In every industry, professionals must maintain the latest knowledge and practices of emerging trends and technology. However, procurement best practices are in a rapid state of change.
It is transforming from the back-office administrative function to one with significantly more influence over companywide decisions. The procurement managers are the main heroes who balance the budget effectively. They also can eliminate waste in the supply chain, control costs, and analyze the buying process.
To get there, it’s essential to have a comprehensive understanding of Procurement best practices. Today, through this blog, we will delve into top procurement best practices, learn how to audit your business’s procurement process and make wise spending decisions, specifically in high-value areas like information technology. Here, you can also get Procurement professional certification to get a clear understanding of it.
What is Procurement?
Before exploring the practices, we will focus on what procurement technology is. It encompasses the entire procedure of souring and collecting all required materials for products and services. Experts also conduct procurement, which is the procedure of analyzing, shortlisting, selecting, and gaining the products or services needed for the business.
To become an expert in procurement, make sure to check How to Become a Procurement Professional?
Following are the typical steps in the procurement procedure:
- Assessment and identification of the business’s requirements.
- Research for potentail suppliers.
- Generating the list of your potential suppliers.
- Request for quotation or proposal.
- Then, check the quote or the proposal sent by the suppliers
- Negotiate the terms.
- Award the contract to your selected suppliers.
- Arrange and gain the products or services.
- Complete the quality check.
- Analyze results, margins and KPIs.
- Implement and maintain your relationship with the suppliers.
Let’s Explore Procurement Best Practices
Following are the unpacking of each Procurement best practice in 2024 with in-depth explanations of why they are so essential.
1. Develop a fully digital procurement process:
Trending technology and cloud-based automation software lie at the centre of today’s most successful industry-leading organizations. Automating the manual, paper-based processes significantly increases efficiency, streamlining data collection and analysis and cutting costs.
The effective use of cloud-based software as a service (SaaS) in Procurement is rising rapidly. It also demonstrates the 5th largest global SaaS market as of 2019.
Digital SaaS technology drives global commerce today with practical methods, where businesses that don’t abandon paper-based, manual processes might quickly fade into the competitive background.
It is usually unfeasible to expect businesses to remain competitive without any advantages provided by automation software.
2. Spend Transparency:
Developing the procurement management functions transparently is the bottom line to unlocking the different potential savings and making headway towards gaining operational excellence.
It is the key to ensuring accountability and reducing the opportunities for fraud in the procurement procedure. The robust way to increase cost savings is by keeping your spending under control. For this, you must consider the following procurement processes:
- Define and implement procurement policies properly.
- Monitor and document each step of the procurement procedure.
- Analyse and manage the approved supplier lists.
- Develop proofed procurement contracts.
- Conduct frequent audits.
With the help of focusing on the power of data analytics and automation, businesses can avoid dark purchasing and maverick spending. Procurement technology provides strong visibility into the procure-to-pay process cycle.
3. Supplier Engagement:
Each business has several suppliers who provide effective products and other speciality services, perform continuous maintenance, and fulfil one-time urgent repairs. Even if calling the specific vendor to order merchandise sounds easy, it includes the tasks of qualifying and managing the supplier is anything but.
The procedure of analyzing the potential supplier, onboarding the vendor, scheduling the service, obtaining the invoice, and getting the vendor is overwhelming. If managed manually, just the simple procedure of submitting one vendor invoice can take several hours.
Supplier management tools provide a range of distinctive features aimed at optimizing the source-to-contract process and elevating supplier engagement. Procurement tools, in particular, offer robust vendor dashboards, ready-made contract templates, streamlined digital procurement processes, and seamless integration with accounting procurement management systems.
To enhance supplier engagement, organizations can implement the following strategies:
- Generating Win-Win Situations and Trust
Foster mutually beneficial relationships by creating situations where both the organization and suppliers gain value. Building trust through fair dealings and transparent communication contributes to a positive and collaborative supplier relationship.
- Treating Suppliers as Strategic Partners
Shift from a transactional approach to viewing suppliers as strategic partners. Involving suppliers in long-term planning and decision-making processes helps align objectives and ensures that suppliers are integral to the organization’s success.
