You Didn’t Know These 7 Steps of an Effective Purchasing System

The procurement function is critical for any business organization, regardless of size or sophistication. Indeed, an effective procurement helps organizations achieve their goals, tactically and strategically, without compromising on cost, quality, and customer satisfaction.

7 Steps of an Effective Purchasing System

Here are seven steps of an effective purchasing system that you didn’t know:

1. Assess procurement needs

The first step of an effective purchasing system is assessing a company’s procurement needs. It’s critical to perform an internal assessment to determine an organization’s sourcing needs. Try figuring out departments, teams, or functional areas that require external support to excel.

2. Contrasting outsourced options

The next step of an effective purchasing system is to conduct a market assessment to identify and seize the best vendors.

You must consider several elements when selecting vendors:

• Delivery time
• Location
• Price
• Availability
• Risk assessment
• Reviews

First, identify how important these attributes or options are to your organization and to your success. Most importantly, evaluate supplier compatibility based on how they fit this criterion.

3. Leverage strategic sourcing

Combine internal and external efforts when selecting your vendors. For instance, productivity and efficiency in procurement is not achieved by sourcing cheaper suppliers to fulfill certain organizational responsibilities. The risk of relying on cheap external labor may double your responsibilities and affect your total costs.

Companies achieve better and stronger supplier relationships and partnerships through strategic sourcing. That’s because SMEs and large organizations conduct market research to identify strategic suppliers.

4. Select suppliers based on contract terms

Negotiating the contract terms is the next step after successfully identifying the right supplier. Clearly outline the following elements when creating contact details:

• The expected scope of work
• Budget
• Expected deliveries
• Terms and conditions
• Legalities

It’s critical to make the contract as clear as possible and to deliver signed copies to everyone on the team. Reviewing and renewing contracts with suppliers can help you optimize costs and achieve better workflows.

5. Vendor collaboration

Vendor collaboration is an indispensable component of an effective procurement and purchasing system. The onboarding of new suppliers starts once the contract is signed and agreed upon by both parties.

When considering new vendors and suppliers, successful procurement can be complicated. That’s why oversight is needed for successful vendor collaboration to ensure easy integration of existing workflows.

So, vendor collaboration helps organizations optimize cost savings and streamline workflows in the supply chain. Nurturing fruitful vendor collaborations and partnerships requires communication and transparency. Include visitors in events and meetings so that they’re aware of delivery-affecting developments.

Including visitors in seminars, events, and meetings reinforce transparency and communication, helping to take advantage of collaboration opportunities in the future.

6. Vendor performance

Lucrative and stable vendor relationships help strengthen your procurement. Lucrative and stable partnerships further help your business focus on continuous improvement and growth.

Measuring vendor performance helps maintain a competitive advantage often overlooked by many companies. Performing an in-depth analysis of your vendors may help evaluate their results based on delivery and quality timelines.

And you can always discuss quality and other performance metric issues if your expectations are not met.

7. Record all supplier invoices

Another critical step of an effective procurement process or system is the ability to keep clear records of all suppliers’ invoices. An effective procurement and purchasing system must record suppliers’ invoices, purchase orders, and goods received notes.

Maintaining a list or record of supplies and invoices helps your procurement know how much money your organization has spent on sourcing and supplies. Also, you may want to file these records for audit purposes.

An effective procurement and purchasing system or process must use real-time spending data because it’s not easy to make spending decisions reactively without data. If the finance department gets spending metrics only at the end of the month, then it’s bad news.

Real-time visibility gives teams valuable insight to distribute budgets more effectively. Leveraging a spend management solution like ProcurePort provides your organization with end-to-end spend visibility, allowing you to track outgoing costs by data, time, supplier, scope, and purpose.

Optimize Your Procurement Process

Creating an effective procurement and purchasing system involves creating a streamlined approach to procurement.

You can optimize your procurement process using the following steps:

• Investing in reliable procurement software
• Enabling swift employee adoption through training
• Defining your strategy
• Determining costs and allocating budgets
• Creating open and transparent communication
• Integrating APIs into your procurement
• Establishing policies, practices, and control in place

While it’s great to work to implement an effective procurement system, a simple approach to optimizing your purchasing process is to select a reliable and trusted provider to deploy a cloud-based procurement solution.

ProcurePort – Unleashing the Monster of Your Procurement System

Cloud-based procurement solutions like ProcurePort are appropriate for both SMEs and large enterprises. Cloud-based procurement systems allow organizations to optimize costs, and achieve scalability, efficiency, and better performance.

ProcurePort’s procurement cloud allows organizations to design, deploy, maintain, evaluate, and report on procurement’s best practices through tested-and-proven, cloud-based procurement solutions.

ProcurePort’s cloud-based solutions provide a tactical and strategic advantage of not only tracking suppliers’ invoices, but building and sending requisition forms and handling contract negotiations.