Tag: Procurement Best Practices

procurement best practices

Procurement Best Practices that Companies Should Be Employing in 2019

Procurement Best Practices for Companies

Earlier, procurement had a simple mandate of keeping the cost low. But nowadays, procurement has become much more complex and requires a set of procurement best practices that can help companies to gain visibility into the operations through accurate data. Such practices improve procurement outcomes apart from identifying sustainable cost reduction opportunities and help companies to gain competitive advantage.  Therefore, we have defined procurement best practices benchmarks set by leading organizations to increase productivity and profitability.

Procurement Best Practices #1: Online procurement

Merely optimizing the website doesn’t improve the organization’s procurement process. Having a digital procurement strategy that incorporates data from different sources such as sensors in warehouses, mobile technology and addresses the consumer needs is must. Online procurement creates a predictive approach and enables organizations to provide products and services according to demands, reducing waste and increasing efficiency of organizations.

Procurement Best Practices #2: Centralize supply management

A centralized supply management system utilizes information gained from various departments and makes purchasing and sourcing decisions based on that information. It mitigates the risks and threats associated with indirect spend and minimizes maverick spend occurring due to unapproved suppliers. Implementing such practices results in substantial returns for companies.

Procurement Best Practices #3: Develop a procurement spend map

Most organizations do not have a proper spend map and rely on poor quality information to understand spend at an organizational level. A spend map provides the basis for identifying opportunities and risks and helps companies to improve supplier value apart from implementing cost reduction initiatives. Mapping spend provides valuable insights into the total spend the company, improves transaction processes and monitors the administrative cost.

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Procurement Best Practices that Companies Should Be Employing in 2019

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How Following Procurement Best Practices Helped an Automotive Company to Reduce Sourcing Costs by 11% – A SpendEdge’s Success Story

The Business Challenge

The client, a well-established automobile manufacturing company in the US, was facing a number of challenges due to drastic shifts in the global supply chain. Since they were looking to expand their business to new and emerging markets, they wanted more information on the procurement best practices. Developing a suitable business model was a key challenge for the automotive company since these markets were posing challenges related to global trade and finished vehicles logistics fulfillment. This was increasing the need to reduce production costs and excess spend. Their primary aim was to outperform competitors, both in home and emerging markets, by reducing operational costs, increasing efficiency, and following the best practices to meet the regulations of the emerging markets.

Want to know how following procurement best practices can help your business reduce excess spend? Get in touch with our experts now!

Solutions Offered

To address the needs of the client, the experts at SpendEdge identified the procurement best practices for the target region and tailored a plan that would allow them to procure raw materials at the lowest possible price. The analysts at SpendEdge followed a scrupulous research methodology that comprised of primary and secondary research coupled with qualitative and quantitative data collection procedures.

In a span of eight weeks, the automotive manufacturing company was able to successfully lower their sourcing and procurement costs by 11%. Our expertise in analyzing the procurement trends and regulations of international supplier markets further helped the automotive company to improve their relationship with key suppliers and minimize procurement risks. By following the suggested procurement best practices, they were finally able to maintain a healthy relationship with suppliers. The engagement also emphasized on the importance of selecting the right supplier, especially when it comes to ensuring the highest quality, flexibility, and cost efficiency of their supplier networks.

Key Findings

By adhering to the suggested procurement best practices, the client was able to enhance their procurement system and synchronize supply management with demand across business processes. They were also able to evolve from a fixed-cost-driven supply network to a variable-cost-driven value network and streamline information flow from the department level to a global scale. This reduced costs for the automotive company by 11.2%.

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What are the Basic Principles of Procurement Best Practices?

Procurement has become a fundamental enabler of business strategy and a preferred method for achieving sustainable cost reduction for many business entities. It is considered to be the most viable option for process simplification with technology enablement. Therefore, businesses should adopt procurement best practices to realize the full potential of their sourcing process.

While following procurement best practices, the team should strike the right balance between short-term savings opportunities and longer-term transformational opportunities. This provides good traction, better substantial benefits, and supply management for companies. Here are a few procurement best practices that companies should follow:

  • Devise a spend map
  • Engage with a wider organization to reduce costs
  • Ensure supply management and contract management
  • Connect commercial and technical capabilities

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Procurement Cycle Challenges and Ways to Overcome Them

Modern companies are operating in increasingly intense scrutiny driven by technology, customer reviews, and expectations for service improvements. Their main objectives are to minimize cost by improving the procurement cycle, manage risks, maintain vendor relationships, and streamline processes.

However, reducing costs still remains the top priority for businesses. Procurement professionals need to think before making any purchase. It might sound an easy task, but only experts will understand the difficulty involved in selecting and creating purchase orders for every request that comes to their desk. This is where unnecessary expenses start. Therefore, it is important for companies to profile the challenges faced during the management of the procurement cycle that can lead to the failure of the project.

