Good procurement, at its core, is all about process improvement, so your procurement practises should, in theory, run like a well-oiled machine, with each action working in synchronicity. If your business is following poor procurement practises that are losing you money, you probably aren’t spending much time thinking about how to innovate your current process to maximise spend and reduce risk.
However, this can all change by allocating time to identifying process improvement opportunities. It may seem like a time-consuming task to transform your procurement, but the potential returns from doing it well are significant, making it worth your while.
If you haven’t spent much time perfecting your processes, it’s not easy to know where to begin. To make it easier for you to identify where improvements are needed, we’ve compiled a list for you to follow and work through.
Which areas have process improvement opportunities for procurement?
- Technology applications
- Procurement training
- Contract management systems
- Supplier relationship management (SRM)
- Refining spend
Technology is a big one to look out for. It’s constantly developing, driven by demand for more impactful procurement.
As we head into a new decade, we can expect to see more and more businesses using eTools and other technology. There are lots of different technological applications out there, but generally, they all come with some of these benefits:
- Improve efficiency
- Help to reduce cost
- Reduce risk
- Better analysis
- More real-time data (RTD)
- Less need for lower-skilled workers
- More time for employees to work on tedious tasks that can be performed through technology
Implementing new technology as part of your process improvement strategy is an investment, and there’s no point in making an investment only for it to not the serve its intended purpose. This is a problem you can read more about here.
To avoid this problem, it’s important to consult with experts who already have the robust knowledge needed to advise you on what technologies would help your business specifically, rather than trying a ‘one-size-fits-all’ solution that rarely works.
Leading on from technological applications, it’s crucial that your procurement team are able to work eTools properly. Any introduction of new procurement tech should come with staff training.
Even if you don’t plan to invest in new technology, you still need to invest in your team to expand their capabilities and make them feel valued. Procurement training is the perfect opportunity to do this. It will not only improve your procurement process and make sure everyone’s knowledge is up to scratch, but it should also reduce risk, improve your turnover and increase staff engagement.
To read more about the benefits of procurement training as part of process improvement, click here.
Contract management systems
Implementing a contract management system technically belongs under technology; however, it deserves a mention of its own.
Contract management takes up a lot of time resources that employees could be repurposing elsewhere to drive more growth and cost-savings.
Having a clear view of what contracts you’ve got will also provide opportunities to group your categories as well as negotiate with suppliers to further lower costs.
Supplier relationship management (SRM)
Having poor SRM can become detrimental to businesses. This is because a lack of communication breeds miscommunication and opportunities to innovate and cut costs are missed.
Effective SRM allows you to have a clearer view of your suppliers and provides the opportunity to mao the supply chain past the first tier. This is a significant component of risk reduction and corporate social responsibility (CSR).
Keeping track of spend in any business is a challenge, but if your procurement processes aren’t up to scratch, then you’re probably losing more money than you even realise.
As part of your process improvement, you can implement a tool to help with your spend analysis so that it becomes clear where money is being spent and where it can be saved.
Because the cost of procurement rarely stops at the number on the price tag, it’s also important to take into account the total cost of ownership. This will mean that in the future, you are able to make better spending decisions, rather than simply going for cheaper options only to have to pay for repairs, maintenance and updates etc.
Ultimately, there’s a lot more that businesses could be doing to minimise spend while improving efficiency and profitability. When combined, the benefits are difficult to counter. While it seems like the holdback stems from stretched resources, there are certainly opportunities to improve your procurement processes gradually, by tackling one component on the list at a time.
However, the common denominator is usually better technology, which allows you to transform your procurement with far more ease. Remember, expert advice is absolutely crucial to choosing procurement tools that are the right fit for your business.
At Bromley Wood Associates we have considerable experience in helping businesses to assess, manage and prioritise suppliers so that you can not only manage risk and compliance but, more importantly, drive innovation to help grow your business. If you would like to speak to us more about Supplier Relationship Management and how you can improve it in your business, contact us today.