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procurement spokes of the wheel

The Spokes in the Wheel of Procurement

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So many things have changed in 2020, what a year! But, what matters most is ensuring the spokes of your procurement wheels are all there. It really comes down to the most important fundamentals within the entire procurement space.

Typically, procurement involves designing and deploying strategies that will drive value from the supplier base. To start this process requires in-depth research on current and emerging trends to help determine new solutions and which suppliers are the best fit. Then, it is about managing relationships, conducting best practices in negotiation, and driving a cost-effective plan. Tools to ensure best-in-class procurement can vary from business to another, but here are the essential practices.

Use cloud-based procurement tools

There isn’t a better time than the present to implement future-ready procurement activities. Make sure team members have more time to spend on strategic initiatives, as well as reducing repetitive manual tasks are all vital for continuity especially in the face of unprecedented circumstances.

Invariably, technology plays a massive component of everyday activities. As such, a procurement digital transformation becomes inevitable. Moreover, competitive organizations are the ones taking the lead around implementing digital procurement processes.

Initiate supplier evaluation

Unquestionably this is a crucial step. It takes analytical insights and data to evaluate a potential supplier comprehensively before sending out the contract. In addition, you must execute due diligence around quality, delivery, pricing, and supply chain transparency. Some say this is one of the most important spokes of your procurement wheel.

Many businesses consider procurement as one of their top priorities since it can take up a significant portion of their overall spend. While many companies still have manual procurement practices in place, it’s critical to transition to and embrace relevant technology solutions to keep up with evolving business and consumer demands.

Interview prospective vendors

It is imperative to interview vendors to learn more about their services and products. Every business has a set of suppliers who deliver essential products and services. Yet, qualifying and managing suppliers can become quite complex. It begins with identification of a prospective supplier, then onboarding, scheduling, invoicing, and payments. When executed manually, these processes can take hours each. Other ways to improve supplier engagement include:

  • Viewing suppliers as strategic partners
  • Setting parameters around specific KPIs
  • Creating a mutually-beneficial partnership based on trust
  • Facilitating easy communication and collaboration

Optimize inventory

Depending on the economy, and shifts in the market, profit margins can shrink. As such, it is crucial to constantly be on the lookout for ways to improve profits and control spend. So then, procurement should be involved in optimizing inventory as the cost of “holding” inventory is much greater than ordering products. Generally, holding costs should be no more than 30 percent – this includes consumable items, electronics, clothing, and more.

So what causes an unbalanced inventory? Usually, it is the result of ineffective forecasting and planning. To improve inventory management requires data-driven analytics and insights. Ask these questions to help optimize your inventory:

  • Have any products or services been over-or-under purchased?
  • What is the ratio of operating inventory relative to excess stock?
  • What is the desired rate of purchases?
  • Do purchase orders align with current inventory levels?

Incorporate spend transparency

Transparency opens opportunities for finding savings and enhancing operational efficiencies. Not to mention, spend transparency enables accountability while mitigating the potential for fraud. What steps can you take to incorporate spend transparency? Below are a few of the fundamentals:

  • Spend time defining and deploying procurement policies
  • Document every step of your procurement wheel and monitor progress
  • Make sure your contracts are fool-proof
  • Execute audits frequently

The objective is to decimate maverick and dark spending. With procurement technology, you can use the power of automation and analytics to do just that.

Improve contract management

How would you rate your bargaining abilities? Negotiation skills are paramount in terms of procurement. You don’t want to bend on either quantity or quality. When you embark upon a well-negotiated partnership, you improve your competitive edge while inducing cost savings where needed. One of the most common issues in procurement is contract management.

Why do contracts matter? For many reasons including consistency, supply chain continuity, and budgeting. And, it’s also critical to have a central repository where you can quickly review, manage, and audit your contracts at any time – accessible from anywhere.

Collaborate with suppliers

Now that you have initiated the contract, it’s time to ensure a steady workflow to ensure product shipment or service delivery remains smooth. This is also the time to have backup plans in place in the event of an unforeseen scenario. Supplier management is all about people management.

Manage in-house expectations

Remember that you will still need to win over the confidence of your team members regarding both quantity and quality expectations. As a result, it is important to be prepared for any potential issues, to be transparent with your responses, and to be open to team suggestions.

Review periodically

You might have signed the contract, but it’s not over yet. Now, you must be vigilant to keep suppliers on task with fulfilling their agreements. Still, you must be diplomatic at all times. Keep an eye on the contracts, market conditions, and evolving business requirements.

