What is the significance of procurement best practices in the BFSI Industry?
In a challenging, rapidly developing, and highly demanded industry such as BFSI, companies are often in need of strong best practices, when attempting to strengthen the supply chain. A necessary change for companies aiming to improve their supply chain, is leveraging procurement market intelligence, understanding the value of this department across their organization, and implementing robust strategies to improve their performance. Capitalizing on the right procurement strategies, data, and practices can help companies in various ways, including improve operational efficiency, reducing costs, and enabling improved partnerships. With procurement market intelligence, digitization, and cloud-based software, procurement and the BFSI sector have taken a substantial leap in the direction of growth, expansion, ease of operations, and overall performance improvement. Additionally, the rising focus on the importance of procurement best practices, supply chain collaboration, and preemptive strategizing is creating a space for unencumbered improvement, high efficiency, lower costs, and propelled growth.
How does Procurement Help BFSI Industry Players?
Improved Supplier Relationships: Procurement relies significantly on developing and maintaining strong, positive relationships with potential and current suppliers. Adhering to procurement best practices and strong procurement strategies helps companies identify their best-fit suppliers, and develop sustainable strategic partnerships. With the help of data and procurement market intelligence, companies can also enable a collaborative, honest, and mutually beneficial partnership with suppliers and vendors. During the procurement process, companies can utilize relevant data regarding their market, their suppliers’ market, and other significant factors to determine the ideal approach to partnerships, and promote improved engagement and compliance from suppliers.
Cost-Reduction: The process of procurement includes negotiating, purchasing, and acquiring the supply of various goods and services. In the BFSI sector, the majority of purchases are service-oriented, and remaining include information technology, software, and hardware requirements. When entering new contracts, chief procurement officers can use data, new cloud-based tools, growing technology, and spend transparency to identify the best approach to upcoming purchases. This ensures high-quality purchases, reduced lead times, better prices, improved sustainability, and an overall reduction in costs. Conducting efficient research and implementing procurement best practices can help companies reduce costs, maintain stronger relationships, negotiate better terms, and reduce total cost of ownership.
Demand Management: Supply chains are a vast and complex combination of processes, driven by demand, supply, and strategies. However, it is necessary for companies to ensure that their supply chain keeps pace with demand, there is a balance between the capabilities of the supply chain and consumers’ demands, and is based on a clear distinction between wants and needs. This process requires the complete and enthusiastic participation of stakeholders, and data-driven strategies to ensure efficiency and success. In the procurement department, companies aim to ensure there is synchronization between supply and demand, substantial flexibility along the supply chain, and lower chances of unexpected risks, shortages, or overloads. The demand management process includes forecasting and can help companies substantially improve their procurement strategies.
Performance Overviews and Evaluations: Strong procurement functions, strategies, and approaches can help companies continuously track their performance, evaluate and make necessary changes, and maintain optimal performance through the year. Utilizing procurement market intelligence and procurement best practices can provide companies with unparalleled insights into their performance, industry benchmarks and their position in comparison, and necessary improvements. Maintaining regular tracking and improving performance routinely can help companies mitigate risks, reduce unexpected costs, streamline processes, identify better approaches, and enable unparalleled efficiency while maintaining a significant strategic edge. This can also provide improved transparency with stakeholders, help engage suppliers more, enable the termination of unnecessary expenses, and better customer satisfaction.
Increased Efficiency: Structure and strategies help companies tackle significant challenges, prepare for major challenges, and enable significant improvements. With a strong procurement department, companies can implement substantial change within the supply chain, target shortcomings and complexities, and reduce the impact of unmitigated risks. Procurement best practices and strategies can also help minimize unnecessary expense, create better communication systems along the supply chain, address inter-departmental challenges, and enable honest strategic partnerships. All these factors contribute significantly to the potential growth, increased efficiency, and streamlining of the supply chain. Capitalizing on strong procurement functions can help companies surpass major market challenges, and significantly improve efficiency.
What are five essential procurement best practices?
