64% of companies identified supply chain disruption as their greatest challenge in contemporary times. Without effective best practices in place, your procurement processes could easily fall prey to such disruption - leading to inefficiency, delays, reduced customer satisfaction, and jeopardized relationships with key suppliers.
To avoid this scenario, you must implement procurement best practices to achieve end-to-end efficiency in your procurement processes and keep buying workflows moving seamlessly. Read on and learn the procurement best practices that can help eliminate process bottlenecks while streamlining purchasing workflows.
Common Supply Chain Bottlenecks
Although procurement procedures differ from one organization to another, they frequently have a similar structure
With so many steps involved in procurement processes, there can be plenty of chances for bottlenecks that hinder operational efficiency and threaten cost-cutting savings. Such delays or disruptions may reduce operational efficiency while decreasing cost savings potential. Data shows us there are common bottlenecks. Organizations face difficulty managing time and resources due to unexpected disruptions in supply chains, for instance.
50% of Chief Procurement Officers (CPOs) acknowledge that unexpected risks in their supply chains present the biggest challenge to them. In comparison, 72% have experienced external disruptions of manufacturing supply chains which caused missed, late or short deliveries, and one out of every five companies experienced low-quality deliveries.
These challenges have greatly hindered the delivery process for goods to end-users. Furthermore, poor supplier communications and relationship management have compounded supply chain risks as suppliers fail to inform companies of delays they could potentially experience.
According to 64% of procurement professionals, an inability to accurately judge supplier performance is a serious threat. To counteract this issue, 42% of organizations are increasing transparency with suppliers to mitigate supply chain risks that cause bottlenecks. Furthermore, 56% are increasing communication with their vendors to identify issues early. An absence of appropriate procurement tools also presents issues.
Lacking tools hindering procurement management further complicates transparency issues within your system; while at the same time helping mitigate supply chain risks. 52% of Chief Procurement Officers agree that underutilization of automation technologies poses a significant threat.
That is why 25% of organizations utilize digital solutions or monitoring tools to gain greater supply chain visibility and more easily identify areas of risk. Furthermore, depending on one supplier can prove extremely problematic; should one collapse, you could experience delays as you won't have anyone providing products.
As any procurement specialist knows, good strategic sourcing practices require finding multiple suppliers for each input, leading 39% of organizations to diversify their suppliers by multi-sourcing products instead of solely relying on one. Although bottlenecks might appear unavoidable at first glance, you can successfully navigate many challenges by adopting simple best practices into your procurement strategy plan.
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Procurement Best Practices - Ways To Streamline Purchasing
Eliminating inefficiency and bottlenecks from the system will improve how well procurement works for your company. Here are several effective approaches that will rejuvenate and ensure sustainable procurement practices run seamlessly:
Automate Procurement Processes
Procurement is one of the cornerstones of business operations and profit margins. Yet, purchasing teams are frequently left with outdated processes and tools to use daily. How much easier would resource management become if teams didn't need to perform tedious activities themselves manually?
One-third of organizations believe automating processes is the key to eliminating disruptions and bottlenecks from procurement processes, with 23% already investigating or implementing automation solutions.
Procurement automation software makes the purchasing process faster, reduces costs and errors and speeds up productivity by automating repetitive tasks such as data entry, record updates, approvals and document handoffs - speeding up processing while increasing cost savings and decreasing errors.
Why Implement Procurement Automation?
There are three main reasons to automate procurement:
Save Time: Consider all of the hours your team devotes to processing purchase orders, data entry, approval follow-ups, invoice follow-ups and invoice follow-ups - this adds up quickly over time. Not only do 42% of business leaders agree that automating menial tasks could speed up repetitive task completion quicker, but 54% of employees also claim this could save 240 hours annually by automating menial tasks.
Automation will Reduce Human Error: Automation reduces human errors such as miscalculating dollar amounts or misentering order numbers by automating them, with half of business leaders and employees alike agreeing that Automation reduces manual mistakes.
Reduce Processing Costs: Chief Procurement Officers rank cost-effectiveness as one of the key advantages of digital procurement processes, and 31% of business leaders believe business process automation decreases labor costs.
How Hard Is It to Implement Automation?
Procurement software like Arion ERP makes this task quite straightforward, offering various pre-built purchase order templates you could start using immediately.