Final thought

You are now aware of the spokes of your procurement wheel. Some of these processes might seem familiar while others could be new. Nonetheless, procurement excellence mandates proper implementation. The first step in creating a competitive and sustainable procurement process is with the right technology tools. Only then can you make data-driven decisions, maintain compliance, reduce expenses, optimize inventory, and more. Contact Premikati today if you’re ready to take the spokes of your procurement wheel to the next level.

Premikati Contract Management

Contract Management for CFOs

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7 Ways Financial Departments Benefit From A Modern Contract Management System

 

Finance and procurement go together like peanut butter and jelly. Procurement teams must have both time and funds to complete their tasks while financial departments must control spend and guide money towards the highest-impact activities available. Contract management software like SAP Ariba help finance and procurement work together smoothly while saving everyone a ton of time and money. Here are seven ways a good contract management system can benefit your financial department: 

Lower Total Cost of Ownership (TOC)

If there’s one thing that excites a finance pro as much as increasing a company’s revenue, it’s saving a boatload of money. Using a contract management system is a high-impact path to lower TOC vs. a traditional pen, paper, and fax machine system. Between reduced liability costs, on-time contract renewals, salaries that go further thanks to a major speedboost, and data-based insights into suppliers, a proper contract management system can go a long way to reduce costs. As compared to the analog method and other digital contract management systems on the market, SAP Ariba offers more bang for the buck at a lower price point for any small to medium enterprise looking for a robust contract management system. 

Mitigate The Risk Of Costly Liability Issues

Many risks are preventable with the right tools. Contract management systems help mitigate risks, effectively saving money, in a variety of ways. First, they reduce contract errors such as unsigned fields or accepting a modified, nonstandard contract without review. Because compliance and performance information is stored within the CMS, it’s also easier to see which suppliers may pose problems for the business in the future by offering shoddy quality products or failing to maintain compliance with governmental agencies. 

Stopping these problems from the onset can save massive amounts of money in legal fees as well as reductions due to loss of reputation. 

Broadstroke Benefits With E-signatures

E-signatures let suppliers sign their contracts online. This process can save a lot of money compared to mailing back and forth paper materials which can be bulky and expensive, especially in the face of rising mail costs. The e-signature, however, is traceable and secure. Platforms that offer this service such as DocuSign—the software of choice for SAP Ariba contracts—come with other perks too. They walk signers through each step of the signing process, highlighting the field to sign or initial to make sure no spaces are left blank. This reduces fees that could be associated with any legal recourse that arises from an unsigned or improperly-signed contract. 

Save Time And Reduce Salary Costs

Perhaps more beneficial, e-signature software reminds signers to complete the task which not only ensures compliance, it saves a ton of money in time procurement doesn’t have to spend to reach out and pester people for signature. The cost associated with procurement and legal professionals can quickly balloon if employees get bogged down in sluggish outdated processes. By providing contract templates and a clause library as well as esignature functionality and dashboards with the most important information, each employee can focus more on high-impact tasks instead of menial, wrote jobs. 

Never Miss A Key Date

Especially when underperformance has been an issue, missing a key date to cancel or renew a contract with a supplier can be devastating financially. While it can be incredibly tedious to try to manage all major contract renewal dates using analog methods, a good contract management system can keep everyone on track for success. SAP Ariba offers users a dashboard with upcoming important dates such as contract renewals so there is ample time for research and negotiation that could save a lot of money.

Gain Full Visibility Of The Entire Contract Lifecycle

Optimization is hard when you can’t see everything at play. Contract management software offers financial departments full visibility into the contract management lifecycle making it easier to analyze, strategize, and optimize for the best possible cash flow scenario. With SAP Ariba, the entire set of actions from initiation to renewal are kept in a central database with a variety of other supplier information within a fully-auditable trail. 

Analyze Your Best-Value Suppliers 

With more information about each individual supplier, finance professionals gain insight into  how each supplier plays a role in the organization. Which suppliers bring the most value to the table based on a variety of factors? Where is there room for negotiation? Which suppliers should be replaced as soon as possible. By understanding where value lies within your contracts and suppliers, it’s easier to make wise choices without all the guesswork of papers and pens. 

About Premikati

Premikati is a woman-owned business of procurement experts providing best-in-class software to maximize your company’s ROI.  

Our award-winning team has a 100% success rate implementing on-time and on-budget, due to our agility, leanness, operational experience, and the ability to tailor the transformation process from C-level to end user. (For more information, visit www.premikati.com)

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