Procurement management is critical to businesses as it can take up a large percentage of a company’s spend. A long and procrastinated procurement process could cause potential loss to companies. Ways to improve the procurement process can be different to businesses in different areas, however, there are some common practices that are proved to be beneficial for companies that aim to lean their procurement procedures.
To begin with, automation would definitely help to improve procurement efficiency. An automated process can reduce repetitive operational work and eliminate human errors. Barriers that impede companies from automating their procurement include the lack of data integration, poor data quality, and endorsement from the management. In order to atomize procurement processes, technology plays an important role. A digital enterprise resource planning platform is necessary for managers to integrate company data and prioritize tasks. An automated platform can take care of spotting demands and supplies accurately as well as matching invoice spend.
Moreover, supplier engagement cannot be neglected. A good relationship with suppliers can bring businesses to a win-win situation. With more solid connections with suppliers, companies will be able to access to the latest innovation in their products, to improve their forecast and scheduling accuracy, and to lower their transaction costs. Beyond than building up relationships with suppliers to save the budget, it is also important to control companies spend internally. Optimizing inventory is the best practice since the ‘real cost’ of holding inventory is much higher than the cost of ordering items. The rule of thumb for holding costs is between 20 and 30 percent. Thus, organizations would be able to save more if they constantly regulate their inventories.
Lastly, contract management is the main component of procurement. The lack of consistency is contracts, cumbersome processing, and supply chain discontinuity can all bring negative impacts to companies. To better manage contacting processes, companies need to find their own ways. One possible solution is to bring contract management to cloud. When contracts are created, stored, and maintained in a centralized data repository, organizations can leverage their spend optimally, reduce costs, and mitigate risk.