating, recording, and maintaining contracts. Optimal spending, cost-cutting, and risk mitigation are just a few of the advantages that contract management automation can offer businesses.
A central repository for storing documents is one of these benefits, as is a highly scalable and adaptable user interface to meet particular business needs, automated alerts to showcase collective bargaining agreement milestones and renewals, and performance analysis to keep tabs on delivery times, product quality, price changes, and compliance to purchasing policies.
The benefits of cloud-based contract management are supported by additional statistics, with a recent survey from the International Association for Contract and Commercial Management (IACCM) indicating that organizations using CLM software experience a 35% reduction in processing times, a 42% increase in compliance with contractual obligations, and a 24% reduction in overall costs. With such promising outcomes, it is evident that moving contract management to the cloud can significantly improve procurement operations.
2. Creating RFI, RFP, & RFQ Documents
Businesses have now seen a new trend to receive from potential suppliers the RFI/RFQ/RFP documents they've received from other customers.
To establish best practices for creating each type of document, it's better to develop a template. For example, for RFQs, use a table that includes the part number, the manufacturer's part number, description, yearly or monthly volumes, and a blank column for the bidder to enter their price.
When creating RFPs, develop a template that includes ONLY the requirements that we discussed. These are the necessary items for the service or product to be successful. Do not include anything extra! Allow bidders to offer their ideas for meeting these requirements, and keep in mind that businesses can always narrow down the list and ask for revised bids with more specific requirements later.
3. Cloud Based Procurement Tools
As we move towards a more technology-driven world, digitalizing procurement processes becomes crucial to ensuring their readiness for the future. With digital procurement solutions, organizations can eliminate the repetitive and mundane operational aspects of procurement, allowing team members to focus on strategic roles.
Among its many capabilities, BusinessBid Procurement Cloud Software is a top digital procurement solution for managing suppliers, approving invoices, making purchase requests and orders, spending analytics, and integrations.
Organizations can easily onboard, retain, and handle vendors with the help of this software. They can also quickly three-way match invoices and approve them while they are in the field.
Fluid forms also make it easier to track, approve, and record purchase requests, and they can be used to generate purchase orders (POs) from those approved automatically.
Organizations can derive valuable insights from purchasing-related data using data-driven insights, while the software integrates with other crucial finance software packages to optimize procurement processes.
4. Work Scope
Collaboration is crucial for creating effective scopes of work, and it is essential to identify the stakeholders who will develop them. Only stakeholders can develop scopes of work that meet their needs. While I have worked in small organizations where stakeholders lack this expertise, I have also been in environments where experienced engineers have developed scopes.
To create a strong scope of work, you must work with stakeholders to identify two key elements: essential requirements and desired features. This process involves establishing a document that the stakeholder can walk through with you to identify must-haves and nice-to-haves.
Must-haves are critical components that the product or service must deliver. Please meet these requirements to make the purchase useful. On the other hand, nice-to-haves are additional features that would be beneficial but are not mandatory.
Strong relationships are required to facilitate this collaborative process, and procurement leaders should train their teams to build these relationships. By doing this, you can ensure that everyone is heard and that the final product satisfies their needs.
5. Transparent Spend Management
Achieving operational excellence and unlocking potential savings requires making procurement functions transparent. Spending transparency is crucial to minimize fraud opportunities and ensure accountability in the procurement process.
To increase cost savings, it is essential to bring spending under control. Here is how you can achieve transparency in five simple steps:
1. Establish and put into practice precise purchasing guidelines
2. Manage a list of authorized suppliers
3. Create strong procurement contracts
4. Track and record every step of the procurement process
5. Execute frequent audits
By following these steps, organizations can eliminate maverick spending and dark purchasing while gaining better visibility into the procure-to-pay cycle through data analytics and automation.
6. Supplier Relationship
Qualifying and managing suppliers is more complex than calling a vendor for products or services, even though every organization relies on several suppliers for essential products, specialty services, maintenance, and repairs. The process involves identifying potential suppliers, onboarding them, scheduling services, obtaining invoices, and making payments, which can be overwhelming. Even a single vendor invoice submission can take several hours if done manually.
Organizations can optimize their source-to-contract process and strengthen supplier engagement by leveraging supplier management tools that offer distinct features. For instance, e-Procurement tools provide the following:
• Easy-to-use dashboards for vendors.
• Collected contract templates.
• Digital purchasing procedures.
• The incorporation of accounting management systems.
In addition, enhancing supplier engagement can be achieved by creating mutually beneficial arrangements, establishing trust, treating suppliers as strategic partners, monitoring supplier performance using specific KPIs, and enabling collaboration and communication with vendors. Organizations can create a more streamlined and productive procurement process by implementing these strategies while building long-lasting relationships with their suppliers.
7. Efficient Data Analytics
As businesses strive to improve their procurement operations and gain deeper insights into their processes, the significance of data analytics in procurement is growing. With advanced analytics tools and abundant data sources, businesses can now analyze vast amounts of data from multiple sources and obtain valuable insights into their procurement processes.
Using data analytics in procurement offers numerous benefits, such as identifying inefficiencies and reducing costs. By examining data related to supplier performance, pricing, and inventory levels, businesses can simplify processes and negotiate better contracts with suppliers. Additionally, data analytics can help businesses identify and mitigate risks in their supply chain, such as production or delivery disruptions, quality issues, and non-compliance with regulations.
To leverage the potential of data analytics in procurement, businesses must invest in appropriate tools and technologies, such as data management systems, analytics software, and artificial intelligence/machine learning algorithms, to identify patterns and trends in extensive data sets. It is also essential to have the availability of high-quality data from multiple sources, such as supplier performance metrics, financial data, and market trends.
8. Sustainable Practices
Driven by a heightened awareness of the environmental impact of supply chains and the need to reduce carbon footprints, businesses are increasingly focusing on sustainability in procurement. In 2023, a significant shift will be observed towards eco-friendly practices and collaboration with suppliers with the same sustainability commitment.
In 2023, businesses must put a major emphasis on reducing waste in supply chains. Implementing corporate sustainability practices, such as recycling, reusing, and repurposing goods and resources, as well as reducing packaging and food waste, will be necessary to achieve this. Businesses must work closely with suppliers to ensure circularity when designing goods and materials.
The use of environmentally friendly materials in business procurement procedures will be another area of focus. One example is utilizing sustainable, biodegradable materials with less adverse environmental effects than traditional ones. Businesses might use bioplastics made from plant-based sources instead of conventional plastics based on petroleum, for example.
Businesses must adopt a data-driven strategy to lead the trend toward sustainable procurement. Determining inefficiencies and establishing improvement goals will require monitoring and evaluating various indicators like carbon footprints, water use, and waste generation.
To achieve procurement excellence, BusinessBid should consider combining familiar and new procurement best practices. These practices can help organizations unlock their full procurement potential.
By implementing a cloud-based digital procurement tool, you can revolutionize your business. With a comprehensive procure-to-pay tool, you can streamline and optimize your procurement processes, resulting in maximum efficiency and cost savings.
With BusinessBid, organizations can significantly shorten procurement cycles, accelerate purchase approvals, reduce expenses, analyze procurement data to make informed decisions, ensure consistent policy compliance, and much more. Use procurement tools by BusinessBid to stay ahead of the competition and elevate your procurement game. Try it out today and experience the difference it can make.