Professionals in every industry need to maintain up-to-date knowledge of emerging trends. Procurement, however, is in a rapid state of change. It's transforming from a back-office administrative function to one with significantly more influence over companywide decisions. Following procurement best practices has never been more critical to business success.
Below, we elaborate on six critically important best practices that will empower you to remain competitive in the future.
TOP 6 PROCUREMENT BEST PRACTICES FOR 2023
Below, we unpack each best practice and provide explanations of why they’re so important and timely. However, first, we’ll give you a sneak peek at our list:
- Implement a fully digital procurement process
- Shift to sustainable procurement practices
- Make transparency a priority
- Embrace mobile app technology
- Form strategic alliances with preferred suppliers
- Improve supply chain communication
Now, let’s dig in.
1. IMPLEMENT A FULLY DIGITAL PROCUREMENT PROCESS
Emerging technology and cloud-based automation software lie at the center of today's most successful industry-leading businesses. Automating manual, paper-based processes significantly increase efficiency and streamlines data collection and analysis while cutting costs.
The use of cloud-based software-as-a-service (SaaS) in procurement is rising rapidly. Procurement software represented the fifth largest global SaaS market as of 2019.
Paper-based procurement is a thing of the past. The insight gained from accurate data storage and automated analysis drives highly-informed decision-making. It is transforming procurement into one of the most influential business functions.
Digital, SaaS technology drives global commerce today. Consequently, businesses that don't abandon paper-based, manual processes may quickly fade into the competitive background.
It's simply unfeasible to expect a business to remain competitive without the advantages delivered by automation software.
2. SHIFT TO SUSTAINABLE PROCUREMENT PRACTICES
New generations of consumers prefer doing business with companies with strong corporate social responsibility (CSR) reputations. It's no surprise that 85% of consumers are more likely to buy from companies known to embrace sustainable business practices.
Sustainable procurement is the way of the future. How does this relate to procurement and supply chain management? Data from McKinsey & Company indicate that 90% of a company's negative environmental impact stems from supply chain practices.
Successful procurement organizations of tomorrow will start to adopt sustainability policies and embrace sustainable procurement today.
3. MAKE TRANSPARENCY A PRIORITY
Today’s consumers prefer to buy from brands that champion sustainability. Providing transparency around your sustainability efforts is necessary if you want to reap the associated benefits of sustainable supply chain efforts.
Sustainable supply chain practices undoubtedly represent a positive development in the evolution of procurement. Unfortunately, helping to save the environment doesn't generate revenue on its own.
Transparency in business is quickly becoming the norm. Therefore, when you adopt sustainable supply chain processes, it's essential to communicate your efforts to the market whenever possible. AS a result, your business will remain competitive, continue to grow, and make an even greater impact with its sustainability efforts.
In short, transparent sustainability supply chain management will be a significant market differentiator over the next decade and beyond. We already see it in some industries, manufacturing being among the most visible.
4. EMBRACE MOBILE APP TECHNOLOGY
SaaS companies in general—including procurement software providers—are increasingly offering mobile app versions of their systems. Mobile procurement apps let users access key data from anywhere they have mobile data.
Users can work with purchase orders, remotely track the delivery status of ordered supplies, run spend analysis reports, etc., while on the move. In today's fast-paced world, using mobile apps while on the job is par for the course.
Mobile procurement apps are paving the way forward. Mobile procurement management apps improve collaboration, efficiency, and internal communication. They also provide easier access to crucial business insights.
Consider that implementing mobile apps drives 40% of B2B revenue. That number is sure to keep rising.
Digital procurement is the way of the future. Therefore, mobile apps will—and already are—playing a significant role in driving digital transformations in the procurement space.
5. FORM STRATEGIC ALLIANCES WITH PREFERRED SUPPLIERS
Supplier relationship management is essential to a procurement organization's ability to add value and reduce spending. Nevertheless, having solid relationships with suppliers isn't enough these days.
The most successful procurement teams in the future will form strategic partnerships with suppliers. Doing so provides an abundance of benefits.
Therefore, if you gain your suppliers' trust, they can act as your eyes and ears, providing you with information about innovations in your space.
Strategic alliances can greatly enhance your procurement efforts[/caption]Additionally, when you form a mutually beneficial strategic partnership with a supplier, they will likely come to you with new ideas.
