Procurement Best Practices — 9 Tips to become a better Procurement Professional

Table of content

What is Procurement?

Common Bottlenecks in the Supply Chain

Procurement Best Practices

Conclusion

FAQ

Last updated: 29-02-2024 at 09:58

Key take-aways

There are 11 intricate steps in the procurement process.

It is important to have multiple suppliers for each input to avoid supply disruption in the unforseeable
future.

There are various procurement best practices, but you should carefully choose which among these
works best for your company/business.

Procurement best practices are regarded as the effective procedures to do in the procurement process.
Many of us have our own ways on how to deal with challenges in our respective fields of profession. But
there are ways that are effective for your profession.

For this article, we will guide you on the best practices in procurement. We will explore how these
practices can help you in your profession or your business.

Reading this article will allow you to use the best practices you have learned in your profession or your
business. This article will also enable you to change the procedures that are not contributing to the
growth of the procurement process.

What is Procurement?

Before we guide you on all the best practices, we must review what procurement means. Procurement
encompasses the full process of sourcing and gathering all the needed materials for your products or
services.
Professionals consider procurement as the process of identifying, shortlisting, selecting, and acquiring
the products or services needed by the company.

Below are the usual steps in the procurement process:

Assessment and identification of the needs of the company

Research for potential suppliers

Creating a list of your potential suppliers

Request for quotation or proposal

Check the quote or the proposal sent by the suppliers

Negotiate the terms with the suppliers

Award the contract to your selected suppliers

Arrange and receive the products or services

Perform quality check

Analyze results, margins, and KPIs

Develop and maintain your relationship with your suppliers.

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Common Bottlenecksin the Supply Chain

With what we have discussed above, there are many steps in the procurement process. The multitude of
steps can be an opportunity for bottlenecks to arise during the procurement cycle.

Many businesses experience problems with managing time and resources due to unforeseeable
disruptions in the supply chain. According to a report made in 2019 by Gartner, up to 48% of chief
procurement officers admit that unknown risks in the supply chain are their biggest challenge.

The report also shows that 64% of procurement chief officers agree that the inability to accurately gauge
the supplier’s performance poses a great risk in the supply chain.
Additionally, 72% of them agreed that underutilization of technological advancements and procurement
tools have significantly disrupted the performance of organizations. The lengthy manual process slows
down the procedures that decrease the growth of the organization.

Lastly, Reliance on a single supplier is highly problematic. If your supplier has faced an emergency that
results in failing to meet your demand, the delays in your production are inevitable. That is why it is
important to have a good strategic sourcing process to avoid these problems as it requires the business
to find multiple suppliers for each input.

Procurement Learning Journey Assessment

Procurement Best Practices

The bottlenecks mentioned above can be mitigated by using the procurement best practices below:

1. Create Procurement Management Frameworks

You need to create a strong framework before you address the problems in the procurement process.
You should know that this is not an overnight process so you can take your time to map out the
workflows and build standard procedures.

The following are the processes where your framework should create guidelines:

Monitor and approve purchase requests

Manage your suppliers

Quality assurance

Payment and invoice

Keep records

Hiring new members of your team. Use an email finder extension to easily get in touch with potential
candidates

Train your employees on products and their procedures

2. Engage with your supplier

Your relationship with your supplier is vital to the success of your organization. Timeliness of delivery
and assurance of the quality of the products requires a strategic relationship with your suppliers.

You need to know your suppliers better for you to evaluate their performance and your relationship
with them. You can engage your suppliers to collaborate effectively if you know them based on the data
you gathered from their performance.

3. Improve your inventory

Inventory is often overlooked in the procurement process. But, this is more important than what you
think. One of the procurement best practices is keeping your inventory at an optimal level.

The cost of taxes, warehouse fees, outdated products, and insurance adds up over time which harms
your return on investment when you hold it for too long. The inventory should rotate regularly to lower
these risks and unnecessary expenses.

4. Automation of procurement process

An efficient procurement process will save you time and money. It will also give you more time to focus
on your customers’ preferences and feedback. However, to reach this level of efficiency, you need to
automate your procurement processes.

Employing automation in your procurement process will eliminate the repetitive tasks in your
procedures that allow your employees to focus on other things.

Another benefit of automation is that it is free from human error. There are times when employees
cannot avoid making mistakes. Automation helps streamline workflows that improve your employees’
satisfaction.

The following are the critical process you need to automate:

Payment reconciliation

Payment reconciliation compares your accounting and your payments to make sure that they match.
Through this, your cash flow is secured with ease and your team can focus on other tasks than process
each transaction manually.
Accounts payable

Accounts payable automation platforms refine everything from invoice coding to purchase orders. With
this, you can efficiently manage accounts payable processes with ease and without human interaction.

Invoice

Invoice automation is a complex process that is an entire area of its own even if it is under accounts
payable automation. It handles price matching, data entry, approvals, purchase orders, and invoice
processing.

By automating invoices, you can reduce the occurrence of late fees that can make your suppliers happy
resulting in giving you discounts.

5. Integrate your procurement process

The procurement cycle is full of approvals that create barriers. Ultimately, even with the help of
automation, you will still have these gaps in your procedures.

That is why it is important that you integrate your procurement process. Instead of manually
transferring data between procurement systems, you must connect it so that it can be processed
effectively.

6. Transparency

The stakeholders of your company must have the ability to see all the records, purchase orders, and
technical specifications in real-time. This ensures that they are guided with the tasks that they will do.

A transparent system enables better record management, strategic sourcing procedures, and cost
reduction in procurement.

The following are the steps to ensure transparency in procurement:

Plan and implement strategic policies

Document all steps in the procurement process

Manage and update your list of potential suppliers regularly

Create a flawless procurement contracts

Perform audits from time to time

7. Work with procurement professionals

We know that procurement is a complex and dynamic system that has overlapping procedures. This
makes your procurement to be challenging to improve.

Many questions surround those who have just started in procurement. Even some procurement
managers are confused about where to start improving their procurement processes.

This is where experts in the field of procurement come in. Those who have a comprehensive background
in procurement can help you where to start. With their knowledge and experience, they know how to
streamline your procedures even if it seems impossible.

8. Know your corporate responsibility

Many customers nowadays care about their responsibility in the community. That is why you need to be
mindful of the impact of your supply chain on the economy and the environment.

With the cancel culture on the rise, your organization must take note of all the expectations of the
customers. If you fail or make a wrong move, you might end up damaging your reputation which is
beyond repair.

9. Create dashboards

Creating data dashboards enables your employees to see real-time data in your supply chain in a way
they can easily comprehend.

Your sourcing will become more flexible with a clear data dashboard in procurement. It can show
accurate spend analysis, price fluctuations, and the performance of your supplier.

Featured Download: Enjoying this article? If so, click here to accelerate your career:

Here is Procurement Process Checklist to ensure that you won’t miss a thing.
Conclusion

Procurement does not only cover the sourcing and acquisition of goods and services, rather, it
encompasses a lengthy process from assessing and identifying the needs of a company to closing deals
with suppliers.

Moreover, procurement professionals also need to mitigate risks in the procurement stage to have a
smooth-flowing and problem-free supply chain.

Thus, the mentioned procurement best practices will only be effective if regarded and used with proper
execution and caution. Nonethless, it’s better to keep these in mind.