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Efficiency lies at the heart of successful procurement, empowering you to get the most out of your resources and make a strategic difference.
Yet, many procurement teams struggle with outdated processes, fragmented data, and a lack of collaboration. These hurdles not only waste valuable time and money but also limit the ability of procurement to contribute meaningfully to the organization.
If you’re ready to break free from these inefficiencies, read on.
We’ll delve into five strategies designed to tackle some common pain points—helping you optimize procurement operations.
Let’s dive right in!
To implement meaningful changes within any process, a thorough audit is the most obvious yet essential first step.
In procurement, these reviews are essential to identify any inefficiencies and bottlenecks hindering your operations. Or, they can just reveal some areas where the right automations or practices can bring benefits that haven’t been considered so far.
Therefore, your entire procurement process needs to be carefully analyzed to pinpoint where the true potential for optimization lies.
Source: Veridion
Remember, inefficiencies can lurk within any stage and substage of your procurement process.
For example, something as seemingly straightforward as requisition submissions can become a bottleneck if the workflow is overly complex or relies on outdated paper-based processes.
Or, another common area ripe for improvement is the research and assessment of potential suppliers. Let’s say you currently did this manually, filling out comparison tables like the one shown below.
Source: Jotform
Even with a relatively small number of potential suppliers, this approach is time-consuming.
Procurement specialists would likely be spending hours on internet searches, compiling data, and wrestling information into a comparable format.
This process, if not streamlined, can block the entire procurement timeline, delaying sourcing and impacting your bottom line.
Sometimes, you may not immediately find obvious inefficiencies within your existing process.
That’s often because you’re approaching the problem solely from your own perspective.
To gain more comprehensive insights, consider consulting your team, as well as other key stakeholders. They may have daily frustrations or observations that point directly to hidden process weaknesses.
Combining this on-the-ground feedback with tracking specific metrics is a powerful strategy.
For example, the image below shows metrics that can assess delivery times and supplier performance.
Source: Veridion
By tracking factors like order cycle times and supplier lead times, you gain valuable data that can help you see if the process is becoming less efficient over time and pinpoint the source of the slowdown.
Better yet, you can even benchmark your numbers against your industry’s averages to identify areas where you truly excel and others where there’s significant room for improvement.
With all this information in hand, you’ll be well-equipped to not only clearly evaluate the bottlenecks and inefficiencies within your process, but also start strategizing the best ways to optimize them.
While assessing your procurement process, you might discover that even if it’s reasonably efficient, the entire operation lacks a clearly structured, standardized framework.
Even if you do have some procedures in place, there’s always the potential to reassess and further streamline them.
After all, bringing standardization to your procurement operations can significantly improve consistency, efficiency, and compliance across the board.
So, where do we start?
A clear procurement policy is the foundation.
This policy outlines all the main procedures, guidelines, and expectations governing your procurement activities. To be practical and truly streamline operations, you’ll want this policy to remain concise and focused.
Pedro Berrocoso, a digital procurement expert, shares this sentiment:
Illustration: Veridion / Quote: Linkedin
Along with advocating conciseness, Berrocoso emphasizes having separate attachments outlining things like exempted items or key contacts and not including them in the main policy.
So, a good procurement policy needs to be stripped down to the essentials outlined below and be easy for anyone in the organization to understand and reference quickly.
Source: Veridion
Your policy should clearly define the roles and responsibilities of everyone involved in the procurement process. This means specifying who has the authority to initiate purchase requests, who approves them at different spending levels, who handles sourcing, and so on.
In this context, you’ll really want to focus on and define approval workflows within your policy.
These are essentially the step-by-step sequences for authorizing purchase requisitions, contracts, and invoices.
Well-defined approval workflows, with clear thresholds for different levels of spending, promote accountability and reduce the risk of errors or unauthorized purchases.
Next, the policy should outline the entire procurement journey, covering everything from the initial identification of a need and supplier sourcing, all the way through to contract negotiation, and performance monitoring.
Finally, it’s vital to outline what procurement-related documents need to be retained, who’s responsible for managing them, and how your procurement activities align with applicable regulations and laws.
Overall, with a clear policy, well-defined procedures, and streamlined approval workflows, an organization can unlock significant efficiencies in its procurement operations.
Next up, let’s see why centralizing your procurement data is an effective strategy that you should implement.
With modern approaches available at your disposal, traditional data management methods where data is handled in a decentralized manner— with separate departments and teams doing their own thing—simply aren’t as efficient as they could be.
Having all your procurement data housed within a single system can provide great benefits, giving you far better visibility into spending, contracts, supplier information, and more.
Consider only some of the procurement data that you might want to centralize.
Source: Veridion
Centralizing all your supplier information, for instance, is crucial for accuracy and accessibility. With everything in one place, it’s easier to evaluate suppliers, track their performance over time, and ensure contract compliance. The same approach applies to all other relevant procurement data.
