Procurement and spend management are critical components of any organization’s success. Yet all too often, procurement teams are not given the resources and strategic assistance they need to thrive.
From balancing needs across multiple internal departments to maintaining beneficial vendor relationships, ensuring contract compliance, and so much more, procurement strategy is essential in reducing costs, improving productivity, and identifying further opportunities for optimization.
However, with so many moving pieces involved in the procurement process, you may find yourself asking a common question — is it time to hire a procurement consultant?
In this ultimate guide to procurement, we will investigate recent evolutions in the world of procurement and help you decide whether it makes sense to partner with a procurement consultant. Keep reading to learn more, or jump to a specific section below:
- 4 Ways to Use Spend Analysis to Optimize Your Organization in 2021
- Procurement Best Practices to Implement Post-COVID
- How Procurement Automation Increases Organizational Efficiency
- How to Supercharge Your Reporting and Analytics Using RPA
- Confessions of a Procurement Consultant: The Power of Data Transparency
- Maximizing ROI Through Strategic Sourcing and Procurement
- How to Strike a Perfect Balance Between Direct and Indirect Procurement Teams
4 Ways to Use Spend Analysis to Optimize Your Organization in 2021
Spend analysis is a founding component of a successful procurement strategy. From identifying areas of overspending to pinpointing efficiency improvements, spend analytics can set the foundation for optimized spend.
Modern spend analysis depends heavily on data accuracy and analytics efficiency. Without it, you will be unable to make data-informed decisions that direct the procurement process. With the right data collection tools in place, here are four ways to use spend analysis efficiently:
- Procurement Taxonomy — Procurement taxonomy provides insight into spend categories organized by department. Creating a taxonomy offers a number of benefits for organizations, including accurate and consistent spend reporting and increased transparency among spend categories, both of which enable an intuitive buying experience.
- Spend Classification — Also known as spend categorization, spend classification is a necessary component of spend analysis as it allows you to organize spend data correctly. Spend classification can be viewed as an extension of generic procurement taxonomy that aggregates spend data into a more organized system.
- Indirect Spend Reduction — With proper spend classification in place, you can gain visibility into areas you are actually overspending on. While that includes vendor relationships and raw material purchases, oftentimes a main culprit of overspending is indirect spend, including outdated technology and inefficient HR services.
- Opportunity Assessment — In addition to reducing indirect costs, spend analysis also makes it possible to identify high-level, strategic spend opportunities that improve processes and reduce risk.
Gain a further understanding of spend analysis by reading our full article here.
Procurement Best Practices to Implement Post-COVID
Procurement teams worldwide were forced to reconsider their approaches due to the supply chain disruptions that resulted from COVID-19. As a result of the ongoing pandemic and the fast adjustments made by procurement teams, the industry has changed forever. Here are five procurement best practices to remember during the pandemic and beyond.
- Prepare for Other Crises — COVID caused never-before-seen disruptions to the modern supply chain that many procurement teams did not see coming. It has now forced teams to have crisis plans in place that include zero-based category management strategies, investments in digitization and spend analysis, and expanded vendor partnerships.
- Double-Down On Smart Procurement Processes — While reducing procurement budget was often the first thought of organizations at the onset of the pandemic, those that actually doubled down on their procurement investment were able to gain a competitive advantage.
- Prioritize Risk Management — Organizations with reliable supplier relationships were able to mitigate risks associated with the supply chain shortage. Moving forward, procurement teams can continue to minimize risk by investing in predictive analytics to identify demand slumps and price adjustments early.
- Data, Data, Data — Opinions are valuable, but data is priceless. When procurement teams have the raw data to back up or refute their opinions, spending decisions become more intelligent.
- Invest in Automation — Procurement teams can easily automate many manual aspects of the job, including invoice and vendor management, contract approval, and purchase order practices, ultimately making the entire procurement process more efficient.
To learn more about each of these practices, read the full blog here.
How Procurement Automation Increases Organizational Efficiency
Speaking of procurement automation, much of the industry’s future hinges on the improvements being made through robotics process automation (RPA). Automation is growing more prevalent throughout many industries, and the reduction of manual work is especially lucrative in procurement. These are three ways that procurement automation can improve efficiency throughout your organization:
- Manual Labor Reduction — Manual procurement processes, including those listed above, are still evident in many organizations simply because that’s how things have always been done. However, your procurement professionals are some of the most skilled, strategic people in your organization. Procurement automation takes these manual processes off their plate and allows them to focus on more strategic initiatives.
- Reduce Manual Errors — As a result of manual labor reduction, the human errors that every person is susceptible to are reduced. Rather than humans filling out repetitious forms and contracts, programmatic systems can automate this process quicker and more accurately.
- Avoid Setbacks — Even the smallest error can have drastic consequences when it comes to procurement data. These errors create more work for your procurement team that ultimately delays approvals and takes up even more of their time.
To learn more about specific procurement steps to automate, visit the full posting here.
