Businesses evolve to be efficient and adhere to the strategy that helps the organization stay in the competition. Sticking to a paper-based purchase model and email-driven invoices will create a lag in a business model that is digitally thriving. Embracing technological advancements like modern procurement in your business model will help you achieve business excellence.
When automation is the key for all your business processes to be seamless it is unfair to still rely on the conventional procurement process. The modern procurement process is key to embrace now! Procurement is a series of interconnected activities related to the purchase process. Following snail-speed manual procurement will never help you meet your business needs and values.
Modernizing procurement helps organizations accelerate their purchase operations effectively and financially. By cutting out the complexities of manual procurement, modern procurement aids businesses to achieve their targets on time. Let us read about what modern procurement is and why it is needed and how it works.
What Is Modern Procurement?
Procurement involves the inter-connected activities that are the basics for the business to operate whereas modern procurement aims at streamlining the procurement procedure with automation tools or software.
Procurement involves end-to-end supply chain process cycles like knowing the needs, buying raw materials, tracking, negotiations, purchasing procedures, post-purchase reviewing, processing payment, and building customer/supplier relationships.
Seems too laborious to handle and complex to manage, right? Managing any part of this process manually will be tiresome and with errors and lots of time. Modern procurement serves to be the right solution to ease out the entire process with the following benefits:
- Reduced costs
- Improved efficiency
- Better customer and vendor engagement
- More accurate data
- Undisrupted supply chain
- Improved business outcomes in a minimal time
- Reduced risks
Why Is Building A Modern Procurement Process Necessary?
Gaze into the future, to know how behind your business is and what it takes to prosper in this digital era. Relying on emails and spreadsheets for purchase activities will make your business outdated. It is time to get rid of these information silos and upgrade to modern purchase procedures. Outdated procurement needs an upgrade to speed up the business drive.
The conventional procurement process is constrained by the following:
- Increased risks and manual errors
- Inefficient data flow
- Lack of internal and external communication
- Collaborative challenges
- Unstructured data analysis
- Challenging contract & vendor management
- Process transparency and difficulty in tracking
- Laborious & time-consuming
Modern procurement helps businesses with strategic sourcing opportunities that enrich the values of the business. Modern procurement helps Identify opportunities for improvement and analyze them to optimize the end-to-end purchase process. This helps businesses minimize manual errors and battle out bottlenecks.
The modern procurement process assists firms in lowering costs, increasing revenues, and adding value as part of the whole procurement process. If your organization is growing quickly and you haven’t yet optimized your purchasing procedures, you’re likely to fall behind. Naturally, purchasing procedures get increasingly complex as organizations expand. Positively, this shows that the company is indeed expanding and succeeding since expansion is accompanied by a higher desire to purchase more goods and services. Say hello to modern procurement and look forward to –
- Informed buying decision
- Orchestrated supply chain management
- Mitigated risks
- Cross-function collaboration
- Curated digital map addressing short and long-term improvements
- Improved visibility in key procurement segments.
Few stats that provoke your thought on modernizing your procurement process:
Forbes states that about 74% of business owners who consider adopting new digital technology in such areas will have the privilege of being the lead or fast-changer of disruptive technology.
A Gartner survey revealed that 82% of CEOs in supply-chain-intensive industries plan to increase investments in digital capabilities across their enterprise.
These research data and reports have put pressure on business owners to modernize their supply-chain / procurement processes and enhance their buying decisions. Modernizing the procurement process facilitates a tactical advantage of strengthening the business outcomes. Modern procurement speeds up the entire process by automating the end-to-end supply chain management process. Let this be the right time to experience your fast-paced business drive with modern procurement tools. Never let Slack messages influence your business decisions. Go digital to embrace inventory excellence.
Steps Involved In the Procurement Process:
1. Developing a procurement strategy
This step propagates as a procurement strategy that aids businesses to identify risks and challenges. This will help organizations focus on the most important issues and develop a plan to overcome those risks and challenges. This also finalizes the budget requirement of the process. Allocation of resources and approval of funds is to be estimated in this step. Budget estimation should focus on the purchase that yields the best value to the business drive. Spending more for the best fit is better than spending on a misfit.
2. Identifying & approving potential vendors
The next step in the procurement procedure is to identify potential suppliers. This can be done through a variety of methods, including
- Searching for new suppliers online
- Requesting recommendations from other companies that use the same type of product or service.
- Reviewing past performance data for current suppliers.
Forecasting the demands can impact the procurement process flow positively. This helps organizations prevent unexpected spending or ad-hoc purchases. Evaluating the supplier list will help to decide and approve the vendor who will serve the best in the long run.
3. Selecting suppliers
The goal of this step is to select the best supplier based on their ability to meet your business’s needs at the lowest cost possible. This may involve evaluating financial stability, product quality, and delivery timeframes before making your final decision. Invitation To Bid (ITB) and Request For Proposal/Quote (RFP/RFQ) come into the picture while selecting eligible vendors.
