3 MIN. READ
As the fourth quarter draws near, many companies undergo a process akin to a "fall cleaning," sweeping away procedures and processes that no longer yield optimal results. In preparation for a successful final quarter of the year, companies should meticulously review their procurement procedures and establish goals for simplification and enhancement. Let's take a look at how your business can clear away procurement inefficiencies and set the stage for a more successful and cost-effective future.
Your Procurement Fall Cleaning: What Should be Assessed
Your fall cleaning procurement assessment can encompass:
● Current processes.
● Current supplier relationships.
● Inventory management.
● Workflows.
● Purchasing channels.
● Training.
● Collaboration.
● Metrics used for monitoring performance.
● Digitization.
Each of these deserves exploration.
Current Processes
The procurement process involves six steps. They are:
1. Identifying what your company needs.
2. Choosing a supplier.
3. Establishing the terms of supply agreements.
4. Creating and sending a purchase order.
5. Receiving and paying an invoice.
6. Checking that a delivery is correct.
Procurement may be streamlined at any step. Goods and services may no longer fit company requirements. Any orders for them should be stopped.
Choosing a supplier may be slow, confusing, or both. Businesses should establish simple supplier evaluation protocols and ensure all procurers follow them.
As conditions in the supply chain evolve, terms of supply agreements may have to change with them. A look at past problems and the current marketplace will serve as a guide. This may be particularly true about shortages brought on by the pandemic. It also applies when political conditions improve, making materials easier to obtain.
Purchase order forms may need to be updated and revised. They should be formatted to simplify data entry and resist errors.
Steps five and six may be reversed or modified depending on current conditions and logistics arrangements. A business may want to receive and audit a delivery before paying for it.
Supplier Relationships
Supplier relationships change. Vendors can have financial or production problems that prevent scheduled deliveries. They may lose quality certifications required by the contract. Staff changes may also result in poor performance. Strategies that eliminate poor performers and forge strong bonds with reliable partners improve the purchasing experience.
Inventory Management
Two things no business wants to do are run out of necessary supplies and foot the storage costs of unnecessary ones. A study of inventory management will cut costs and improve efficiency.
Workflows
What happens between the establishment and fulfillment of a need? Teams should carefully examine how many forms need to be filled out, and the number of staff members required to process a request. This effort will uncover options to make the procurement process go more smoothly. Taking advantage of new technology also goes a long way toward reducing wasted time and energy.
Purchasing Channels
Purchasing or buying channels are another way to approach procurement workflow, particularly in large organizations. A purchasing channel is how the right product at the right price can be obtained. It often applies to specific product categories and outlines the steps necessary to purchase in that category. When properly constructed, purchasing channels will:
● Simplify the buying process.
● Increase compliance with purchasing rules.
● Increase the visibility among categories of spending.
● Save money by using contracted suppliers.
Training
Too little training results in time, energy, and money loss. Anyone participating in procurement should be trained in handling whatever forms and procedures they need. They should also have access to a current supplier list and be informed of existing buying channels. Thorough and up-to-date instruction removes many pitfalls from procurement.
Collaboration
Collaboration can be external and internal. It applies to supplier relationships. A supplier knowledgeable about products and services can steer employees researching them in the right direction. External collaboration also results in contracts that better serve all parties. A procurement department, however, is not an island. It will buy for teams with a deep understanding of present needs and a good guess about future ones. Collaboration between procurement and other areas yields input that promotes improvement of the entire procurement process.
Metrics
Cost reduction forms the bedrock of procurement metrics. Streamlined procurement procedures should achieve desired results with lower outlays. However, procurement agents should also ensure compliance with governmental regulations. Procured materials, products, and services must meet quality certification and ntractual requirements. ISO-certified businesses will find consideration of quality issues vital. Rejects or returns due to quality issues may be red flags to substandard materials and problem vendors.
Digitization
Humans and computers both make mistakes. However, they differ in nature. Digitization should not replace the humans who have and receive valuable insights. Software is often better and much faster at math. In less than a second, a computer can calculate what a human may spend minutes or hours doing less accurately. Digitization can track everything from rebates to inventory. Analytics also tease out top performers among suppliers and identify trouble spots. The generation of regular reports keeps human operators alerted to problems. When digitization takes tedious tasks out of human hands, the work will be done faster and with fewer errors.
Finding the Right Partner
Streamlined procurement depends on reliable, accurate sourcing. Drawing on over 100 years of experience, IndustryNet offers rigorously verified and up-to-date profiles of all U.S. Industrial companies. Search, source, and quote for free among 460,000 suppliers and service providers on IndustryNet. Finding the resources for a productive fall cleaning starts here.