Key procurement cycle challenges

#1 Inaccurate planning

Mostly, the decisions made while planning for purchase and delivery are crucial as they affect the overall schedule and total cost of the operations. Improper planning in the procurement process may result in material shortages or surpluses, cash flow problem, and unnecessary delays. Therefore, companies should follow procurement best practices and prototype planning models to facilitate pre-tender and procurement processes and improve their procurement cycle.

Want to avoid unnecessary material shortages and cash flow problems? Get in touch with our experts and know how they can ensure best in class procurement cycle for your organization.

#2 Reducing costs

The process begins with the proposal of the annual budget. However, the reduction of costs majorly depends upon effective supply chain management. Even small reductions in material costs in a company’s total operating budget can impact the organization positively by increasing its profit margins. Therefore, professionals managing the procurement cycle must adopt procurement best practices and negotiate effectively to obtain materials of the highest quality at the lowest cost.

#3 Legal and political environment

Legal environment refers to a broad legal framework that governs all business activities including research and development apart from procurement rules and regulations. It involves various aspects such as manufacturing, finance, marketing, and contracts of the procurement management system. Similarly, the political environment includes trade associations, professional associations, and business firms or companies that are engaged in the procurement process.  Their varied interests affect the overall budget of the procurement management system and disturb the complete procurement cycle. Such an environment requires companies to include detailed provisions in their contracts and develop a strong coalition among policy makers, bureaucrats, and interest groups to get their procurement process in place.

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#4 Maintaining vendor relationships

Vendor relationship management is an intellectual approach to manage relationships with vendors who supply goods and services to the organization. The methodologies of vendors pre-qualification in the procurement cycle vary from company to company but the relationships strengthen when procurement professionals follow mutually agreed upon standards to assess the performance. 

How to manage your procurement cycle?

Our team of procurement experts at SpendEdge realizes that ensuring efficiency in the procurement process has a positive chain reaction within the entire organization. Therefore, we are highlighting four steps that are critical to step-up your procurement cycle:

  • Incorporate a contract management system
  • Maintain a good supplier relationship
  • Automate processes
  • Employee training and development

Making changes in the procurement cycle may seem a daunting task at first but it is extremely beneficial in the long run. Request a free demo and know how our experts can help you improve the procurement cycle.

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Procurement Best Practices That Will Help Businesses Stay Competitive In 2019

Doing what you’ve always done is no longer acceptable in business. There are always a set of best practices that can be employed to maintain business excellence and improve productivity. The same is applicable for a companies’ procurement process as well. Companies need to follow procurement best practices to increase their revenues by being cost-effective.

Many government and commercial organizations have started recognizing procurement as a fundamental enabler of business strategy. It is a viable source of opportunity for process simplification and also provides detailed insights into operations through data and information. Therefore, organizations should focus on enforcing procurement best practices benchmarks that can enable them to realize the full potential that procurement can deliver.

At SpendEdge, we understand the impact that a procurement process can have on business. Therefore, in this blog, we have listed out procurement best practices that will ensure supply chain excellence for companies.

Want to improve the efficiency and effectiveness of the procurement process? Get in touch with our experts and know how adopting procurement best practices can help your organization.

Procurement best practices adopted by companies

E-Procurement

Digital procurement strategy is not just limited to creating an online shopping cart or optimizing the website. It incorporates data from numerous sources such as sensors in warehouses and social media and enables companies to create an approach that can address the needs of the audience. Therefore, businesses should adopt digital procurement solutions and strategies and try to reduce waste and unneeded inventory costs. This is one of the procurement best practices that companies can follow  and increase their process efficiencies.

Centralized supply management

A centralized supply management system enables companies to make purchasing and sourcing decisions based on the information and data received from the various departments and experts in an organization. This helps companies to mitigate risks associated with unmanaged direct spend and is considered as one of the procurement best practices by experts. Moreover, such procurement practices ensure the prevention of unnecessary spending with unapproved suppliers.

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Improve total cost of ownership

Strategic sourcing empowers companies to not just examine the purchase price, but also examine the total cost of owning or consuming a product or service. Even best-in-class companies have stopped selecting suppliers merely on the basis of price. They analyze the complete procurement process and then implement procurement best practices that can reduce the total cost of ownership.

Strengthen supplier relationship

Companies today are focusing on “supplier relationship management.” They are adopting various alliance management programs that can provide them a mechanism to strengthen their relationship with suppliers. They are even creating platforms for problem resolution and developing continuous improvement goals to achieve value for both parties.

Optimize inventory

Optimizing inventory becomes extremely crucial for companies during the economic downturn. Putting inventory on the radar help financial officers to find new ways to improve the bottom line and reduce working capital. Therefore, supply chain organizations are advised to review their inventory quantities and adopt procurement best practices.

Want to know how your organization can utilize procurement best practices to drive optimal client outcomes? Request a free demo today!

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Spend Management Solutions: A Holistic Guide for Procurement Companies

“Only a truly integrated spend management solution can fetch value for your company and result in intelligent procurement.”

Limited supply chain visibility, poor supplier transparency, new regulations, spend creep, contract management, risk mitigation, and the growing need to do “more with less” are some of the key challenges that procurement companies face. Spend creep has become one of the biggest challenges for companies today as companies are spending extensively to stay ahead of the competitors.