Customize those templates to match your processes using an intuitive drag-and-drop designer or create specific processes from scratch, such as approval workflows or forms - the only thing necessary to get started is having an established workflow in mind that needs Automation.
Build out your dynamic procurement workflow, create digital forms to facilitate it and add business rules defining automation functions - this creates a streamlined procurement process with forms automatically routing to each approver at exactly the appropriate time. Linking your SQL database to your procurement workflow allows quicker data entry by automating forms; all data will automatically be uploaded into the database for up-to-date records.
This Is How The It Company Pivotal Simplified Its Purchasing Procedures
Pivotal relied heavily on email for procurement organizations, manually filling out purchase cards and orders before emailing them off to be processed. Implementing Arion ERP has dramatically expedited this entire process; purchase cards now automatically pull cost centers from Google Sheets and conditionally route them directly to their appropriate approver - eliminating errors and delays that had previously existed in this system.
Have Well-Defined Processes
Processes must be efficient to optimize operational efficiencies; unfortunately, inefficiency often arises because companies lack clearly-delineated procedures. Without well-detailed processes in place, teams cannot know which tasks or actions need to be prioritized at any given moment to get work completed; employees may struggle with streamlining communications among different stakeholders on projects, ultimately leading to chaotic operations and potentially leading to business closure.
Though things might still get done using ineffective processes, you are likely to incur significantly greater expenses in terms of money, efficiency, productivity and morale.
Unnecessary costs are frequently incurred by duplicate requests, and poor record-keeping causes delivery delays and lost time.
To clearly define your procurement processes:
- Document every step of the purchasing process
- Identify who is responsible for each task
- Outline how those actions should be performed step-by-step
Practice Process Transparency
The greatest method to avoid delays and bottlenecks in procurement is to increase supply chain transparency. Transparency means providing all process stakeholders access to relevant documentation and information so that they may complete their roles seamlessly.
Currently, only 50% of procurement leaders possess high or very high visibility into their tier-one suppliers. Yet, the benefits of greater visibility were evident: organizations with greater access had an edge in growth over those without as much insight into suppliers.
The benefits of transparency include:
- Faster processing- When everyone is aware of what needs to be done and the procedures or standards they must follow, there are fewer bottlenecks.
- Cost reductions- Transparent procurement reduces costs by eliminating wasted time on long back-and-forth email chains and confusing requests. Instead, stakeholders can see exactly what they need to do and when.
- Accountability- Transparency in documentation holds you and your vendors accountable for each stage of the procurement journey.
- Responsible sourcing practices- Fully transparent processes help companies responsibly source products and services, abiding by their corporate social responsibility.
47% of procurement professionals are considering new tools or applications to increase transparency. Due to automated record-keeping, procurement automation software like Arion ERP can aid in improving transparency.
Have a Centralized Contract and Documentation Hub
22% of companies report contract complications within their supply chains as inconsistencies between contracts, challenges with contract management and errors that cause delays are top concerns for them. Most issues relate to one simple factor: not having a central location where employees can easily locate contracts and other necessary documentation (from operational process templates to contract templates) needed by employees for access and retrieval. Having all this documentation easily accessible ensures:
- Consistency of contracts and communications
- Fewer errors
- Less time wasted dealing with remedial work
Establish a central hub to store all your contract templates and current versions of commonly-used contracts, using Google Docs templates or contract management software as simple solutions.
Use Data to Optimize Inventory
Inventory management is vitally important as inventory carrying costs can be prohibitively high - experts estimate this figure between 18% to 75% annually, depending on your business type.
As companies strive to lower costs and streamline spending, ensuring optimal stock levels is critical. Excess stock means costly logistics fees; too little will leave customers frustrated/. Utilize data-driven insights and AI technology to quickly determine optimal inventory levels at any point in time and predict your company's needs for stock in the future.
Currently, 39% of procurement professionals rely on operational analytics for better business metrics and indicators tracking; nearly 50% of organizations also seek tools or applications that enhance supply chain tracking.
One in 10 organizations is already employing AI to optimize logistics management. At the same time, an additional 10 percent use it to enhance inventory control. Although implementation requires additional technological solutions, data collected during this process helps accurately anticipate demand to avoid overstocking or undersupplying items.
