Procurement Best Practices That You Should know

Posted by Negotiatus on November 28, 2018 at 1:46 PM

Today's changing business environment pushes companies to evolve their strategies faster than ever, and one process often overlooked is procurement. By putting extra emphasis on establishing procurement best practices, companies can position themselves to achieve their goals faster and at lower costs. Since purchasing is one of a company's top expenses, by implementing practices that lead to cost savings, companies can give themselves more flexibility with how they budget and spend their money.

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If you're looking to invest in good procurement processes, you'll need to ensure that your strategy is aligned with your goals and that your staff is on the same strategic page. Here are the top best practices to consider for procurement teams when looking to optimize and streamline their processes.

Have the right people in place

Having the right teams in place is essential. First, you'll want to establish a governing supply chain council that can give directives and help your company align its supply chain strategy with its overall business policy.

This should be comprised of a mixed group of organizational members, including the designated leader of the supply chain organization, company executives, business unit managers and other leadership members.

Their goals should be to:

  • Centralize supply chain and procurement protocols.
  • Help remove barriers to successful supply chain management.
  • Discuss potential current or future issues.
  • Modify supply chain management strategy as needed.
  • Solicit input from other organizational members working within the supply chain.

In an ideal world, this group holds regular meetings to discuss supply chain-related issues. Even if they don't meet routinely, just establishing a council displays the company's commitment to their supply chain management strategy.

Once you have your strategic group in place, you'll want to staff the operational aspects of your strategy. This group carries out the supply chain council's directives and ensures that proper protocol is followed.

Properly structured staffing is a must, and it's important to make certain everyone involved in the process is on board and understands the transactional procurement practices you've established.

Utilize technology to meet your objectives

Utilizing technology in your procurement processes can improve your operations. Through automation, you'll enjoy increased productivity and efficiency because your processes become highly streamlined.

To reach your best potential, be sure to:

  • Conduct a system analysis to determine overall needs, and go beyond processes and workflows.
  • Review any processes that may need improvement and see which technologies can fill any gaps.
  • See how tech can help to optimize inventory. Effective automation should track your total stock and be able to notify you when you need to replenish.
  • Remember that technology should simplify the vendor management process, not complicate it or leave gaping holes in the process. Recognize the value of an efficient purchase-to-pay process.

When choosing technology, review your systems' analysis to ensure your preferred software actually meets established needs. The goal is to better manage your supply chains, not piece together a convoluted process.

Sourcing, contracts and spending

A good partnership between buyer and vendor creates a situation where both parties enjoy cost-effectiveness and efficiency. Your purchasing process should be fully integrated within your organization.

  • Choose at least three reliable suppliers that meet your criteria within your price range. Keep an updated preferred supplier list at hand in case you need to upgrade or expand beyond your chosen vendors.
  • Focus on total cost of ownership (TCO). The purchase price is important but shouldn't be the only consideration.
  • Establish alliance management. Use two-way communication to connect with key suppliers to develop strong relationships and reduce conflict. This way, both parties effectively work together to reach the best results and have a mechanism in place for problem resolution.
  • Ensure collaborative strategic sourcing. Bring all stakeholders onboard and make the best decisions that result in streamlined processes, lowered total cost and better responsiveness to changing needs.
  • Establish spend visibility for the entire organization. In a recent survey, just a mere 6 percent of businesses felt they reached full visibility in their supply chains, despite it belonging to their top three priorities.
  • Put contracts under the supply chain function to effectively monitor them and ensure that compliance is reached and terms are met.
  • Account for enforced processes and policies, such as order approvals, etc.

All of these should be developed with cost reduction in mind. In a 2017 survey, 79 percent of procurement leaders said they planned to focus on cost reduction to ensure spending remains within or lower than the budget allots for purchases.

Automating transactional activities can go a long way toward accomplishing this goal.

Poor planning or a lack of an efficient supply chain process results in poor procurement practices. To succeed, you'll want to establish procurement best practices. This isn't easy, but you can simplify it through a streamlined and organized process that will allow you to successfully reach your objectives and goals in a cost-efficient manner.

Topics: procurement