The procurement process is a critical aspect that every delivery-based business should prioritize. For such a business to be up and running, they would need to acquire goods from various suppliers in a timely fashion.
Working with the best suppliers and the best price available is essential for business growth and effectiveness. These are the primary activities involved in procurement.
The Importance Of Procurement Management
In a business organization, there is always a need to minimize costs when procuring goods. No company wants to pay over the odds. An effective procurement system serves as the ultimate solution to help businesses to minimize costs and maximize their profits.
Firstly, identifying quality suppliers to source for products can be a time-consuming process. Also, it is only possible to get the best prices from these suppliers if you maintain a good supplier relationship with them.
Procurement management is not only crucial for sourcing and supplier relations. It also ensures that risks are minimized. An effective procurement process with robust contract management will enable businesses to properly handle contract risks, operational risks, financial risks, and more. The end result is a better supply chain and increased profits.
Another importance of an effective procurement process to your business is that it helps you understand internal happenings. You have to identify the products that the various sectors of your business needs before sourcing. As a result, you get informed on the entire procurement cycle.
Likewise, procurement management involves various stages, which must be carried out with efficiency. Considering how often businesses are affected by everyday economic and political happenings, it would be disastrous for companies that do not adequately manage their procurement activities.
However, a digital procurement system can facilitate better procurement. Less work will be done, more time saved, while products will be sourced faster without any detriment on their quality or price. Furthermore, the process will be more accurate and consistent as the human error will be eliminated.
How to Ensure an Effective Procurement Process
To ensure that your procurement department functions effectively, a well-designed procurement management process is needed. Luckily, the procedures to keep this organized and easily repeatable are simple.
Identify the required products
Efforts should be made to identify the required products in your business organization. You stand a better chance of paying less if the products needed are amplified. Therefore, procurement professionals should ensure that feedback is received from all business units. This also helps prevent last-minute order editing.
However, not every requirement thrown should be directly included in new orders. Validation should be carried out to ensure that the business needs the products. Goods that are not of utmost importance should be cut off to save costs.
Supplier evaluation and negotiations
Thorough supplier evaluation is essential to categorize the best suppliers available. It involves going through the suppliers’ list and checking your primary factors, such as quality and pricing. You should also consider secondary factors such as supplier reputation, product warranty, customer service, etc.
If your business has registered suppliers, this process will be a lot easier. However, you can still open applications for prospective suppliers to widen your choice. You can pick up multiple ideal suppliers before negotiations. The order should then be given to the supplier that offers the best deal.
Making payment and auditing
To ensure that the supplier(s) deliver accurately, you have to play your part. This involves making quota or prompt payment as agreed (either before or after delivery) once your supplier releases the purchase invoice.
Auditing the delivered products is the next procurement process after making payment. This is to ensure that suppliers deliver quality products. If there is any fallback, negotiations should be carried out for a possible fix. This could be full or partial refunds, replacement, etc.
Bottom Line – Automate With ProcurePort
The entire procurement cycle is associated with several risks in aspects such as sourcing, contract management, supplier management, and spend management.
Adequate measures can ensure that the effectiveness of procurement. A considerable part of your delivery-based business’s success depends entirely on how well the procurement process is managed.
With the ProcurePort Contract Management platform, you can automate your entire procurement cycle, thereby eliminating the hassles associated with the manual process.