How innovative approaches can optimize procurement approaches?

In business, efficiency is everything. However, when it comes to procurement, where only 6% of companies agree to have full visibility of their supply chain, efficiency optimization matters even more. One of the studies revealed that procurement professionals spend one-third of their time handling manual mundane tasks. There are other performance bottlenecks that are affecting the process efficiency to a great extent. Let’s analyze top procurement challenges and learn some innovative ways to overcome them to improve efficiency with ease.

Traditional Procurement Challenges and Limitations

Traditional procurement methods typically rely on manual processes. Data may be siloed across departments, resulting in unwanted delays and performance inefficiencies.

As traditional procurement caters to a large number of average suppliers, businesses miss out on potential savings and innovation opportunities through strategic partnerships.

All these challenges can cause:

  • Inflated costs due to reacting sourcing
  • Lengthy approval cycles
  • Missed opportunities for volume discounts

Operating with such slow, expensive procurement processes for a prolonged period can push a business into a competitive disadvantage.

On the other hand, companies leveraging innovative procurement approaches are more likely to thrive, innovate, and shape their sourcing and procurement lifecycle.

Different Ways of Procurement Optimization for High-Efficiency

Spend Analytics

Spend analytics gives you a clear picture of where your money goes. It analyzes your historical purchasing data to identify hidden costs and areas with excessive spending. You also get valuable data on buying trends and supplier performance to negotiate with a stronger hand.

Spend analytics are also useful in categorizing purchases to identify opportunities for standardization that translates to efficiency. You can use ERP systems to collect data from various departments and visualize them with business intelligence tools to analyze spending patterns and uncover areas for consolidation.

Also Read: Real-Time Analytics: The Driving Force Behind Responsive Supply Chains

Supplier Consolidation

Strategically reducing the number of vendors is one of the most effective methods to optimize your business’ procurement efficiency. When you purchase from a few suppliers, you get the chance to leverage better pricing terms and discounts due to a higher volume of orders.

Additionally, fewer suppliers means fewer invoices and lower processing costs. As mentioned earlier, you can take the help of spend analytics to identify categories for consolidation. You can also leverage supplier relationship management systems to centralize suppliers and efficiently manage supplier relationships with consolidated vendors.

Reverse Auction

Reverse auctions are undeniably innovative procurement strategies to drive prices down. Here, the traditional roles of suppliers and buyers are reversed. Unlike the traditional process, the buyer posts a request for a specific commodity or service. Then potential suppliers submit competitive bids in real time.

The winner is generally the supplier willing to do the job or provide service at low costs. There are dedicated reverse auction platforms where businesses can define their needs and manage the bidding process online. You can also integrate reverse auction platforms with your existing procurement systems for a smooth data exchange and task automation for easy management of the entire procurement cycle.

Moglix utilized all of the tips shared above and a few more to increase the working hour efficiency of a leading cement manufacturer by 20% which was challenged by a fragmented supplier base, and non-standardization in pricing.

How to Optimize Indirect Procurement?

What is indirect procurement?

Indirect procurement involves purchasing goods or services that are not directly related to a business’s core production. This could include office supplies, facility management, travel expenses, and marketing services. As indirect procurement accounts for up to 80% of a company’s total purchases, it is imperative to optimize it with innovative strategies.

Here are some innovative methods to optimize indirect procurement:

  • Use big data and spending analysis to identify hidden patterns and potential cost savings
  • Implement a category management system to manage specific categories and identify innovative sourcing solutions
  • Leverage cloud-based e-procurement platforms to automate workflows, streamline operations, and reduce administrative burdens
  • Use online marketplaces dedicated to specific indirect procurement categories to access a large pool of vendors with low-price bids


Also Read: Digital Transformation in Procurement: The Current Trends and Future Directions

Nowadays procurement optimization requires modern technologies and approaches to address challenges emerging out of growing competition in the market. However, thoughtful implementation of these strategies is imperative to achieve significant procurement optimization that reflects recurring profit to the organization.

Are you looking to optimize your procurement through innovative methods? Leverage Moglix Procurement Solutions today!

FAQs

How to optimize product procurement?

An ideal product procurement optimization strategy should focus on acquiring the right products, at the right price, and at the right time. In this regard, businesses can use spend analysis and supplier consolidation to identify areas of cost reduction and make consolidated purchases for maximum discounts. They can also utilize an e-procurement process to automate routine tasks to save time and reduce operational costs.

What are the 4 stages of procurement?

The four stages of procurement are as follows:

Stage 1: identify goods/service requirements and outline the budget and specifications

Stage 2: find qualified vendors and select the best supplier through various methods

Stage 3: negotiate contracts, issue purchase orders, receive/ inspect goods or services, and manage supplier performance

Stage 4: release supplier payments and evaluate the procurement process for potential improvements

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