How to Supercharge Your Reporting and Analytics Using RPA
As we’ve mentioned multiple times, accurate data collection and reporting is a must-have if you want to improve the procurement process. However, collecting those pieces of data and reporting them to various teams can be laborious and time-consuming.
That’s where RPA shines in terms of procurement. Modern analytics are powered by machine learning and artificial intelligence that simplify the data gathering process and improve accurate reporting. From direct and indirect spend to supply chain interactions, having access to this data allows you to make data-informed decisions rather than opinionated guesswork. You can use RPA to improve your reporting and analytics in the following ways:
- Updated Data and Error Elimination — In addition to the aforementioned reduction of manual error, RPA bots update that data consistently, meaning you and your team always have updated access to accurate data.
- Spend Analytics — RPA bots programmatically analyze spend to find opportunities to optimize various spend categories, both direct and indirect.
- Contract Compliance — In terms of contract management, RPA bots are able to create custom reports that monitor risk, track usage and pricing, and maintain compliance, ultimately simplifying the post-award contract management process.
- Performance Management — Identifying opportunities to optimize strategic spending is one thing, but if you don’t track the performance of those process updates, what’s the point? RPA bots assist in performance tracking to collect data about the direct results of these decisions.
Read our full guide about RPA bots to learn more about their role in procurement data analytics.
The Power of Data Transparency
Continuing with the importance of data, having accurate data is not enough — it’s what you do with that data that matters. If data collection and reporting is segmented to certain departments, it will surely create misalignment and frustration between various teams.
This is where data transparency comes into play. Data transparency includes everything from how data was gathered, how the data is driving purchasing decisions, and who has access to that data.
Starting your data collection efforts with a focus on transparency builds trust throughout the organization and makes it easier for important decision-makers to access necessary information. Here’s how you can benefit from data transparency throughout the procurement process:
- Cross-Departmental Alignment — Finance teams need to understand why procurement teams make the purchasing decisions that they do. Without equal access to data, there will likely be communication breakdowns between the two departments that impact organizational alignment.
- Cost Savings — Rather than consistently going back-and-forth on past spending decisions, data transparency allows finance and procurement teams to work cohesively to identify cost savings opportunities.
- Performance Management — Data transparency includes internal efforts to communicate objectives and provide real-time data that provides insight into various developmental opportunities.
Maximizing ROI Through Strategic Sourcing and Procurement
Strategic sourcing and procurement both play integral roles in the entire source-to-pay process. Without one, the other cannot effectively exist. In essence, strategic sourcing is the ability to find the right vendors and suppliers based on reliability, capability, and pricing. This sets the stage for your procurement team to actually purchase the goods and services from the vendors identified through strategic sourcing.
Without strategic sourcing, you simply purchase goods and services from unknown vendors without proven track records of success. Not only does this create disorganized and difficult-to-manage relationships, but it can also reduce the effectiveness of your purchases.
At the same time, procurement is needed to physically act on all the groundwork completed through strategic sourcing. Without procurement, the negotiated contracts will fail, ultimately negatively impacting your reputation.
When the two strategies are working in unison, you can maximize your return on investment in five key areas:
- SG&A Cost Reduction
- Contract Compliance
- Aligning Spend to ESG
- Business Continuity Planning
- Process Efficiency
Dive into each of these five subjects in the full blog post here.
How to Strike a Perfect Balance Between Direct and Indirect Procurement Teams
For too long, there has been a barrier between direct and indirect procurement teams. The truth is that each side of procurement should be working in unison to optimize overall strategy and production.
Both sides of procurement are equally important to your organization’s success, but because the two teams have distinctly different tasks, it can be difficult to align them and break down existing silos.
Why Direct Procurement?
First things first, without direct procurement you cannot have any products; without any products, you cannot generate any sales. Direct procurement teams are ultimately responsible for sourcing the materials needed to make physical products. Also, direct procurement teams play an invaluable role in maintaining vendor relationships that help you avoid potential blips in the supply chain.
Why Indirect Procurement?
While indirect procurement processes set the stage for manufacturing finished goods, indirect procurement processes are needed to create finished products. MRO costs are critical for product-based companies to ensure that all the machinery, parts, and services needed to operate smoothly are up to standard.
Restructuring your approach to procurement and prioritizing both teams equally will allow your organization to operate as smoothly as possible. For more insight on finding the perfect balance, read our full breakdown of direct and indirect procurement here.
Is it Time to Hire a Procurement Consultant?
In reality, this is only a snapshot of the various difficulties that modern procurement teams face. Even organizations with established procurement practices and departments can benefit from expert consulting.
From data collection and RPA utilization to efficiency updates and internal alignment, procurement consultants customize solutions for your unique needs. At Acquis Consulting, we’re proud to offer spend management and procurement solutions that drive measurable results for your organization.
From strategy to technology, we implement tailor-made solutions that you can use to improve your success. Take the first step towards procurement optimization with Acquis Consulting.