How to Improve Procurement Efficiency
By Hugo Britt | April 6, 2021
Procurement was once known for imposing clunky purchasing processes, but in recent years many teams have managed to successfully shake off this long-outdated reputation.
Increasingly, procurement professionals are lauded for their innovation, creativity, agility, and cost-saving initiatives, not to mention the crucial role they play in driving diversity and sustainability within the supply chain.
8 Steps to Improve Procurement Efficiency
When it comes to improving procurement efficiency, though, a sourcing hero’s work is never truly done. Far from sitting back and accepting its elevated position within the business, the profession must make a long-term and ongoing commitment to accelerating its sourcing processes.
Here are eight steps for doing just that.
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, improve the quality of products and services purchased and mitigate risk throughout the supply chain.
The subsequent reduction in maverick and tail-end spending, coupled with the reduced administrative burden of managing a huge supply base, will also serve to improve operational efficiency. Procurement professionals will be less consumed by endless supplier relationship management (SRM), negotiations, and the processing of purchase orders or invoices, and be able to spend more time nurturing the relationships that really matter.
In establishing these more meaningful and trusting relationships with a core group of preferred 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 time-consuming 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. As a result, procurement teams will spend less time managing conflicts or chasing after contracts, suppliers and invoices, and instead 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 will likely become frustrated at having to seek a manager’s approval for every single purchase, and enforcing this rule can result in major purchasing bottlenecks.
4. Establish clear expectations for your supply base
Miscommunication 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 organization’s bottom line. Automated purchasing systems give procurement teams total control of (and visibility into) the purchase order cycle and the ability to quickly transform employee requisitions into purchase orders.
Not only will an automated system reduce maverick spend through an accessible and intuitive system, but it enables procurement to track business costs in real-time, and improves 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 organization’s spend. While ad-hoc procurement systems might occasionally be appropriate for start-ups or smaller businesses, a larger team cannot do without a more unified and formalized approach to procurement.
7. Increase procurement efficiency by sourcing locally
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 qualification and performance 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 like to think of ourselves as a sourcing accelerator. We connect our members to ready-to-go supplier contracts that align with your stakeholders’ goals in weeks, not months.
Contact us to learn how you can save not only money, but the time and effort you would normally spend on supplier discovery, the RFQ process, and negotiation.