It’s always a good idea to take stock at the start of a new year. Procurement processes can always be improved. In 2020, leading organisations can reinvent procurement practice, first by evaluating challenges and then by creating a procurement strategy, optimising procurement processes, embracing technology and committing to a proactive new approach to procurement generally.
The four biggest procurement challenges we face
Most businesses face significant procurement management challenges, but the four most critical are:
- day-to-day task management encompassing negotiation, supplier administration, and vendor performance management
- meeting expectations such as supplier value improvement, supplier obligation fulfilment, contract benefits realisation, timely data-driven decisions, and proper escalations of issues such as errors and disagreements
- spend analysis around contract amounts, budgets, purchase control, supplier invoicing and payment processing, fiscal year spend tracking and management
- streamlining operations with documented processes, improved vendor/supplier relationship management and procurement analysis.
Creating an infallible procurement strategy
Any successful procurement management strategy for 2020 and beyond must consider the complete sourcing cycle from requisitions to compliance in detail. The fastest path to efficient procurement is a strategy that eliminates manual processes, optimises core procedures, improves supply chain management and leverages analytics.
Successful procurement practices are built upon reliable procurement technology, define actions based on supplier performance, have stakeholder support and help collaboration with suppliers and between departments.
Optimising procurement processes
Once your strategy is defined, it’s time to assess and optimise and procurement processes. The most effective first step to do this is to standardise the implementation and adoption of contract management and eProcurement software. Stakeholder buy-in is a must.
Leading procure-to-contract management software supports requisitions, procurement, supplier management, bidding/RFXs, sourcing, contract lifecycle management and purchase order management in one user-friendly system.
Enterprise procurement software can support process improvement in the following ways:
- better acquisitions with supplier response and price comparisons, qualification ratings, and obligation evaluations
- post-purchase monitoring with automated reminders to review critical supplier performance and contract terms, and rate the best
- more productivity and collaboration with insights into rebates, volume discounts, budgets and milestones. Procurement personnel will be positioned to make informed choices around cancellations and renewals without data silos
- enhanced control and spend management that gives legal, procurement and accounting teams the necessary transparency to track approved contract values, payments from budgets and the remaining balances of contracts
- improved supplier relationships by collecting feedback for each purchase to help with making decisions on future purchases and the overall partnership.
Executing Proactive Procurement
Proactive procurement management is where measurable opportunities can be realised. This management style is built upon accurate spend data, spend analytics KPIs, and artificial intelligence (AI):
- Accurate spend data: regularly enter, extract, review, classify, enhance, and cleanse data from contracts, purchase orders, general ledgers, suppliers and other internal systems to ensure accuracy.
- Spend analytics KPIs: focus
on visibility, analysis, and process by establishing KPIs. Examples
- number of suppliers or transactions for each category
- material price increases or decreases
- average purchase order value
- total spend based on suppliers
- product and service delivery rates
- supplier risk ratings.
- AI-Driven Procurement: Procurement professionals can reduce instances of reactive time spent on routine tasks by leveraging AI. Artificial intelligence automates procurement processes and improves data reliability allowing procurement and contract managers to proactively focus on strategy and analytics.
Reinvent procurement in 2020 with Four Business Solutions
Managing the full procure-to-pay cycle may seem complex, but it doesn’t have to be. Contract Insight offers contract management and e-procurement software to support procurement, contract and legal professionals better manage contracts, agreements, and vendor/customer obligations. It’s fast to implement, user-friendly, and easy to adopt. It can help you manage an entire contract portfolio with intelligent workflow, automated alerts, AI-based contract management, data extraction, audit trails, contract reporting and analytics.
Four helps small and multi-national organisations enrich the way they work. From supply chain to procurement and contract management, we have decades of experience helping companies forge ahead in the global market. If you’d like a demo of Contract Insight or simply to find out more about what we do, please call John O’Brien at Four Business Solutions on 0800 6250 025.
John O’Brien is the CEO at Four Business Solutions, global business consultants and software integrators providing business processes improvements in Finance, Supply Chain and Operations, across a broad range of industries.