Top 5 Procurement Best Practices in 2024 to Up Your Game

The cost of purchasing, and doing business, is on a steady rise. Businesses have started to regard procurement management as their top priority since it takes up a large share of their overall spend. Considering most organizations still hold on to their manual procurement practices, a complete revamp of their procurement functions is crucial to keep pace with business demands. 

In order to get the fundamentals right, organizations need to implement an effective procure-to-pay process and embrace the right technology solutions. However, simply revamping the process and implementing a top technology product won’t make the procurement function best-in-class. So, what does it take?

The answer might vary from one organization to another, but there are some procurement best practices that several leading companies have adopted over time.

Here’s an outline of the top 5 procurement best practices that, when implemented properly, can significantly lower costs, improve process efficiency, and have a positive impact on the cost-income ratio.

1. Cloud-based procurement tools

Taking procurement digital is a critical step in making procurement activities future-ready. Digital procurement solutions help teams reduce the repetitive operational parts of procurement, freeing up team members to focus on strategic roles.

As technology continues to become an integral part of our everyday activities, a complete digital transformation for procurement activities is inevitable. High-performing organizations are leading the pack on digital procurement practices. If you are new to procurement, here is a step-by-step guide to creating a successful procurement strategy. Download it now!

Here’s what competent digital procurement solutions like Kissflow Procurement Cloud can handle:

• Supplier Management – Onboard, maintain, and manage vendors in an easy-to-use, efficient platform.
• Invoice Approval – Approve your invoices on the go and perform quick three-way matching.
• Purchase Requests – Fluid forms help you capture, approve, and keep track of purchase requests.
• Purchase Orders – Issue POs and generate orders automatically from approved purchase requests.
• Spend Analytics – Generate actionable, data-driven insights from your purchasing-related data.
• Integrations – Connect your procurement cloud with other essential finance software systems.

2. Spend Transparency

Making procurement functions transparent is the baseline to unlock potential savings and make headway toward achieving operational excellence. Spend transparency is the key to ensuring accountability and minimizing opportunities for fraud in the procurement process. A great way to increase cost savings is by bringing your spend under control. We have put together a simple and easy guide to achieve that in 5 steps. Download it for free now!

Steps to ensure spend transparency in the procurement process:

• Define and implement procurement policies properly
• Monitor and document every step of the procurement process
• Identify and manage a list of approved supplier lists
• Establish fool-proof procurement contracts
• Conduct frequent audits

By harnessing the power of data analytics and automation, organizations can eliminate dark purchasing and maverick spend. Procurement technology offers better visibility into the procure-to-pay cycle.

3. Supplier engagement

Every organization has a number of suppliers who deliver essential products, provide specialty services, perform regular maintenance, and complete one-time urgent repairs. Although calling a specific vendor to order merchandise or repair a faulty machine sounds simple, the task of qualifying and managing a supplier is anything but.

The process of identifying a potential supplier, onboarding the vendor, scheduling the service, obtaining the invoice, and paying the vendor is overwhelming. If managed manually, just a simple process of submitting one vendor invoice can consume several hours.

Supplier management tools offer a set of unique features to improve the source-to-contract process and enhance supplier engagement. eProcurement tools offer comprehensive vendor dashboards, pre-made contract templates, digital procurement processes, and extensive integration with accounting management systems.

An organization can improve supplier engagement by:

• Generating win-win situations and trust
• Treating suppliers as strategic partners
• Monitoring supplier performance with specific KPIs
• Enabling collaboration and communication with vendors

4. Optimized inventory

As profit margins shrink in certain industries, organizations are constantly looking for ways to control their spend and improve the bottom line. So, it is important for procurement teams to constantly review their inventory and ensure they stay optimal. Here are some of the things you should know about inventory.

Here are a few questions organizations need to check whether their inventory is optimized:

• The ‘real cost’ of holding inventory is much higher than the cost of ordering items
• The rule of thumb for holding costs is between 20 and 30 percent
• It is not just consumable products that go bad over a period of time –everything from consumer electronics to clothing is subject to risks
• The major reason for out-of-balance inventories is poor planning and forecasting.

Procurement leaders around the world are slowly recognizing the power of better data-driven insights. Nearly 50% of respondents in the 2018 Global CPO survey confided that they are leveraging intelligent and advanced insights for cost and inventory optimization.

Here are a few questions organizations need to check whether their inventory is optimized:

• What is the ratio of operating inventory in terms of safety, replenishment, and excess stock?
• Does the procurement team over-or under-purchase any products/services?
• What is the optimal frequency of purchases?
• Are all purchase requisitions and orders in sync with inventory levels?

5. Contract Management

Although procurement teams try to negotiate potential savings in the sourcing stage, they never completely unlock the value. While the reasons vary, the most common problem is a disorganized contract management process.

A recent report on contract management indicates that nearly 81 percent of organizations don’t use any Contract Lifecycle Management (CLM) software. As a result, they face a number of pain points including lack of consistency across contracts (53 percent), cumbersome processing (45 percent), and supply chain continuity problems (36 percent).

Organizations can stay clear of these procurement pitfalls by moving their contract management process to the cloud. When contracts are created, stored, and maintained in a centralized data repository, organizations can leverage their spend optimally, reduce costs, and mitigate risk.

Contract management automation will provide organizations with:

• Central repository: Store all documents (riders, amendments, etc.) in a cloud database that is accessible from anywhere
• Configurable interface: A highly scalable and customizable interface that could be tailored to fit around business requirements
• Automated notifications: Trigger automated alerts to highlight contract milestones, renewals, and chances for renegotiation.
• Performance monitoring: Track delivery time, product quality, pricing fluctuations, and adherence to purchasing terms/policies

Level up your procurement game with Kissflow

Some of these procurement best practices may seem simple and familiar, while others are fairly new. However, by implementing them properly, organizations can unlock procurement excellence.

A cloud-based digital procurement tool is the first step towards building a sustainable procurement strategy. A comprehensive procure-to-pay tool like Kissflow can take care of procurement processes, making them streamlined and efficient.

With Kissflow, organizations around the world are shortening procurement cycles, accelerating purchase approvals, reducing expenses, making informed decisions with procurement analytics data, keeping up with policy compliance consistently, and more. Try the Kissflow Procurement Cloud for yourself today, and see how it can help you beat the competition and up your procurement game significantly.