How to Improve Procurement Efficiency
By Hugo Britt | October 26, 2022
Procurement was once known for imposing clunky purchasing processes. In recent years, however, many teams have managed to successfully shake off this long-outdated reputation.
Procurement professionals are now celebrated for their innovation, creativity, agility, and cost-saving initiatives. And let’s not forget the crucial role they play in driving diversity and sustainability within the supply chain.
8 Steps to Improve Procurement Efficiency
1. Identify inefficient processes
To make meaningful changes, you’ll first need to conduct a thorough review of your existing processes. What factors are causing bottlenecks or holding back meaningful progress, and how much is this costing your organization? Are there certain areas in which increased efficiency will have a significant and measurable impact?
Be sure to consult your team and other key stakeholders for their feedback and insights.
Once the relevant information has been collected, you’ll be able to prioritize how best to direct your resources and time.
2. Consolidate your supplier lists
There are several benefits associated with supplier consolidation. It enables procurement teams to leverage economies of scale and improve the quality of products and services purchased. Reducing suppliers also helps mitigate risk throughout the supply chain.
The reduction in maverick spend, tail spend, and administrative burden of managing a huge supply base will also improve efficiency. Procurement professionals will be less consumed by endless supplier relationship management (SRM), negotiations, and the processing of purchase orders or invoices. Instead, they’ll be able to spend more time nurturing the relationships that really matter.
By establishing meaningful and trusting relationships with a core group of strategic suppliers, procurement will enjoy an improved and seamless service.
3. Educate your workforce
Maverick spending typically happens for one of the following three reasons:
- There are no effective preventative barriers in place.
- Internal buyers consider existing processes to be too tedious and/or confusing.
- Internal buyers are unaware of existing processes.
Curbing maverick spending and encouraging buyers to spend with preferred suppliers is best achieved through educating the workforce.
When employees understand the purpose behind procurement processes and how to navigate them with ease, compliance will naturally improve. Procurement teams will spend less time managing conflicts and chasing after invoices, and be able to focus on value-adding activities.
You might also consider limiting the number of approved buyers in your organization or setting a purchasing limit. However, if you do choose to go down this route, be careful not to exert too much control over your buyers. They’ll likely become frustrated having to seek a manager’s approval for every single purchase. Enforcing this rule can result in major purchasing bottlenecks.
4. Establish clear expectations for your supply base
Unclear communication and a lack of transparency between buyer and supplier can be very time-wasting. Be sure to set clear expectations and conduct regular performance reviews to ensure both parties are working towards a common goal. This can prevent manufacturing and shipping delays and ensure that products and services are delivered to the standard you require.
5. Accelerate your P2P cycle time with an automated system
An outdated purchase order process impacts employee productivity and the company’s bottom line. Automated purchasing systems give procurement teams total control of the purchase order cycle. These systems also provide the ability to quickly transform employee requisitions into purchase orders.
An automated system will reduce maverick spend through an accessible and intuitive system. It also enables procurement to track business costs in real-time, improving visibility and accuracy. For example, the system could be used to identify pre-approved suppliers or set budget limitations.
6. Standardize your procurement processes
Without standardized procurement processes, you’ll struggle to drive efficiency or effectively monitor your company’s spend. Ad-hoc procurement systems might occasionally be appropriate for start-ups or smaller businesses. A larger team, however, cannot do without a more unified and formalized approach to procurement.
7. Increase procurement efficiency by sourcing locally
Sourcing products and services locally won’t always be possible but it’s certainly worth looking into. The major supply chain disruptions caused by the COVID-19 pandemic has pressured many organizations to reconsider their procurement strategy.
This includes investigating the potential for local sourcing, which reduces transportation time, costs, supports the local economy, and promotes sustainability.
8. Simplify your supplier onboarding processes
Does it take a long time for your team to identify, assess, qualify and onboard a prospective vendor? Simplifying these steps will drive leaner, faster procurement, not to mention make life easier for your suppliers. This can be achieved by establishing a universal set of guidelines as well as standardizing your supplier performance and monitoring processes.
Engage with a Group Purchasing Organization
Another way to improve procurement efficiency is engaging the help of a group purchasing organization, or GPO. Here at Una, we’re proud of our speed-to-savings approach. We connect our members to ready-to-go supplier contracts that align with your stakeholders’ goals in weeks, not months.
Contact Una to learn how you can reduce the time and effort spent on supplier discovery, the RFQ process, and negotiations.