There are many elements to be aware of as a procurement team. Understanding each and every step in the process is integral to building a successful, comprehensive, and efficient procurement process. There are many industry specific and market-unique variables involved in procurement that can alter how an individual company employs procedures. However, grasping the high-level theory and principles that drives successful procurement teams allows management to own the implementation process from the start. This leads to the formation and employment of a specifically designed strategy that bolsters efficiency, saves the company money on spending and purchasing activities, and creates a culture of continual improvement. From budgeting to the inventory delivery, procurement teams should be constantly evaluating their purchase requisition policies and procedures for improvement opportunities.
Continual improvement is the process of consistently and periodically reviewing implemented processes and procedures to analyze flaws and areas of potential improvement. It relies on engaged employees who feel the ownership of their role within an organization, as well as upper management that accepts, listens to, and trusts their front-line workers. Continual improvement is vital to maintaining high standards throughout an organization but is especially necessary when it comes to the procurement processes. Procurement software is swiftly becoming a staple element in any procurement department. As such, procurement teams need to stay on their feet so to speak, and make a concerted effort to be inventive and innovative in finding additional aspects of the process that can be improved upon to further increase efficiency, and raise their competitive advantage.
Purchase Requisition Policies and Procedures – The Procurement Starting Line
At the top of the procurement process are purchase requisitions. These are filed by individual departments within an organization, and after being vetted and approved by senior management, culminate in the ultimate purchase orders submitted by the company, resulting in the final delivery of products or services. There are a handful of purchasing best practices that when adhered to, bring a company’s purchase requisition process into the 21st century. Building a comprehensive procurement process that emphasizes efficiency throughout the entire chain means enhancing each step in the process. Optimization at the granular or departmental level, compounds on itself, and leads to a system that’s fully optimized from top to bottom.
Self Service Purchasing: Self-service purchasing refers to assigning purchase requisition permissions within procurement software to individual department-heads, or managers. This streamlines the purchase requisition submission process and helps minimize delays in the purchase requisition-to-purchase order process.
Allowing departmental figures external to the procurement or purchasing team to submit purchase requisitions easily and quickly also empowers those managers. Engaged employees who feel ownership over their tasks, rather than feeling bogged down by bureaucracy, show higher levels of work-satisfaction, and efficiency. To make this possible, purchase requisitions can be submitted with pre-approved contract pricing, once again shortening the approval process, and therefore the amount of time it takes for a purchase requisition to become a purchase order. This achieves more accurate purchasing procedures, and reduces the chance of both over, and under spending.
Departmental Budgeting: Budgeting is the end-all-be-all of accounting practices. Ensuring that cash-flows remain positive, and a company can maintain both profitability and functionality is one of the main principles in business management.
In terms of procurement teams and purchase requisitions, departmental budgeting is absolutely necessary. Departmental budgeting provides valuable insight into how a company’s cash-flow travels throughout the organization, where funds can be better applied, and many other pieces of valuable data. This data can be used to optimize spending practices, while also visualizing under-funded or over-funded departments for management to make informed and decisive adjustments, without sacrificing efficiency.
Attentive Management: While delivering employee ownership, and allowing departments to perform as independent, decentralized branches of the organization carry significant benefits – there is still a need for secondary accountability. This is the responsibility of upper management, and the actual purchasing department. While empowering departments to submit purchase requisitions, without jumping through hoops, streamlines a portion of the internal-procurement process; this efficiency is lost if there’s no back-end accountability on purchase requisitions submitted.
A procurement software will only be as effective as the staff using it. Employing attentive and informed staff and upper management is a vital aspect to optimizing your companies purchasing efforts. Management that understands the far reaching and long-lasting benefits of building an integrated and continually updated procurement process is just as valuable as the software itself.