The former is a formal request for information, often used by government agencies to solicit bids from businesses while the latter only allows prequalified suppliers to submit proposals or quote the price.
4. Negotiating contracts
When you’re negotiating a contract, it’s important to understand the legal aspects of your business. You’ll need to know what types of contracts are available and what they mean for your company. Negotiation is not meant to just reduce the cost of the purchasing process. The goal is to find the ideal vendors who can provide the resources in a more reliable way in addition to the profit terms. This helps businesses avoid the unwanted chaos of vendor switches and create the best strategic alliance with vendors.
Opting for the right contract that works well for the particular business is a matter of concern here. Factors like vendor type, cost structure, delivery dates, flexibility, and the responsibility each party holds as stated in the contract are to be considered.
Based on these considerations, companies can move forward with a solid contract negotiation of either the fixed or flexible contract type. Drafting a precise contract is the focal point and online forms help with customizing one. Storing them online for future reference helps avoid unwanted disputes. Getting a legal expert review encourages a fair trust relationship.
5. Creating purchase orders
After back-and-forth discussions and negotiations, there comes the step of raising a purchase order. The purchase order is forwarded to the selected supplier. Once the vendor accepts and acknowledges the PO, the legal contract gets activated. It is then the responsibility of the finance team to match the purchase invoice against the vendor-acknowledged PO.
6. Managing procurement projects
Based on the PO, the vendor delivers the goods in perfect condition and at a fixed time. Setting up a dedicated team to examine the order received and report to the vendor in case of any faults is inevitable. This team should manage and monitor the procurement process to avoid unnecessary issues in the purchase.
Uncompromised quality and compliance with quantity expectations are of utmost importance when initiating the purchase process with a new vendor. Keeping track of past data and benchmarks ensures data security. Automation tools or e-procurement platforms like Cflow can do their best to ensure on-time delivery and track records using real-time data.
7. Strategy of three-way matching
This three-way matching strategy is paramount in making the procurement flow more streamlined to avoid any discrepancy in the process. This ensures that there is no mismatch among approved purchase orders, vendor invoices, and delivery receipts.
The procurement management team is accountable in all segments of order, dispatch, and receipt of the goods ensuring the three-way match. The goal of this step is to avoid payment delays, unauthorized payments, or any other kind of purchase mismatches.
8. Paying invoices & approval
When there is a three-way match, it is time to pay the vendor. Approved invoices are then taken care of by the finance team. Abiding by the contract, the accounts team makes the payment immediately. Procurement automation solutions like Cflow make this process easy-breezy! Modern procurement makes use of such tools more exquisitely.
Thanks to payment integration, modern procurement offers the procure-to-pay option. This encourages a safe and secure payment process and invoice reconciliation.
9. Managing supplier relationships
It’s important to have a clear understanding of what makes a good supplier relationship. Supplier relationship management is a strategic approach to managing your suppliers/vendors. This will help you develop an effective strategy for managing your suppliers and improving the quality of their products or services.
Identifying the value that each supplier brings to your organization can indirectly help in cost savings, quality control, and other innovative measures. Accountability, transparency, and trust are the key features that help hold a good relationship.
10. Managing business records & reports
Modern procurement helps organizations keep track of their data as well as optimize their spending. This in turn increases the license utilization of the business. Easy access to the data and reports is the prime factor in tech-based modern procurement. This helps the organization maintain the databases which are helpful for audits and help out better visibility with financial transactions.
This step also lends a hand in making decisions over whether to continue with the same vendor or whether there is a need for a vendor switch.
How to Optimize Your Procurement Process
The goal of the procurement process is to get the right products at the right price while meeting all your internal requirements and external regulations. You need an optimized procurement process that works for everyone involved to achieve this goal. An optimized procurement process can host the benefits of an undisrupted supply chain at a reduced cost. The following measures can help you optimize the procurement process.
Identify areas for improvement:
Identify the opportunities for improvement by conducting a thorough analysis of your current processes and practices. Comparing the current practice and best purchasing practice helps you capture the market. The metrics you use to measure your performance can help you identify areas for improvement, as well as the impact of any changes you make.
Analyze the current process:
the right analysis should review the performance at regular intervals, identify areas where improvement is needed, and adjust timelines and tasks as needed.
Create a plan of action:
Develop a plan for improving those purchase processes and practices based on the results of your analysis.
Review the process and make adjustments as needed:
Monitoring and adjusting your procurement process is an important part of the optimization process. Reviewing metrics can help you determine if there are any bottlenecks in the system that need attention.
Implement your optimized procurement process:
Implement changes to maximize efficiency and effectiveness in all areas related to procurement. Say hello to the modern procurement process!
Speeding Up Your Business Drive With Modern Procurement Process: The Necessity
Streamlining the business process with ease is the need of the hour of every business to reduce costs and enhance profit margins. Improving the procurement process with modern automation tools and software is what the modern procurement process aims for. Remember, procurement at a slower pace can cost your business dearly!
