Cost optimization is not synonymous with cost-cutting. Rather than be a response to a short-term need to actualize savings, it should be a long-term strategy to increase business performance.
As is the case with virtually all business functions, the future of procurement is digital; the strategies required to achieve optimization throughout the supply chain process will involve technological solutions.
Procure software can be the difference between sink or swim for many small to medium enterprises (SMEs). The benefits of an effective e-Procurement solution can be truly staggering.
In this blog, we discovered that the right e-Procurement solution can pay for itself more than 7 times over. Research concludes that businesses can expect to yield a massive 720% ROI on procurement software product spend.
When it comes to supply chain optimization, the experts are clear that e-Procurement is not simply an option for consideration – it’s the only way forward.
As business research and analytics gurus, Gartner recommends overall digitalization of business processes as a way to drive cost optimization. They particularly stress on supply chain optimization and inventory management as focus areas that can drive cost optimization for business.
Here we explore other focus areas that may be incorporated into your organization’s cost optimization strategy.
Spend analysis is critical to reducing procurement costs
Spend visibility is the only way to ensure your organization is not in the dark when it comes to your corporate spend.
Our recent blog focusing on spend analysis explored how your business must be recording the right data in order to be able to answer the right questions about your corporate spend.
Spend analytics software helps your business to record that data and provide actionable insights into your business’ spending. Without spend analytics software, your business cannot and will not achieve an effective cost optimization strategy.
Online auction can unlock procurement cost reduction opportunities
Nothing puts downward pressure on supplier prices like reverse auctioning.
Though we have already established that procurement cost reduction is not the only focus of a cost optimization ethos, having access to a platform whereby you can invite vendors to bid for your business makes sense as a sourcing tool.
Software for auction can be put to use for all areas of business spending, for products and services alike, and the growing popularity of this procurement process means that suppliers are well-versed in the ins and outs of using auction software online. As a means of doing business, it is efficient, transparent and opens up the market to a broader range of suppliers, leveling the playing field for the top dogs and smaller organizations.
Don’t overlook the importance of inventory management
A key area identified by Gartner in their guide to cost optimization is inventory management.
Part of an effective spend analysis is a detailed overview of your company’s inventory. Inventory is a working capital asset, and as such reducing the amount of stock you have at any given time will benefit your cash flow and therefore your bottom line considerably.
The less stock you have, the lower your warehousing costs, but if you don’t have sufficient stock to ensure order-fulfillment then you are at risk of losing out to competitors who can out-deliver on timings. If you order in large qualities to benefit from bulk discounts, you may overpay in storage or overstock losses in the long-run. Don’t order enough and you may not get optimal cost-per-unit pricing.
Inventory management is a careful balancing act of logistics and forecasting and the right data available must be available at all times in order to achieve a perfect balance.
Procure-to-Pay solutions provide the greatest opportunity for accessing actionable data
A procure to pay solution can drive down the cost of doing business.
Previously, we have explored how procure to pay best practices can achieve measurable cost savings across your entire business. The main benefit of procure to pay software is standardization, which ensures all data is measurable whether for accessing analysis or establishing goals. Transparency and the opportunity for collaboration ensure that all stakeholders are fully engaged and informed on all processes of the transaction.
Embrace change as an opportunity
There is no mistaking that the overwhelming evidence is that procurement best practice involves embracing technological advancement. Utilization of the wealth of technology and services available to your procurement team is what can drive your organization’s cost optimization strategy to ensure your business performance outshines even your ambitions.
To discover how ProcurePort’s range of e-Procurement solutions can provide your business with the opportunity to stay up-to-date with the technology available to you, schedule a demo of our software to discover how we can help revolutionize your procurement processes and unlock cost savings.