Executive Chronicles | The Complete Guide That Makes Creating Procurement Workflows Simple | During the 2020 pandemic, the world of business learned several very critical lessons. People discovered that remote work is the future and that most companies are not ready for disruption. It was a wake-up call for most supply chains, with many of them using force Majeure declarations in the first few months.
Businesses that deal with suppliers need to establish solid procurement workflows now more than ever. You have to look for a way for your goods to be secure, regardless of whether you go through micro or macro business disruptions.
Read through this article to better understand how to create working procurement workflows.
The Importance of Creating Procurement Workflows
Procurement workflows are all about acquiring quality products or services from preferred vendors. This should be done within a given timeline and budget.
With an effective procurement workflow, you’ll increase spending influence and improve procurement efficiency. You’ll improve supplier management, and standardize your contract lifecycle.
How To Implement Robust Procurement Workflows
For your procurement departments to be effective, you need to manage your procurement needs. You need to have a well-thought-out management plan based on factual information. Technically, procurement follows a logical order.
You have to start with what you need to contract and plan how to contract it. You’ll then send requirements to various vendors and have them bid for a chance to get the contract.
For you to have an effective procurement workflow, you’ll need to follow the seven steps listed below.
Implement a Procurement Software
Implementing your procurement workflows manually can be disastrous. You’ll have to deal with human errors and delays. Procurement software can incredibly improve employee productivity and reduce errors.
It’ll help you streamline your procurement process end-to-end from procure-to-pay. There are various procurement software in the market. Look for one with the best-in-class features.
Analyze Your Organizations Spend
Among the first few things you should do is analyze your organizational spending. This will help you develop a working procurement strategy. Go through your current spend culture by obtaining data from your sourcing department.
Get data from stakeholders, suppliers, and other parties involved in the procurement process. The data you collect will be a knowledge base for your organization.
It’ll also work as a foundation for your procurement workflow strategy. You can use various tools, to analyze unknown and overlooked costs.
Define Roles and Responsibilities
One of the most important things you have to do is define roles and responsibilities in your procurement department. Everyone involved has to understand the scope of their work. It’s essential for you to create boundaries between responsibilities for a smooth operation.
Create a Procurement Schedule
A procurement schedule is vital so procurement processes are done within expected deadlines. Break down your procurement project into consistent tasks for your procurement department. Make sure you give them a start and projected deadline for stipulated tasks.
Assess Market Conditions
This is by far one of the most important things you can do for your procurement workflows. Scrutinize the supply market by collecting relevant data from potential suppliers.
Define Your Procurement Policies
Now that you know what needs you need to address, you need to create a list of procurement policies. This will eliminate existing inefficiencies.
The most important part of this process is identifying and mitigating risks. You need to know what you may run into during the procurement process.
Risks are inherent in the procurement process. Your procurement strategy will help you figure out and mitigate them. Once you understand all your risks, assign team members to distribute ownership of said risk types.
Essentially, you can either decide to start your procurement policy from scratch. Alternatively, you can adapt an existing policy template to fit your business needs.
Your procurement policies need to offer guidance on fair practice for everyone involved. Additionally, there should be remedies for all possible violations. This will help you can mitigate all problems.
Consider 3PL Logistics
Third-party logistics are essentially about outsourcing to a third-party company. A 3PL company will take care of stocking inventory, customer order fulfillment. There are several types of 3PL companies in retail.
Conduct thorough research to ensure you hire the right partner. With a 3PL company, you’ll gain expert knowledge, save money and time, and increase flexibility.
Determine Costs
Determining costs is a crucial step in procurement workflows. Costs will impact your budget directly. You have to request proposals from your vendors, asking them to bid for the goods.
Your proposal should include schedule dates and vendors’ work arrangements. During this process, it’s vital for you to conduct a make-or-buy analysis. Decide whether you should be doing the work yourself.
Consider the cost of building as opposed to buying the products. Also, consider whether you would have enough time to do the work and meet your commitments.
Establish Vendor Management
Vendor management is a critical part of the process. You’ll specify what strategies and protocols to use. Your organization will ensure vendors provide acceptable products within a given deadline.
The vendor management process also details invoice processing, timesheet approval, and status reporting. Most vendors and suppliers require payments during the contract and not at the end of it.
This means that you will need to have scheduled payments as part of the contract. You should ideally make payments based on progress.
With progress payments, you’ll have to define what tasks will need to be accomplished in a given timeline. You’ll also need to set a quality standard that must be met before you can pay the contract.
Creating Simple Procurement Workflows
If you want to create simple procurement workflows, follow these steps as your guide. This is an involved process, so ensure you do your due diligence and include all involved parties.
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