How to Improve Procurement Efficiency

 

When it comes to improving procurement efficiency, though, a sourcing hero’s work is never truly done. Instead of sitting back, the profession must make a long-term and ongoing commitment to sharpening its sourcing processes.

1. Identify Inefficient Processes

To make meaningful changes, you’ll first need to conduct a thorough review of your existing processes. What factors are causing bottlenecks or holding back meaningful progress, and how much is this costing your organization? Are there certain areas in which increased efficiency will have a significant and measurable impact?

Be sure to consult your team and other key stakeholders for their feedback and insights. Once the relevant information has been collected, you’ll be able to prioritize how best to direct your resources and time.

2. Consolidate Your Supplier Lists

There are several benefits associated with supplier consolidation. It enables procurement teams to leverage economies of scale and improve the quality of products and services purchased. Reducing suppliers also helps mitigate risk throughout the supply chain.

The reduction in maverick spend, tail spend, and administrative burden of managing a huge supply base will also improve efficiency. Procurement professionals will be less consumed by endless supplier relationship management (SRM), negotiations, and the processing of purchase orders or invoices. Instead, they'll be able to spend more time nurturing the relationships that really matter.

By establishing meaningful and trusting relationships with a core group of strategic suppliers, procurement will enjoy an improved and seamless service.

3. Educate your workforce

Maverick spending typically happens for one of the following three reasons:

  1. There are no effective preventative barriers in place.
  2. Internal buyers consider existing processes to be too tedious and/or confusing.
  3. Internal buyers are unaware of existing processes.

Curbing maverick spending and encouraging buyers to spend with preferred suppliers is best achieved through educating the workforce.

When employees understand the purpose behind procurement processes and how to navigate them with ease, compliance will naturally improve. Procurement teams will spend less time managing conflicts and chasing after invoices, and be able to focus on value-adding activities.

You might also consider limiting the number of approved buyers in your organization or setting a purchasing limit. However, if you do choose to go down this route, be careful not to exert too much control over your buyers. They'll likely become frustrated having to seek a manager’s approval for every single purchase. Enforcing this rule can result in major purchasing bottlenecks.

 How to Improve Procurement Efficiency


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