How to Optimize Your Procurement Process
Optimizing the procurement process can help businesses contain costs, minimize waste, make time for more efficient sourcing and improve their relationship with vendors. Creating an efficient and effective procurement process means evaluating the current process, identifying opportunities for improvement, and implementing changes. Procurement optimization also requires the right software tools.
In this post, we’ll discuss some of the most common problems companies deal with in their procurement process, and show you how to solve them.
What is procurement process optimization?
The procurement process involves everything your company does to obtain the goods and services needed for daily and company operations. This involves several components including sourcing, purchasing, negotiating prices, receiving and approving goods, and record keeping.
Procurement process optimization refers to improving the productivity, efficiency, and performance of the workflows and activities that make up this process.
Common problems that affect the procurement process
Most procurement processes require a similar set of tasks and activities, which means they are also vulnerable to some common and costly issues and problems. These include fragmented communication, procurement bypass, contact management, and outdated technologies.
Procurement teams work with several departments within an organization and suppliers. For them to collaborate effectively, data and information must be able to flow easily across teams and departments. Otherwise, communication becomes fragmented and each team makes their decisions in a silo, which can cause delays, rework, and mistakes.
Communication problems are costly, but many of them can be prevented by properly integrating existing tech and processes, and by using a system of engagement that makes it easier for teams to access information and improve visibility. In both cases, the tools that teams rely on to communicate will work with other components to create a more unified system.
Procurement bypass happens when employees buy products and services without going through the approved processes. For example: if a team member orders materials or services outside the proper workflow, the company may end up overpaying for the product or dealing with waste resulting from duplicate or unusable orders.
In some companies, this type of rogue procurement has become the norm. In these scenarios, it may seem like procurement teams have little or no control over their supplier relationships or that they miss out on important discounts. This can also lead to payment delays if finance departments lack visibility or cannot complete their three-way matching process.
One way to solve procurement bypass is to create the procurement process with a low-code automation tool. This makes it easy for teams to adjust the process as needed, and to connect it with related workflows, such as accounts payable. This ease of use makes it less likely that procurement teams will resort to shadow IT, unsanctioned workarounds, or time-consuming management across emails or spreadsheets.
Difficulty tracking contracts
Supplier agreements often use varying terminology and include a number of amendments and other complexities. This lack of consistency among contracts makes it difficult to digitize information and avoid the problem of missing or unformatted data. At the same time, managing vendor contracts by hand takes time and is prone to errors.
Automation can prevent many of the problems that arise when vendor contracts are managed manually. Forms can be used to capture data, while rules and conditionals can be used to prevent missing information.
Integrations through a low-code automation solution can automatically route information through systems to maintain data consistency, capture electronic signatures, and make it easier for users to access the information they need.
When it comes to implementing additional systems or apps, companies may be reluctant, especially if it presents a steep learning curve — and procurement teams are no different.
At the same time, digital transformation is happening everywhere. Businesses use new technology to differentiate themselves from competitors and to solve some of their most pressing process management challenges. One way businesses are resolving this tension is through the use of low-code software that makes it easy for users without coding experience to engage with and benefit from its features.
Low-code software is a cornerstone of citizen automation initiatives and helps business teams stay agile without adding to the IT backlog.
Low-Code Automation: Good for Business, Great for ITDownload the report
Optimize your procurement process in 7 steps
Optimizing your procurement process is easier than you might think. Below, we’ll show you seven best practices to improve your procurement process.
1. Review alignment with business goals
No procurement process will be truly successful if it doesn’t help your business meet its goals. Make sure you understand how procurement is expected to contribute toward achieving goals and meeting targets.
2. Map your current procurement process
Before you can optimize any procurement process, you need to understand how it flows and works in its current form. Whether you’re using software, a whiteboard, or on pen and paper, process mapping helps you visualize how your existing process works and where common bottlenecks or delays occur.
3. Scrutinize each handoff
Points in the process where data or work changes hands are known as handoffs. This might be a handoff between two people, or it could be between a person and a system, such as an email or communication that comes through an app.
Handoffs are also notorious for causing bottlenecks, delays, or even rework, so it’s important to map where each handoff occurs. Using standard flowchart symbols is a great way to identify all handoffs in your process.
4. Identify your improvement opportunities
Once you’ve created a process map that illustrates the flow of your procurement process and handoffs, it’s time to create a list of all the tasks, activities, and handoffs that need to be improved. Remember to invite feedback from all procurement team members to avoid overlooking problems that might not be obvious, and to eliminate any blind spots.
5. Create a list of automation opportunities
The procurement process offers many opportunities to automate tasks. In general, any task that is repetitive, predictable, scheduled, or frequent is a good candidate for automation. Low-code automation software makes it easy for business teams to create and customize automations using a visual interface that does not require coding experience.
6. Create a new map for the improved process
Now that you have an inventory of all the process components — like people, tasks, activities, data, documents, and handoffs — create a new process map that illustrates the new and improved process flow.
Share this new process map with anyone impacted by the changes, and anyone who needs insight into how the process works. Make a copy of this map available as part of your process documentation.
7. Implement, test, and deploy
Once you’ve made the adjustments to the new version of the process and put everything in place, test the new process to ensure that the end result meets expectations. If the new process achieves the desired goals, go ahead and train all users on it. Once this is complete, activate the optimized procurement process.
If issues persist, gather feedback from those impacted and continue to optimize the procurement process until all bumps or hang-ups are resolved.
Optimize your procurement process with Pipefy
One of the most common barriers to procurement process improvement is not having access to the right tools. For many teams, procurement optimization requires the customization of existing legacy systems, which consumes precious developer resources.
Low-code business process automation (BPA) simplifies optimizing the procurement process by giving procurement teams an IT-approved toolbox that they can use. With no coding experience required, teams can build, modify, and automate their procurement process with an easy-to-use, visual interface.
Low-code BPA integrates with the existing stack to augment current apps and systems, giving teams a system of engagement to complement their current system of record. Low-code BPA works with all types of business processes, giving it the adaptability teams need to orchestrate and scale processes across the enterprise and the security assurance that IT teams want.