- Upgrading to Modern procurement tools from the paper-driven or spreadsheet-based procurement process aid businesses to quicken up the pace of operations at reduced costs.
- Modern procurement process strives to speed up the slow and complex procurement process using technologies like no/low-code automation or procurement software.
- Modern procurement tools are designed with the goal of making sure that everything from purchasing to inventory management is handled efficiently and effectively. This boosts the focus on running your business effectively instead of worrying about ordering paper clips or paying bills on time.
- Modern procurement processes ease the complexities and challenges involved in procurement processes and workflows.
- The inefficiencies of the traditional procurement process have an adverse impact on the business’s bottom line that an organization holds. The SaaS era tries to bridge the inefficiency and the company’s bottom line with effective automation software and tools.
- Rising risks at the organizational level have made businesses look for solutions that leverage their operations without hurting their profits. The manual procurement process faces internal difficulties that disrupt the entire supply chain flow. With the modern procurement process, the risk of an economic downturn is mitigated!
- Modern procurement helps out businesses to orchestrate operations, maximize savings, and offer a seamless and simplified process experience in procurement, which promotes ongoing process improvement.
- Modern procurement is both a short-term action and a long-term practice; it is both the action of using technology to enhance the functionality and efficiency of procurement as well as the practice of consistently looking for methods to modernize the process and maintain competitiveness. Thus incorporating modern procurement is a spontaneous as well as long-term practice.
End-to-end workflow automation
Build fully-customizable, no code process workflows in a jiffy.
Checklist For Best Procurement Practices: Turning Risks Into Opportunities
Boost up the purchase procedure in a more modernized way so that all cycles of procurement activities require minimal time and cost. The practices that can help optimize the purchase process and every other step of the procurement lifecycle are listed below. Indulging in such practices will ensure that procurement flow is under control.
- Define a clear procurement strategy
- Focus on purchases that add value
- Determine costs and budget
- Create an open communication channel with suppliers
- Maintain easy access to budget and better process visibility
- Adopt a system that has no room for paper and spreadsheet silos
- Maintain a centralized, accessible vendor database
- Integration with APIs and ERP
- Build happy vendors
- Opt for automation of major tasks
- Establish policy and process compliance
- Invest in good procurement software like Cflow
It is like ticking all the checkboxes or it can be as simple as investing in a modern procure-to-pay solution like Cflow to get all boxes ticked out instantly. Thriving businesses should acquire such modern purchasing tools and utilize them effectively to ensure the procurement procedure is intact and streamlined. Investing in good procurement software ensures enriching businesses with all their requirements at the perfect time without any discrepancies.
Leading Edge [No-code/low-code] Technology In Procurement
Adapting to changes is a vital thing for the business to grow faster. Utilizing modern technology and tools for procurement should be a strategic function so that it should not alter the business’s bottom line. With a no-code procurement solution like Cflow, there is greater accessibility, transparency, efficiency, and sustainability in procurement activities.
Investing in automation tools makes procurement optimized when business grows faster and becomes more complex to handle. The benefits that are worth the cost of automation tools are
No-code/low-code: No more waiting for IT to support, build or resolve. With no-code/ low-code even non-techie can contribute to building workflows with easy-to-build forms and easy-to-use interfaces.
User-friendly templates: Building from scratch costs you sweat. Customize the business framework with pre-built templates. I swear no more sweats!
Easy integrations: Integration with third-party apps makes supply chain management seamless and hassle-free.
Agile dashboards: Dashboards of flexible structure, helps in gathering proper information internally and externally. Insights and reports provide real-time information that helps teams identify where and what requires a pause/jump.
Elegant interface: the no-code software is more confident in building workflows without losing the elegance, with its drag-and-drop interface. So changes and customizations are just a few clicks away.
Cloud-enabled service: Digitally modernizing the procurement process will require cloud-based access and migration as a mainstream key feature. Enrich user experience with mobile-enabled service for the procurement process to make users stay on cloud-nine.
Unleash Productivity: Knowing KPI
Like any other business process, the procurement process has to be assessed for effectiveness. Key performance indicators (KPIs) for procurement assist in assessing the effectiveness, efficiency, and performance benchmarks of business strategy processes. There are two types of KPIs: quantitative and qualitative.
These can be outlined as Supplier KPI, Purchase Order KPI, and Return on Investment (ROI). These are monitored regularly as they improve quality, and delivery and enhance cash flow. These metrics improve the performance standard and effectiveness of the procurement process. Numeric representation on quantitative KPI whereas the qualitative KPI ensures enriching business productivity and performance.
Building a streamlined procurement process will require you to take the first step of investing in cloud-based automated tools. Never stress out managing the tedious procurement process, sign up for a strategic procure-to-pay solution like Cflow to achieve procurement excellence.
Time to toss out stone-age procurement processes; Experience modern Procurement with Cflow now!
What would you like to do next?
Automate your workflows with our Cflow experts.