Research and write a blog post detailing six ways procurement can generate cost savings.
Below is a copy of the final blog, you can also view the project on Wax Digital’s website
6 ways procurement can save money
As a procurement professional you’re more than aware of the pressure to save money.
You know it’s never quite good enough to save money on a category or item. Your boss is always pushing you to save more. If it’s not coming from your line manager, it’s the CEO clamping down and insisting on company-wide cutbacks.
To help you overcome the pressure we’ve compiled six of our top tips on how procurement can generate cost savings.
#1 – Implement an eProcurement solution
If your organisation hasn’t invested in a professional eProcurement solution, now is the time to do so.
Most cost-saving advice focuses on processes and measures that are impossible to implement without eProcurement software.
The purpose of this software is to centralise and automate the interactions between a business, its consumers and other supply chain stakeholders. eProcurement solutions improve the speed and efficiency of procurement and spend management practices.
There are various eProcurement tools available and our cloud-based system, web3, is one of the leading solutions – and no, we’re not just blowing our own trumpet here!
Our customer-centric approach gives you the flexibility to implement a fully integrated Source to Pay (S2P) suite or to select specific modules from a range of sourcing and purchasing solutions that best suit your needs.
#2 – Eliminate maverick spend
One of the biggest challenges for procurement is ‘maverick spend’. The term describes purchases that haven’t been approved by the central procurement team or appropriate budget holder.
To eliminate maverick spend you’ll need to start with a thorough spend analysis. This will help you identify the main reasons why employees are spending without approval and help you form a plan to tackle the issues.
Most businesses choose to manage expenditure at the point of demand. To achieve this, you’ll have to implement a Purchase to Pay system (P2P). This will enable you to create approval structures, workflows and assign user permissions to ensure purchase requisitions are reviewed before an order is placed.
#3 – Run competitive supplier auctions
How often does senior management insist that you ask suppliers for a discount when purchasing a product/service?
Key decision makers like to view this ad-hoc strategy as effective cost saving. Occasionally, you’ll meet the brief and report back with a 5-10% discount. But with this approach, you’re going to struggle to get the best value for money.
This is where eSourcing shines – this solution is a key component of the Source to Contract lifecycle and provides buyers with access to a wider range of suppliers.
eSourcing software enables you to run a variety of electronic auctions (eAuctions). You can select potential suppliers and invite them to participate in your event – creating a real-time competitive bidding environment which allows you to receive the best price available.
#4 – Never miss a contract renewal date
Auto-renewals are a tricky beast. Quite often the devil is in the detail, or the small print in this case. Either way, before you know it, you’re locked into another 12 months of service with an undesirable supplier.
It’s bad practice to not read the finer details of a contract. But we can empathise with procurement professionals – it’s likely that you’re tasked with managing hundreds of supplier agreements.
With a contract management system in place, you can manage all your agreements from a secure, cloud-based repository. The increased visibility enables you to review contracts quickly and efficiently. To reduce the risk of contract rollovers you can create automated notifications that prompt a thorough review of an agreement before it expires.
#5 – Use electronic tenders
Manual tender management can create major problems for you and your supply chain. It’s a common pain point felt by procurement teams of all sizes.
Generally, the issues cited focus on the complex nature of tender documents, the time taken to build tenders and the lack of consistency when comparing supplier responses.
web3, features electronic tenders (eTenders). And like most automation tools, eTenders offer customisable templates – which allow you to efficiently build and amend documents. Easy and efficient tendering helps you run more tenders and secure greater cost savings from your supply chain.
#6 – Strategic supplier management
Poor relationships with your vendors can undermine the reputation of your organisation and prevent your business from receiving goods on time.
Successful supplier management is more than just positive social interactions between buyers and vendors.
However, creating solid professional relationships with your vendors can deliver mutual benefits. It can help you align supplier objectives with your own, increase the likelihood of cost savings from your supply chain and enable you to negotiate better contract terms with vendors.
The key is to identify suppliers that are the most important to your organisation. Without the right tools, this process is time-consuming and drains resources.
But with a comprehensive supplier relationship management solution (SRM), you can strategically segment your vendors into tiers based on their importance to your business operations. The multi-tiered approach indicates the degree of active management each supplier requires.