Have a Multi-Sourcing Strategy
Relying solely on one supplier for any supply chain element can be risky. When purchasing goods from just one vendor, delays and bottlenecks could arise from failure to produce goods on schedule or issues in managing supplier relations which lead to their relationship breaking down, delaying production until you find another suitable vendor to supply goods - and this means no results until one replacement supplier is identified and implemented into your pipeline.
39% of organizations now rely on multiple suppliers when procuring goods, providing greater resilience in their procurement systems and creating greater sourcing options for themselves.
Not only should you select suppliers from multiple geographical regions, but war, pandemic, geopolitical issues and climate issues can easily wipe out an entire region's supply chains if left unprotected from uncontrollable variables like war or pandemic outbreak. To combat this potential pitfall, 30% of organizations plan to diversify their supply chains across multiple geographies to be less vulnerable when an unexpected regional event knocks manufacturing offline.
Build Strong Supplier Relationships
47% of organizations believe that strengthening supplier relationships is the most effective way to reduce supply chain disruptions and bottlenecks since quality supplier management fosters transparency between both parties involved so both can stay informed of what's occurring at both ends.
Supplier communication strategies enable organizations to stay aware of issues or changes and stay abreast of process alterations or payment issues, so potential bottlenecks can be dealt with early before becoming crisis points. Over 50% of organizations have increased their supplier communication strategy as this allows them to identify disruptions early.
Communication between supplier and buyer can also help mediate potential disputes before the relationship turns sour while building solid relationships can ensure you come out ahead when there's limited capacity in accommodating all buyers - especially when your supplier needs extra help accommodating more of its buyers than expected - by building strong bonds between supplier and purchasers. Make sure this includes you.
Train Your Procurement Team
Deloitte reported in its recent report that for teams to deliver sustainably on organizational priorities such as cost and risk management, CPOs need to employ effective talent strategies. So your procurement leader must ensure your procurement team abides by all policies and processes within your organization.
An effectively trained team is much better prepared to carry out processes efficiently and effectively while being in a better position to identify obstacles as soon as they arise - this is why CPOs often prioritize team enabling during difficult times.
Be sure to provide formal procurement training, communicating any changes as they come. Also, centralize procedural documentation so staff members know where to find training resources. With well-trained teams onboard, it will be much simpler for managers and supervisors to hold procurement staff accountable for mistakes.
Top Technology Trends In Procurement
Recent technological innovations have had profound effects on many business activities. Digital transformation, in particular, rapidly alters back-office processes like supply chain management and procurement. Digitally transformed organizations increase efficiency, cut costs, and meet evolving customer expectations more readily.
Businesses must stay competitive, profitable and relevant by adopting cutting-edge technologies. Procurement is no exception: new procurement technologies enable e-procurement, contract repository management, supplier performance evaluation management, spend analysis, supplier information management, AP automation, business networks, contract authoring, contract authorship, as well as many other functions that must stay current to remain successful and relevant in business environments.
Today's wide variety of software, hardware and peripheral devices has expanded exponentially - it can be challenging to identify appropriate technologies in which to invest for maximum returns from IT budget investments.
To get the best from cutting-edge technologies, it is vitally important that you recognize key trends impacting the procurement process and choose tools that best serve the needs of your organization. Here are some crucial areas where technologies are assisting businesses to cut costs while boosting consumer satisfaction:
Cloud-Based Procurement Software Cloud
Computing and SaaS products provide organizations with solutions for many business functions, and procurement is no exception. Organizations can acquire cutting-edge procurement automation tools at low costs by utilizing subscription models.
Cloud-based platforms enable companies to lower upfront investments, reduce overhead expenses, and enhance real-time information sharing with employees from anywhere and anytime. Employees can access applications anytime and anywhere - this helps organizations increase productivity while remaining competitive in a global economy. Since new providers have entered with flexible Procurement-as-a-Service offerings, organizations can cost-effectively incorporate new technologies into existing processes.
Microservices and Low-Code Platforms
Cloud computing makes leveraging APIs (application programming interfaces) and microservices cost-effective for companies, making integrating various apps with current systems possible and streamlining processes without custom coding requirements.
Low-code workflow automation platforms reduce IT involvement when making system modifications, giving business users more independence and autonomy than systems built using code alone. They use visual drag-and-drop interfaces for managing workflow automation to maximize efficiency.
Existing all-in-one platforms will evolve to give users greater flexibility. They'll be able to mix and match applications to build custom platforms tailored specifically for businesses' needs. Without paying for features, they won't ever use them.
