For many organizations, the thought of using a formal procurement process seems overly bureaucratic and cumbersome. However, your procurement expenses make up a significant amount of your overall business costs. To ensure that you’re getting the best value for your dollar, while saving money, saving time, and reducing risks, you should be using an effective and professional process for your procurement activities.
It will ensure that you get the best solutions for your needs, that you pay the right price for quality, and that you do not overlook vital steps that come back to haunt you. Additionally, when you use a standard process, your suppliers will become familiar with the steps you take, which will streamline operations on both sides of the process and increase efficiencies.
Here are the steps you should take in order to build a procurement process you can be proud of.
Ensure Procurement Value
Your procurement process should be built based on three core values: effectiveness, efficiency, and customer service. You must try to effectively reduce your total spend using procurement methods like strategic sourcing and category management. You also need efficiency in order to reduce the costs associated with the procurement function and processes by streamlining your operations. Finally, you want to provide the best value of materials and services to both your internal and external customers—you want to go above expectations and provide value to specification and on time. You will have to carefully balance and manage these three procurement value propositions as they often compete with one another.
Your organization may perform strategic planning activities for your business unit, operational, and corporate goals, but many companies don’t employ the same strategic methods to developing their procurement processes. Your process should include strategies for identifying, choosing, and implementing the right structures, procedures, systems, values, skills, initiatives, people, and objectives that add to your overall goals and profitability.
Once these strategies have been analyzed and selected, you must translate them into action with linked business planning and performance measurement. This includes having a clear vision and mission, defined values and principles guiding the procurement process, measureable goals, cost and risk balancing in a strategy setting, detailed actions and activities, and a continuous performance review process where new strategies and goals are adjusted and developed as required.
To bolster your procurement value and capabilities, you should be using technology. It can speed up transactions, lower the cost of acquiring, analyzing, and disseminating supplier data, and simplify the routine. This will lead to less wasted time, higher efficiency, and better customer service.
Programs range from e-auctions and strategic sourcing to electronic transactional software and market intelligence tools. With the right program, you will be able to generate contracts, manage suppliers, view electronic catalogues, create and track electronic purchase orders, optimize warehousing, and more. Investing in an integrated end-to-end automated procurement system should be a high priority in your plan to build an effective procurement process.
Focus on Supplier Relationship Management
Supplier relationship management should be an essential part of your procurement process. Creating stronger and more loyal and committed relationships with your suppliers will result in significantly positive long-term effects.
Working with your suppliers effectively in a mutually beneficial way can help you save money by reducing spend, reducing the cost of errors, and allowing you to take advantage of attractive discounts, incentives, and deals offered by happy vendors, which can allow you to gain an edge over your competition.
Increased efficiencies will also allow for more streamlined processes, quick problem resolution, and increased visibility. Well-run relationships will also help you improve value and prevent the loss of good vendors, all of which will help you achieve your business objectives.
When you focus on these four core aspects, you can build a procurement process that reduces costs, drives efficiency, and allows you to get the best value for your dollar.