Procurement processes: The key to efficiency and cost reduction.
Procurement processes play a pivotal role in ensuring the seamless acquisition of goods and services which contribute to overall organisational success. In this month's newsletter, we delve into these processes in more detail and provide valuable insights on enhancing them in your organisation.
In January we ran a poll asking 'How do you feel about your procurement processes?'. Here are the results:
Does this surprise you?
We have many conversations with procurement teams who know their processes could be better, but - thanks to the pressures of daily commitments - struggle to find the time or thinking space to focus on improvements.
But done right, these processes can make a valuable difference to any organisation, impacting everything from government spend (in the public sector) to business competitiveness (in the private sector).
What is the procurement process?
Procurement processes typically involve several key stages. There are many different models ranging from 5 to 13 steps, but essentially they cover:
By implementing best practices and continuously refining your processes, you can help your organisation unlock significant value for money (and/or save costs), reduce risks from potential supplier failures, enhance your compliance and build stronger long-term supplier relationships.
What levers can you pull in your procurement processes to boost efficiency and drive costs down?
There are a number of actions you can take to optimise your processes across the full procurement life cycle.
Here are our tips for driving efficiency and reducing costs:
Streamline your processes through automation, standardised approvals or centralised platforms. Embracing technology will free up employee time for more strategic activities.
Reduce maverick spending by creating clear purchasing policies and e-procurement systems that help prevent unauthorised purchases. This means all spending will then stick to your best practice guidelines, negotiated rates and should be fully visible for analysis and further cost optimisation.
Develop clear and concise specifications to avoid ambiguity to attract better bids and make the evaluation process easier, whilst not allowing certain bidders to influence the specification to favour their offering.
When possible, create bid competition by engaging multiple qualified suppliers through open tenders.
Build negotiating leverage by aggregating demand across the various departments or locations in your organisation. This creates larger purchase volumes and gives you a better ability to negotiate favourable terms and discounts.
Collaborate with suppliers to drive innovation with possible redesign of products or services for cost-efficiency and improved total lifetime value.
Consolidate suppliers to those that are high-performing, this will simplify communications and supplier management, plus potentially unlock volume discounts and deals.
Build collaborative, long-term strategic partnerships with these key suppliers to a culture of joint problem-solving, innovation and cost-reduction opportunities to ensure win-win relationships.
Analyse your procurement data to identify spend patterns, areas of overspending, supplier and product/service consolidation possibilities, and potential cost-saving opportunities.
Track your supplier performance to ensure they are maintaining quality standards, delivery schedules, pre-agreed terms and conditions, and meeting SLAs and KPIs.
Make sure you keep up-to-date with trends and legislative changes to help your procurement processes to evolve. There are a host of great resources (we recommend resources like CIPS Featured Insights, Procurement Magazine, Procurement Leaders or Government Spending)
It's worth remembering that efficient procurement isn't just about saving money, it's about making smarter choices that drive positive outcomes for your organisation and society as a whole. Whilst these tips may seem a little overwhelming when written as a whole, the key is to focus on one area at a time and make incremental steps to improving your processes, the incremental improvements soon start to add up!
If you are struggling to find the time to focus on your procurement processes, or would simply like to bring increased market or category knowledge into your team, we can help. You can always drop us a message or request a call back for advice or guidance at any time.