Unnecessary spend happens when businesses buy additional items, products or services, from suppliers that aren’t needed. Also, it happens because of misguided bid management process, weaker supply chain management systems, and lack of auditing and spend analysis. Therefore, procurement professionals need to have the right spend management solutions to tackle these challenges efficiently and effectively.

At SpendEdge, we understand the impact that spend management solutions can have on your business. And to help companies identify latent opportunities to devise strategic plans to minimize their expenditure in every category, our team of experts have provided a comprehensive guide to spend management.

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3 Procurement Trends That Can Change the Dynamics of the Mining Industry in 2019

Today commodities are moving back broadly into the global market balance but the challenges for the mining industry are far from over. In a world of more complex ore bodies, deeper mines, social and geopolitical risks, growing energy costs, resource nationalism and lack of infrastructure, global mining industry remains under exceptional pressure to control costs, boost efficiency and improve safety performance.

Rising cost is a cause of concern for the mining industry as the strategies of mining companies depend heavily on the current state of the market. Also, the rise in cost is resulting in the declining quality of ore and limited accessibility of new deposits. This will squeeze the supply in the years to come, potentially driving a commodity-price rebound as the global demand continues to rise. So, the companies need to analyze the new procurement trends in the mining industry that can offer exceptional opportunities for efficiency gains and can help in controlling costs as well.

At SpendEdge, we understand the impact that rapidly changing procurement trends can have on your mining business. And to help companies in the global mining industry to reposition their portfolios and excel in the competitive landscape, our team of experts has highlighted three procurement treContact USnds that have the potential to change the complete dynamics of the mining industry in 2019.

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Striving for Procurement Excellence? Here’s What You Need to Do

The role of procurement in organizations is no longer a matter of debate. Sourcing and procurement have been gaining increasingly strategic relevance in companies and has been the object of constant attention as it is directly related to the level of effectiveness of the organization and closely connected to the company’s cost structure. There is a new recognition in companies of the positive impact that procurement excellence can have on important performance indicators, like costs and spend patterns. Now, top players across industries are contemplating ways to attain sourcing and procurement excellence in order to gain a sustainable cost advantage for business. Furthermore, companies can analyze their procurement operation and think strategically using reliable data which is a foundational building block of procurement excellence.

Execute transformational changes

Leading organizations leverage internal and external data while undertaking transformational changes in procurement. This helps them shift focus to strategic buying vs. tactical procurement. Combining these elements give companies unprecedented visibility over their procurement functions and better leverage its role in increasing profitability. Companies that have harmonized data around their spending tend to attain sourcing and procurement excellence. For instance, while purchasing raw materials, manufacturers must gain an understanding of the change in spending on a year-on-year basis in order to proactively pinpoint and cater to any significant fluctuations.

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The Future of Procurement: What has 2019 Got in Store?

Advancements in technology, business practices, and consumer demands have brought about a wave of changes in procurement. With time, procurement’s role in business is changing. In most organizations, procurement is now considered a strategic contributor to an enterprise’s growth and performance. Furthermore, the rise of new procurement trends has resulted in considerable changes in the procurement functions. There are several revolutionary procurement trends that we see today, but it is also important to recognize, acknowledge, and perhaps even leverage them as we work to improve the entire procurement cycle. According to the industry experts at SpendEdge, here are some of the top procurement trends that all set to take off in 2019:

Procurement trends 2019 

Digitization and blockchain

Blockchain is one of the hottest topics across various industries right now and is soon set to become one of the most sought-after procurement trends. Blockchain technology is believed to play an integral role in shaping the transparency of a supply chain. This technology would make it possible to easily share and transmit information in a safe manner across the supply chain. Furthermore, consequent to blockchain’s increasing influence, there is a predicted rise in digital adoption and use of the cloud.

Talent shortage

One of the procurement trends that companies can expect in 2019 is a shortage of qualified talent. Through 2020, the jobs in procurement and logistics are excepted to shoot up by over 20%. Some of the key factors contributing to this include – changing skill requirement, aging workforce, lack of development, and the common perception that supply chain jobs lack excitement. As the role of procurement is changing in most enterprises, the requirement for additional skills sets such as soft skills, critical thinking, and creativity are also growing.

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Corporate social responsibility (CSR)

Over the last few years, CSR has become a procurement criterion in its own right. The rising popularity of CSR among procurement organizations is expected to make it one of the key procurement trends in 2019. This trend is particularly noticeable in the public sector as public purchasing policies are based on European directives, and in large businesses with more than 5000 employees as their responsibility is scrutinized more closely and their larger workforces allow for it too.request proposal

Cybersecurity

In the past few years, the cyber-attacks have skyrocketed at an alarming rate in the U.S. To make it worse, cyber-attacks are growing in size, sophistication, and cost. So, there is little doubt that such malicious practices will continue to plague organization in 2019. In response to the threat, procurement teams must aggressively identify ways to protect the sensitive personal and financial information belonging both to their own organizations and to their suppliers.


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