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Top 5 Procurement Best Practices to Up Your Game in 2024
With purchasing and operational costs steadily increasing, businesses are prioritizing procurement management due to its substantial share of overall expenditure. As many organizations still rely on manual procurement methods, a comprehensive overhaul of procurement processes is essential to meet evolving business needs.
To establish a strong foundation, organizations must adopt an efficient procure-to-pay process and leverage appropriate technological solutions. However, simply updating processes and implementing advanced technology isn’t enough to achieve best-in-class procurement.
While the specifics may vary, there are several procurement best practices embraced by leading companies that consistently drive cost reduction, process efficiency enhancement, and positive impacts on the cost-income ratio.
Outlined below are the top 5 procurement best practices that, when effectively implemented, can deliver significant cost savings and process improvements, leading to a more efficient procurement function.
To establish a strong foundation, organizations must adopt an efficient procure-to-pay process and leverage appropriate technological solutions. However, simply updating processes and implementing advanced technology isn’t enough to achieve best-in-class procurement.
While the specifics may vary, there are several procurement best practices embraced by leading companies that consistently drive cost reduction, process efficiency enhancement, and positive impacts on the cost-income ratio.
Outlined below are the top 5 procurement best practices that, when effectively implemented, can deliver significant cost savings and process improvements, leading to a more efficient procurement function.
1. Embrace Procurement Tools
Transitioning procurement to a digital platform is essential for future-proofing procurement activities. By leveraging digital procurement solutions, teams can streamline operational tasks, allowing them to focus on strategic initiatives.
In our increasingly tech-driven world, digital transformation in procurement is not just advantageous but necessary. Leading organizations are already embracing digital procurement practices to stay ahead. For those new to procurement, here’s a step-by-step guide to crafting a successful procurement strategy. Get your hands on it today!
Discover what robust digital procurement solutions like Zapro Procurement can accomplish:
Supplier Management: Easily onboard, maintain, and oversee vendors within a user-friendly platform.
Invoice Approval: Approve invoices on-the-go and conduct swift three-way matching effortlessly.
Purchase Requests: Fluid forms facilitate the capture, approval, and monitoring of purchase requests.
Purchase Orders: Automatically generate POs and orders from approved purchase requests.
Spend Analytics: Extract actionable insights from purchasing-related data through comprehensive analytics.
Integrations: Seamlessly integrate your procurement with other critical finance software systems.
In our increasingly tech-driven world, digital transformation in procurement is not just advantageous but necessary. Leading organizations are already embracing digital procurement practices to stay ahead. For those new to procurement, here’s a step-by-step guide to crafting a successful procurement strategy. Get your hands on it today!
Discover what robust digital procurement solutions like Zapro Procurement can accomplish:
2. Enhance Spend Transparency
Ensuring transparency in procurement functions is essential for unlocking potential savings and advancing towards operational excellence. Transparency in spending is crucial for accountability and reducing the risk of fraud in procurement processes. To achieve cost savings effectively, it is vital to bring spending under control. We have developed a straightforward guide to help you achieve this in just five steps.
Steps to achieve spend transparency in procurement:
Clearly define and implement procurement policies.
Monitor and meticulously document each stage of the procurement process.
Maintain and manage an approved supplier list.
Establish robust procurement contracts.
Conduct regular audits.
Utilizing data analytics and automation enables organizations to eliminate unauthorized purchases and unapproved spending. Procurement technology provides enhanced visibility into the entire procure-to-pay cycle.
Steps to achieve spend transparency in procurement:
Utilizing data analytics and automation enables organizations to eliminate unauthorized purchases and unapproved spending. Procurement technology provides enhanced visibility into the entire procure-to-pay cycle.
3. Foster Collaboration with Suppliers
Supplier management presents a multifaceted challenge for organizations, spanning from vendor identification and onboarding to invoicing and payment processes. Even seemingly simple tasks like handling invoices can become time-consuming when done manually.
Fortunately, supplier management tools offer a comprehensive solution, streamlining the entire source-to-contract process and enhancing supplier engagement. These tools, such as eProcurement platforms, offer features like vendor dashboards, customizable contract templates, digital procurement workflows, and seamless integration with accounting systems.
Improving supplier engagement entails several key strategies:
Cultivating mutually beneficial relationships founded on trust.
Viewing suppliers as strategic allies rather than mere service providers.
Monitoring supplier performance through tailored Key Performance Indicators (KPIs).
Facilitating collaboration and open communication with vendors.