- Monitoring Supplier Performance with Specific KPIs
Implement key performance indicators (KPIs) tailored to measure and evaluate supplier performance. This data-driven approach allows organizations to assess suppliers based on predefined criteria, ensuring accountability and continuous improvement.
- Enabling Collaboration and Communication with Vendors
Facilitate open lines of communication and collaboration between the organization and its suppliers. eProcurement tools with integrated communication features enable real-time collaboration, ensuring that both parties are on the same page and can address issues promptly.
By incorporating these practices and leveraging the capabilities of supplier management tools, organizations can not only streamline their procurement processes but also cultivate solid and collaborative partnerships with their suppliers.
4. Automation of procurement procedure:
Implementing an effective procurement system not only saves time and resources but also allows for a greater focus on customer preferences and feedback. To achieve such efficiency, the integration of automation into procurement processes is essential.
Automating procurement processes eliminates repetitive tasks, enabling employees to allocate their time to more valuable activities. Additionally, automation minimizes the risk of human errors, contributing to smoother workflows and increased employee satisfaction.
Key processes that should be automated include:
- Payment Reconciliation
Automating payment reconciliation ensures a secure cash flow by comparing accounting records with payments, reducing the need for manual transaction processing and allowing teams to concentrate on other responsibilities.
- Accounts Payable
Automation platforms for accounts payable streamline tasks such as invoice coding and purchase orders. This not only enhances the efficiency of managing accounts payable but also eliminates the need for extensive human involvement.
- Invoice Automation
Invoice automation, while part of accounts payable automation, encompasses a range of complex processes, including price matching, data entry, approvals, purchase orders, and invoice processing. Automating these tasks not only reduces the risk of late fees but also fosters positive relationships with suppliers by facilitating prompt payments and potential discounts.
5. Contract Management:
Even if the procurement teams try to negotiate potential savings in the sourcing stage, they never wholly unlock the value and processes. While the reasons vary, the most common issue is disorganized contract management.
Businesses also need to stay clear of these procurement pitfalls by moving their contact management process to the cloud. When the contracts are generated, stored and maintained in the centralized data repository. They can also increase their spending optimally, reduce costs and reduce the risks.
Following are the different factors offered by contract management automation:
- Central Repository: Make sure to store all documents in the cloud database, which is accessible from anywhere.
- Configurable interface: The highly scalable and customizable interface that could be tailored to fit around the business requirements.
- Automated notifications: Trigger automatic alerts to highlight the contract milestones, renewables and chances for recognition.
- Performance monitoring: Track delivery time, quality of product and its price, and adherence to purchasing terms.
These are the practices, you can also explore the challenges just visit Navigating 2023’s Toughest Procurement Challenges: A Guide to Success.
How will procurement certification help you?
Procurement is one of the best and most rewarding professions for aspiring professionals. To help you start with job satisfaction, you need to get the procurement certification online through GSDC.
Through certification, you will get the advantage of being preferred by employers over your non-certified peers. No matter if you are just starting in your professional career, this certification will help you understand basic practices.
The following are the significant benefits you will get from procurement professional certification:
- Updated details and knowledge regarding industry best practices.
- Opportunity to qualify for the international job role.
- Recognition through employers and industry peers.
- Ability to network in your professional career.
- 3% to 13% higher salaries than non-certified peers.
Through the above information, it is successfully concluded that procurement technology extends beyond the mere sourcing and acquisition of goods and services; it entails a comprehensive process that spans evaluating and identifying a company’s needs to finalizing agreements with suppliers. We have discussed good practice in procurement through this blog.
In addition to these tasks, procurement professionals must actively address and mitigate risks throughout the procurement stage to ensure a seamless and trouble-free supply chain.
It’s crucial to acknowledge that the effectiveness of the mentioned procurement best practices hinges on their careful execution and implementation. These practices, when approached with diligence and caution, can significantly contribute to the success of the procurement process. Therefore, it is imperative to bear these practices in mind and apply them judiciously to achieve optimal outcomes.