You'll have the inside track on new developments in your space. Plus, you'll also have first access to new offerings and insider knowledge your competitors do not.
Procurement teams that form strategic alliances with suppliers can take immediate advantage of innovations. As a result, they will carry a distinct competitive edge in their respective procurement industries.
6. IMPROVE SUPPLY CHAIN COMMUNICATION
A lack of effective internal communication plagues many areas of business. Unfortunately, poor internal communication around procurement and supply chain processes can deliver painful blows to a business's bottom line.
For example, if a procurement manager negotiates a significant price reduction with a supplier, the company can realize substantial cost savings.
But what happens if there's no digital data storage mechanism in place to provide visibility into that negotiation?
Let's say that the next time those same supplies are needed, another procurement manager processes the order. They may be unaware of the negotiation and end up paying the full price. They’ll miss out on the cost savings their colleague worked to establish.
Effective communication is key to results-driven procurement management[/caption]Everyone involved in the procurement process needs insight into every touchpoint and action taken by their team members.
As procurement changes, teams must anticipate industry changes and prepare to benefit from them. At the center of these changes is the expedited shift to digital procurement, driven by the proliferation of e-procurement software.
Procurement organizations that adopt digital processes will benefit from the insights and a data-driven procurement strategy, facilitated by automation software.
Organizations that haven't undergone a digital procurement transformation should start today if they want to be competitive in tomorrow's marketplace.
The coming decade will see procurement transform in many unexpected ways. Consequently, the most effective strategy for adapting to this transformation is to anticipate emerging procurement management trends before they arrive.
Follow the best practices above, and you'll be well-positioned to ride the wave of change that's defining the future of procurement as we know it.
The easiest way to adhere to these best practices, as mentioned above, is through the use of procurement software solutions. If you’re still using a paper-based process and would like to learn more about the extensive benefits digital procurement offers, schedule a free demo of Tradogram’s procurement management system today. You have everything to gain and nothing to lose.
IT Procurement Best Practices
Procuring new software can pose challenges for the IT department, especially when they're not the executive sponsor or end-user. Regardless, it's the IT department that bears the responsibility of implementing and supporting the solution. To navigate this, six best practices are outlined:
- Assign a Champion: Ensure a project champion, not necessarily from IT, takes ownership to avoid project drift.
- Involve IT Early: Include IT in the RFP/RFQ process to address technical concerns upfront and avoid overhauls later.
- Understand IT's Concerns: Address the recurring problem of technical misunderstanding by involving IT early, clarifying technical perspectives.
- Present Solutions: Clarify the problem the technology solves and align it with business objectives, focusing on solving issues rather than simply adopting new technology.
- Avoid Building Over Buying: Resist the urge to build solutions, as it's rarely cost-effective and may lack the polish of purchased solutions.
- Find Tailored Solutions: Evaluate and choose solutions that best fit your organization's needs rather than opting for top-shelf options.
In conclusion, these principles aim to streamline the IT procurement process, ensuring informed decisions that accelerate business objectives without getting lost in a procurement quagmire.
Purchasing Best Practices
Transitioning to modernized purchasing processes revolves around the central goal of gaining control over spend. To ensure success in this shift, consider these ten best practices:
- Prioritize Value-Creating Purchases: Focus on high-volume purchases in areas like IT, software, and services where early involvement and strategic negotiations can yield substantial savings.
- Enhance Requester Visibility: Provide requesters with insights into the purchasing process, alleviating the frustration of chasing down information from various sources.
- Empower Approvers with Budget Access: Equip key stakeholders with real-time budget information to effectively control business spend.
- Involve Legal and Security Early: Ensure compliance with company policies and maximize value by involving legal and security teams in the early stages of purchasing decisions.
- Adopt a Comprehensive System: Choose a purchasing automation solution that eliminates the reliance on emails and spreadsheets, offering a centralized platform for communication and information.
- Maintain a Centralized Vendor Database: Increase efficiency and reduce processing times by having a centralized, accessible vendor database that informs requesters about existing vendors.
- Manage Purchase Orders on ERP: Integrate purchase order management with your ERP for a seamless and efficient approach.
- Cultivate Vendor Relationships: Modernizing processes positively impacts supplier relationship management, providing suppliers with enhanced visibility and faster processing times.
- Continuously Automate Processes: Regularly assess and automate manual or paper-based aspects of the purchasing process for maximum efficiency.
