To know where you are going, you need to know where you are – which is especially true of indirect procurement. Gaining visibility over spend is the best way to cut cost, to improve process and to mitigate risk. Without visibility over spend, your strategy is essentially built on guesswork – which isn’t sustainable or viable long-term. Want to gain some much-needed clarity? Here’s how…
Carry out an audit
If you don’t know where you’re spending your money, with whom, and most importantly how much, then it’s hard to make improvements. Carrying out an audit shows you where your money and time are going with, with whom and how frequently. This visibility informs strategic decisions – such as consolidating suppliers, controlling tail spend and optimising stock control – which reduce costs, save time and boost operational efficiency.
Use data wisely
Data is a powerful tool. But because you generate so much, it can be hard to decide what is useful and what isn’t. Our advice is to not reinvent the wheel when it comes to using data. Simple metrics – such as benchmarking prices or spend across key categories – and simple KPIs, such as supplier efficiency or stock turnover – can go a long way to improving indirect procurement.
Powerful technology is changing the way businesses buy. For example, eProcurement systems are enabling organisations to monitor & predict spend, forecast future stock requirements, identify saving opportunities and to mitigate risk. They’re also generating incredible efficiency through automation, which is saving both time and money. Think about the number of suppliers you deal with and the amount of purchase orders, invoices, returns late deliveries you manage on a monthly basis – imagine reducing that to a single order& invoice, a single point of supply and a single contract.
Monitor & refine
Data analytics extends beyond just looking at saving money. Collecting data, collating and enriching it leads to timely, accurate and actionable insight. From these insights you can monitor performance and refine your approach. And while it will inevitably lead to ways and means of improving procurement’s impact on the bottom line, the approach helps describe, predict and improve overall business performance. When used well, this data-driven decision-making improves overall purchasing strategy, and builds better relationships with suppliers and stakeholders.
Build better supplier relations
Better Supplier Relationship Management (SRM) is the best way to get value from suppliers beyond cost savings alone. It not only increases engagement and mitigates risk, but also allows for better collaboration and service quality. Those perks in turn generate cost savings as well as improvement is service and overall supply.
Modern businesses require tangible and actionable insights, the kind that come from a clear and transparent view over how functions operate and are performing. To that end, procurement is evolving. It’s no longer a function that can rely solely on gut instinct or traditional methods. It has to build its strategy on data-driven insight and by making incremental changes. You can do that by:
• Auditing your spend so you know exactly where you are
• Using data to set and monitor key metrics
• Taking advantage of sophisticated tech to supercharge your operations
• Monitoring and refining your approach for constant improvement
• Building better supplier relations to boost innovation and mitigate risk
For more advice and information on optimising your indirect procurement, visit itelgroup.co.uk