Cloud-Based and Digital Tools: The rise of digitization has significantly impacted the BFSI sector, and procurement departments worldwide, leading to an upsurge in cloud-based software, and the need for businesses to shift from traditional to digital systems. With digital and cloud-based tools, companies can reduce the occurrence of repetitive tasks, mitigate human error substantially, increase speed and efficiency, and streamline various processes to be automated. Leveraging technology, cloud-based software, and novel digital tools is among the necessary procurement best practices and enables companies to better handle supplier management, purchase orders and requests, procure analytics and data, inter-departmental communication, and invoice approval.
Increased Spend Transparency: Efficiency in the supply chain requires spend transparency, and companies often fail to understand the importance or approach to maintaining clarity and transparency along the supply chain. To improve transparency, it is necessary to define proper policies, document every step of the procurement process, manage suppliers efficiently, create air-tight contracts, and review processes frequently. Capitalizing on these processes, and leveraging procurement best practices can help companies improve stakeholder clarity and involvement, reduce unnecessary expenses, increase compliance rates, and better supplier negotiations. Increasing spend transparency also reduces the chances of fraud, creates inter-departmental coordination, and helps identify potential savings.
Supplier Engagement: Companies in the BFSI sector are highly dependent on their suppliers to ensure the timely delivery of services, at ideal prices, at a certain quality, and not meeting those standards can lead to various challenges. To ensure suppliers meet those targets, companies must engage in the time-consuming and challenging process of identifying, interviewing, negotiating, and selecting their best fit suppliers. However, once the contract is signed, it is equally imperative to continuously review performance, engage with suppliers, and foster a positive relationship. Some ways to maintain strong relationships with suppliers is by encouraging necessary transparency, accepting their strategic inputs and suggestions, maintaining clear communication of expectations and goals, and regularly evaluating KPIs. Supplier engagement is a necessary procurement best practice that improves efficiency, reduces costs, enables sustainable partnerships, and encourages growth.
Optimized Inventory: Poor planning, inefficient approaches, and inaccurate forecasting can lead to significant inventory challenges, including potential spoilage, over-stocking, shortages, and unnecessary expenses. Among the crucial procurement best practices, an optimized inventory is crucial to maintaining high efficiency, managing supply and demand, and mitigating major risks. Inventory is a necessary expense, but can lead to severe losses if not optimized or strategized for accurately. Therefore, companies must evaluate their operating inventory in terms of safety, spoilage, and excess, identify over or under-purchasing of products and services, use data to choose the ideal frequency of purchases, and ensure there is synchronization across all levels of purchasing and inventory.
Efficient Contract Management: The large volume of contracts signed and managed continuously in the BFSI sector can cause significant challenges for companies, particularly when improperly handled, or incorrectly negotiated. Maintaining a comprehensive understanding of the suppliers’ markets, costs and prices within the industry, deal benchmarks, and the business’ goals, is important to entering and maintaining ideal contracts. Efficient contract management is a procurement best practice that encourages the use of proper software to enable consistency across contracts, reduce the repetitive processes, improve overall processing, and mitigate supply chain continuity challenges. Centralization of contract data and management can help companies track, evaluate, and rate compliance, performance, and quality of service efficiently. It can also help track spend and costs efficiently, and mitigate the risk of various procurement and contractual pitfalls.
Success Story – SpendEdge Advantage
The BFSI sector has witnessed substantial growth, and exponential changes over the recent years. As companies prepare for the new digital era, a renowned international bank witnessed a decline in their procurement and supply chain efficiency. Consequently, they incurred unnecessary costs, experienced a sudden drop in customer satisfaction rates, were unable to maintain savings, and could not identify their shortcomings. The BFSI sector player sought to collaborate with SpendEdge and scrutinize the cause for these challenges. Our experts carefully evaluated the procurement processes, strategies, contracts, and relationships, and offered the client a list of data-driven recommendations to improve performance and efficiency. These recommendations included crucial procurement best practices, including leveraging digital tools to mitigate inefficiency, improving inter-departmental communication, better contract management, increased focus on supplier relationships and contract management. By implementing the advised changes, the bank successfully overcame their internal challenges, improved savings and efficiency, reduced unnecessary costs, increased transparency and inventory management, and delivered unparalleled service quality to their customers.