- Adapt to Remote Work: In the era of remote work, ensure that key stakeholders working from home have the necessary tools to maintain swift and policy-compliant purchasing processes.
Procurement Transformation Best Practices
Achieving successful procurement transformation involves strategic practices:
- Alignment with Strategy: Ensure procurement goals align with overall business objectives.
- Leadership Commitment: Secure top leadership commitment for necessary resources and cultural change.
- Data-Driven Decisions: Utilize data analytics for informed procurement choices.
- Supplier Relationship Management: Prioritize strong, transparent relationships with suppliers for better outcomes.
- Technology Adoption: Embrace digital tools for streamlined and automated procurement processes.
- Talent Development: Invest in developing procurement professionals' skills and expertise.
- Risk Management: Implement robust strategies to identify and mitigate procurement risks.
- Performance Metrics: Define and measure KPIs aligned with procurement objectives.
- Agile Processes: Foster agility in procurement to respond to market changes and business needs.
- Continuous Improvement: Cultivate a culture of ongoing optimization and refinement.
- Ethical and Sustainable Practices: Integrate ethical and sustainable considerations into procurement processes.
- Communication and Change Management: Prioritize effective communication and change management throughout the transformation.
Adhering to these practices ensures organizations navigate procurement transformation successfully.
Examples of Procurement Practices
Procurement practices encompass a wide range of activities aimed at efficiently acquiring goods and services. Here are some examples of procurement practices commonly employed by organizations:
- Strategic Sourcing and Vendor Selection: Conducting comprehensive market research, negotiating contracts, and selecting vendors based on criteria such as cost, quality, and reliability to optimize procurement decisions.
- Supplier Relationship Management (SRM) for Collaboration: Building and nurturing strong relationships with suppliers to encourage collaboration, drive innovation, and establish long-term partnerships that go beyond transactional interactions.
- E-Procurement System Implementation for Efficiency: Adopting electronic procurement systems and tools to streamline the purchasing process, automate transactions, and enhance overall efficiency in procurement activities.
- Ethical and Sustainable Sourcing Practices: Adhering to ethical and sustainable sourcing practices by considering environmental, social, and governance (ESG) factors when selecting suppliers, contributing to responsible procurement.
- Agile Procurement for Adaptability: Embracing agile procurement practices to respond promptly to changing market conditions, emerging technologies, and evolving business needs, ensuring adaptability and flexibility.
Software Procurement Best Practices
Effective software procurement involves strategic planning and execution to ensure optimal outcomes. Here are key best practices for software procurement:
- Holistic Needs Assessment: Conduct a thorough assessment involving end-users and stakeholders to identify specific software requirements, ensuring a comprehensive understanding of organizational needs.
- Vendor Partnership Evaluation: Evaluate potential vendors meticulously, considering their reputation, track record, customer reviews, and financial stability. Build a strategic partnership that extends beyond transactional interactions.
- Total Cost of Ownership (TCO) Analysis: Perform a detailed TCO analysis, accounting for initial purchase costs, ongoing maintenance, support, and potential integration expenses, providing a comprehensive financial perspective.
- Scalability and Flexibility Planning: Prioritize software solutions with scalability and flexibility, ensuring adaptability to organizational growth and evolving requirements over time.
- License Management Strategy: Implement a robust license management strategy to ensure compliance with software licensing agreements, mitigating legal and financial risks associated with improper usage.
- Security and Compliance Assessment: Assess the software's security features and compliance with industry regulations and data protection standards, proactively addressing cybersecurity concerns.
- Comprehensive User Enablement: Plan and execute thorough user training programs to facilitate a smooth adoption of the software, and ensure reliable support services for ongoing assistance.
- Integration Compatibility Analysis: Evaluate the software's integration capabilities with existing systems and tools, emphasizing seamless workflow and data exchange for enhanced operational efficiency.
- Strategic Vendor Relationship Management: Foster positive and collaborative relationships with software vendors, staying informed about updates and leveraging vendor expertise for optimal software utilization.
- Performance Metrics and Impact Assessment: Define and track KPIs related to software performance, user satisfaction, and overall impact on business processes, enabling a continuous assessment of software effectiveness.
By focusing on these detailed practices, organizations can navigate software procurement with a strategic and informed approach, ensuring that the chosen solutions align seamlessly with their operational goals.