Process Automation
Recent polling uncovered that 63% of procurement leaders consider Automation a top priority when embarking on digital transformation efforts. Many organizations utilize AI-powered technologies like machine learning and predictive analytics in these initiatives, helping quickly analyze large amounts of data to increase operational cost-efficiencies while responding quickly to market needs.
Business process automation (BPA) provides one solution, while purchase order and sales order form automation provides another. By employing BPA techniques in procurement processes, faster and more accurate decision-making may occur - you could streamline operations using purchase order automation or improve customer experiences using sales order form automation.
On the other hand, robotic process automation (RPA) facilitates repetitive manual processes with low value-added individual activities (e.g., data entry). RPA's goal is to decrease labor costs while mitigating human errors.
By employing automation technologies, organizations can accurately determine business needs, assess risks and eliminate repetitive processes; facilitate supplier management; track spending; predict market demand in real-time and increase profits - ultimately improving their bottom line.
Data Analytics
Survey indicates that analytics will most affect procurement processes. Organizations that take part plan on using data analytics for cost optimization (50%), process improvement (48%), and management reporting (45%).
Data-driven approaches will assist businesses in developing innovative solutions to modern business challenges and provide insight. Such an approach will also reduce uncertain decision-making, inefficient use of resources and other unproductive practices - ultimately showing procurement's worthwhile driving organizational changes. Incorporating analytics directly into the decision-making process rather than treating it as a separate project will maximize its benefit in procurement.
AI-Driven Technologies
With such an abundance of data at their fingertips, businesses need the ability to manage large volumes of information in real-time to make accurate, data-based decisions.
AI can be leveraged to assist with vendor sourcing and contract management by evaluating key metrics for renewal and performance analysis, while machine learning may facilitate review/approval processes while updating catalog/contract data on products/materials/suppliers to prevent errors from arising.
IoT devices can help optimize operational efficiencies by monitoring physical assets' movement along the supply chain. AI-powered chatbots can give inquirers immediate insights to aid decision-making processes and enhance customers' buying experiences.
Collaboration and Communication Tools
To be competitive and attract the appropriate customer base. Companies can support an engaging buying experience for all through effective collaboration and communication tools.
Organizations can boost productivity and cut costs by streamlining internal collaboration. They can strengthen supplier relations and reduce supply chain risks through enhanced external communication, leading to greater productivity gains and cost reductions.
Collaboration tools provide real-time information sharing across an organization. For instance, transactional and administrative sides of procurement processes can be connected, increasing operational efficiency while decreasing errors caused by manually transferring files and data.
Mobile Services
Mobile devices such as smartphones and tablets have become essential elements of our lives; Organizations looking to stand out and attract more customers must break down internal silos so they've even become indispensable business tools for procurement specialists who often spend extended time away from their desks.
Mobile devices and services designed specifically to be mobile-friendly enable users to manage procurement from any Internet-enabled location efficiently, increasing cloud computing's benefits by making various digital tools readily accessible to more people.
As more millennials assume decision-making roles, their expectations for mobile services increase exponentially. Indeed, 42% of organizations plan on investing heavily in mobile technologies to assist procurement activities; doing so should help maximize cost efficiency and productivity improvements.
Self-Service Portal
The next-generation procurement systems will be user-driven rather than office-controlled, as more buyers prefer self-service portals to interact with businesses. Over 70% of companies are investing in this technology which enhances customer experiences while at the same time cutting costs and improving efficiency.
Organizations often utilize self-service procurement platforms to empower end-users with non-critical purchases and manage account information independently, freeing procurement personnel to handle complex transactions more efficiently and delivering a more personalized purchasing experience for consumers.
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Final Thoughts
Today's procurement processes utilize numerous technologies that work hand in hand to complement each other and increase effectiveness.
Business life today is full of the latest technological innovations - from cloud computing and native mobility solutions, social collaboration platforms and artificial intelligence-aided decision-making algorithms, all the way up to AI-assisted decision-making systems. Organizations require more than transactional tools to manage increasingly complex procurement workflows effectively.
Organizations can utilize procurement to add greater value to their businesses while becoming better employees themselves. By doing this, organizations will find themselves becoming better employers. Get intouch with the best and most reliable software solution to manage your procurement processes effectively and efficiently.