However, it’s important to note that decentralized data can still be useful in some niche scenarios. Take a look at the following table, comparing centralized and decentralized procurement data.
| Segment | Centralized procurement data | Decentralized procurement data |
|---|---|---|
| Control | Greater control over standards and processes | More flexibility and local decision-making |
| Cost-Savings | Potential for volume discounts, efficiency gains | May be more responsive to immediate local needs |
| Data | Easier data analysis and decision-making | Data may be fragmented and less reliable |
| Risk | Easier to implement risk mitigation strategies | Higher potential for maverick spending and errors |
| Compliance | Ensures adherence to regulations and policies | Increased risk of non-compliance |
| Expertise | Dedicated procurement specialists drive results | Expertise may be diluted at the local level |
If you have branches in different locations, decentralized data might be necessary for quick, local decision-making and increased efficiency.
However, even within those local branches, a centralized data system would be highly beneficial for managing operations within that specific location.
But, generally speaking, you’ll want centralized data as it offers the most advantages.
Much of the benefits of centralization are best felt when using a software solution.
Let’s take a look at an example of such a system, Oracle Cloud with its procurement dashboard shown below.
Source: Oracle
As you can see, much relevant data like PO count, spend, contract information, and much more are accessible within a single dashboard.
A centralized system can collect all this relevant data and put your procurement information in one place for easy access when you need it.
This allows for a holistic overview of your procurement activities, making it easier to identify areas for improvement and streamline processes across the board.
By centralizing your procurement data, you create the foundation for data-driven decision-making and a more streamlined procurement process.
In the previous section, we talked about using systems to centralize all your procurement data.
Let’s now elaborate even further on why using specialized procurement tools is an essential strategy to implement alongside a centralized approach.
Even though the procurement industry is embracing digitalization, there’s still a lot of room for improvement. Just check out these stats from 2023 Ivalua research:
Illustration: Veridion / Data: Ivalua
With half of procurement and supplier management processes not being properly digitalized, it’s no wonder procurement teams waste almost a quarter of their time dealing with manual tasks.
Let’s consider the types of tools that can help change this situation, like some of the following:
Say you’ve encountered inefficiencies in your supplier sourcing process. If so, our supplier sourcing enabler, Veridion, can really help out.
Veridion provides businesses with a global, AI-powered database of suppliers containing over 80 million companies, each tracked through more than 60 data points.
This wealth of data is updated weekly, ensuring you always have the most current supplier information at your disposal.
Source: Veridion
In our system, new companies are continuously added to the database while others are removed, maintaining data accuracy and ensuring you are relying on updated supplier information.
Searching for suppliers in our database is also straightforward. With the help of advanced search APIs, you can find prospective suppliers that meet your specific procurement criteria in any part of the world.
Just search for criteria like the ones highlighted in the image below.
Source: Veridion
Your search results will provide the freshest data about all suppliers that fit the set criteria. So, you get efficient supplier discovery, enabling data-driven supplier selection, and mitigating risks associated with outdated data.
The bottom line is that by employing the right procurement tools, you can ultimately achieve significant efficiency gains across your procurement processes.
Even with the right tools and processes in place, all your efforts can be undermined if there’s no collaboration, both within the procurement team itself but also across the wider organization.
That’s why fostering seamless collaboration is one of the most important strategies to consider alongside everything else we’ve discussed so far.
Teams that don’t operate in silos, and are integrated with other departments, can really boost an organization’s efficiency.
After all, a collaborative environment fostered through the right tools and practices ensures that everyone’s working towards the same organizational goals, including those related to procurement.
Unfortunately, for one reason or another, procurement teams are often isolated.
This sentiment is echoed by commercial solutions director Ilija Ugrinic for Procurement Magazine, who states the following.
Illustration: Veridion / Quote: Procurement Magazine
Let’s imagine a scenario where a procurement team is disconnected from the rest of the business. Without proper communication, they might miss out on crucial information about changing project requirements or budget constraints.
This could lead to procuring the wrong materials, unnecessary delays, or even exceeding budgets, ultimately hindering business success.
To address this, you can actively promote the formation of cross-functional teams.
These are teams composed of individuals from different departments, like the ones shown below, where each member brings their unique expertise and perspective to the table.
Source: Veridion
Imagine including members from finance and IT in a procurement-led cross-functional team.
Finance can provide valuable insights into budgeting and cost control, while IT can offer knowledge of some of the tools and integrations that can streamline the procurement process.
Similarly, R&D can help procurement understand the specific needs and quality standards of a product or service being sourced.
Whether it’s through cross-functional teams or simply by promoting greater communication and integrating procurement with other business functions, the benefits are undeniable.
This approach fosters transparency, breaks down departmental barriers, and ensures that procurement decisions are aligned with the overall goals and priorities of the organization.
With that, we’ve reached the end of our exploration of strategies designed to maximize procurement efficiency.
Throughout our discussion, we’ve highlighted the importance of streamlining processes, using data to make smarter decisions, and embracing tools that foster collaboration.
Don’t underestimate some of the potential power of these changes.
Implementing these strategies goes beyond simply saving time—they create a smoother, more cost-effective procurement function that delivers maximum value across your entire organization.
So, invest in optimizing your procurement process. It’s a direct investment in your company’s long-term success.