Fortunately, supplier management tools offer a comprehensive solution, streamlining the entire source-to-contract process and enhancing supplier engagement. These tools, such as eProcurement platforms, offer features like vendor dashboards, customizable contract templates, digital procurement workflows, and seamless integration with accounting systems.
Improving supplier engagement entails several key strategies:
4. Implement Sustainable Procurement Practices
As profit margins dwindle across various industries, organizations are increasingly prioritizing expenditure control and bottom-line enhancement. Consequently, procurement teams must vigilantly assess their inventory to ensure optimization. Understanding key aspects of inventory management is crucial in this pursuit.
One fundamental aspect is recognizing the true cost of holding inventory, which often exceeds the direct ordering expenses. Typically, holding costs range between 20 and 30 percent, making it imperative to minimize excess inventory wherever possible.
Moreover, it is essential to acknowledge that inventory concerns extend beyond perishable goods; even durable items like consumer electronics and apparel are susceptible to depreciation and obsolescence over time.
A common pitfall in inventory management is out-of-balance inventories, often stemming from inadequate planning and forecasting. This emphasizes the need for robust strategies and systems to anticipate demand accurately.
In response to these challenges, procurement leaders worldwide are increasingly turning to data-driven insights for optimization. According to the 2018 Global CPO survey, nearly half of respondents have embraced intelligent analytics for cost and inventory management. This shift underscores the growing recognition of the transformative potential inherent in leveraging advanced insights to drive efficiency and profitability in procurement operations.
One fundamental aspect is recognizing the true cost of holding inventory, which often exceeds the direct ordering expenses. Typically, holding costs range between 20 and 30 percent, making it imperative to minimize excess inventory wherever possible.
Moreover, it is essential to acknowledge that inventory concerns extend beyond perishable goods; even durable items like consumer electronics and apparel are susceptible to depreciation and obsolescence over time.
A common pitfall in inventory management is out-of-balance inventories, often stemming from inadequate planning and forecasting. This emphasizes the need for robust strategies and systems to anticipate demand accurately.
In response to these challenges, procurement leaders worldwide are increasingly turning to data-driven insights for optimization. According to the 2018 Global CPO survey, nearly half of respondents have embraced intelligent analytics for cost and inventory management. This shift underscores the growing recognition of the transformative potential inherent in leveraging advanced insights to drive efficiency and profitability in procurement operations.
5. Continuously Evaluate and Improve Procurement Processes
Procurement teams often struggle to realize the full potential savings during the sourcing process due to various challenges, with disorganized contract management being a primary culprit.
Recent findings on contract management reveal that a staggering 81 percent of organizations do not utilize any Contract Lifecycle Management (CLM) software. Consequently, they encounter numerous pain points, including inconsistent contract terms (53 percent), cumbersome processing (45 percent), and disruptions in the supply chain (36 percent).
To navigate these procurement challenges effectively, organizations are increasingly migrating their contract management processes to the cloud. By centralizing contract creation, storage, and maintenance in a repository, organizations can optimize spending, reduce costs, and mitigate risks.
Key benefits of contract management automation include:
- Centralized repository:
- Configurable interface:
- Automated notifications:
- Performance monitoring:
Elevate your procurement process with Zapro
Some of these procurement best practices may appear simple and familiar, while others are relatively new. Nevertheless, by implementing them effectively, organizations can unlock excellence in procurement.
Integrating a digital procurement solution is the initial stride towards establishing a sustainable procurement strategy. A comprehensive procure-to-pay tool like Zapro can streamline and optimize procurement processes, fostering efficiency and effectiveness.
With Zapro, organizations globally are shortening procurement cycles, expediting purchase approvals, reducing expenses, leveraging procurement analytics for informed decision-making, maintaining consistent policy compliance, and more. Experience the Zapro Procurement Platform firsthand today, and witness how it can elevate your procurement practices, enabling you to outperform competitors and enhance your procurement capabilities significantly.
Integrating a digital procurement solution is the initial stride towards establishing a sustainable procurement strategy. A comprehensive procure-to-pay tool like Zapro can streamline and optimize procurement processes, fostering efficiency and effectiveness.
With Zapro, organizations globally are shortening procurement cycles, expediting purchase approvals, reducing expenses, leveraging procurement analytics for informed decision-making, maintaining consistent policy compliance, and more. Experience the Zapro Procurement Platform firsthand today, and witness how it can elevate your procurement practices, enabling you to outperform competitors and enhance your procurement capabilities significantly.
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