The Ultimate Guide to Procurement Success in 2022
Procurement management isn’t always known for being the most fascinating part of a business, but it can actually make or break the financial health and performance of your organization. In fact, when economic situations get challenging, much like they are now, procurement and purchasing are often called upon to help drive savings and control operational costs. A highly organized and streamlined procurement department can come through in the clutch to keep a business afloat when things get challenging.
Procurement, by nature, generates a high volume of data, and many organizations find themselves drowning in a sea of information with no way to analyze and leverage it. That data is your lifeline to limit wasteful spending and missed opportunities, and all it takes is incorporating just a few best practices to transform your procurement department into a savings machine. If you are ready to find how to make a change in your business, follow our ultimate guide to procurement success in 2022.
Procurement Management Challenges
The hottest topic in procurement today is the economic challenges that are troubling just about every business. Before you work on improving your procurement process, it helps to understand the challenges plaguing procurement today. Let’s take a closer look.
Increasing Energy Costs
Not many people have been untouched by the rising energy costs in the United States, and it’s not just pain at the pump. Electricity, natural gas, and propane prices are all on the rise, and when energy prices go up, so does the price of everything else. Goods become more expensive to manufacture and transport. Office spaces and retail stores become more expensive to operate. Often, a business relies on procurement to help drive savings, and increased energy costs is a big hurdle for 2022.
Rising Interest Rates
The last few years have seen historically low interest rates a way to keep the economy afloat in the wake of the pandemic. However, rates have been on the rise since the start of 2022. When it comes to procurement management, interest rates mean more than you’d think. Suppliers will have less access to capital, which can slow down production and impact the cost of goods.
You can’t turn on the news these days without hearing about inflation. Everyone in the country is being impacted by inflation in 2022. When it comes to the procurement process, inflation makes it difficult to predict pricing and work within budgets that were set in a prior fiscal year. Not to mention, you may encounter opportunistic price increases that put even more pressure on your bottom line.
Solving Procurement Management Problems
Today’s economic challenges are hurdles, but they’re not too big to overcome with the right procurement processes. There are some solutions you can implement to mitigate the impact of current challenges and keep boosting the bottom line.
AI is everywhere, and one of the most impactful solutions you can use is intelligent procurement management. Here are some ways you can benefit from programs that learn about your procurement process patterns to help drive efficiency.
Intelligent procurement keeps your team from spending too much time on low-value or repetitive tasks. With greater time for high-impact activities, you can drive better results and spend efficiency.
Data-Driven Decision Making
Using intelligent procurement management allows you to collate information and export into a usable fashion so you can make better, data-driven decisions about your spends.
Spend optimization creates a strategic view of your business’s savings through technology that establishes a baseline, then drives savings throughout the organization by outlining spend goals to manage to.
Predictive pricing uses machine-powered algorithms to forecast pricing changes and trends to unlock potential savings.
When you incorporate intelligent procurement, you will need fewer resources on your team to complete the same amount of work.
Because you are reducing resources and increasing efficiencies, you’ll drive savings that boost your ROI.
Once you’ve incorporated intelligent procurement, you can use it to automate your procurement process. Here are a few ways to do that.
You can use automation to digitize supplier information and historical pricing in one centralized, accessible location to empower your planning, sourcing, and logistics team with analytics to drive growth, mitigate risk, and optimize costs.
Better Internal Collaboration
As remote working becomes available to more and more employees, it is important to have tools to facilitate collaboration among teams and across organizations. Automation helps speed up the procurement process and allows for comprehensive project management.
Streamlined Vendor Communications
Communications to vendors tend to all be very similar, which makes this a good area to leverage automation. A great procurement management tool will allow you to create communications templates that populate variable information based on parameters you set.
You can create and store standardized templates for common forms like RFPs that can pull information from your database for easier answers and submission.
You can use automation to incorporate reverse auctions into your strategy. This helps you quickly put up your requests, rank, and accept bids. Using reverse auctions streamlines the process of finding vendors and can drive additional savings.
Getting caught off guard by contract expirations can leave you in an undesirable situation. Automated tools can be set to notify you of contracts that will expire within a certain number of days, so you do not fall behind in the process of renewing contracts or sourcing new vendors.
Procurement as a Strategic Function
Procurement goes from a support function to a strategic powerhouse when you approach the process as a way to identify your organization’s needs rather than just accepting sourcing requirements from different departments. With this approach, the organization saves more money, achieves better profitability, expedites product to mark time, and innovates with agility.
There was a time prior to the pandemic when most executives felt their procurement department wasn’t strategic. They didn’t think the function was critical to leadership or that input from procurement was required to make high-level strategic decisions. Fast forward two years later, and the C-suite has realized the importance of procurement and welcomes the input of the function’s leaders. Chief supply chain and procurement officers must now recognize the board’s priorities and deliver on them through strategic procurement management.
If the last few years have taught us anything, it’s that the unexpected can create a massive issue with supply chains and impact your operations. Rather than put all your proverbial eggs in one basket, it is a good idea to diversify your vendors and spread your business out to mitigate risk and minimize impact to your business should an issue occur with one vendor.
Extend Existing Contracts
Before contracts expire and you have to go into negotiations, approach your vendors and suppliers and request to extend your existing contracts on the current terms. If you are satisfied with the terms, the vendors will likely extend the contract as-is rather than spend time renegotiating and potentially lose the business. You benefit by limiting any potential price increase.
Is There a Software Solution That Does It All?
The best way to set your organization up for procurement success in 2022 is by implementing a modern software like Procoto. Procoto is a cloud-based platform accessible to teams and across functions, no matter where they work or in how many locations. The easy-to-use automated AI workflow can save your business time and money.
No other procurement platform offers such a robust solution for team collaboration. Your entire organization can work seamlessly on projects with access to data, reports, vendor information, and templates in one centralized location. Procoto will transform the efficiency of your procurement process and offer unique features like predictive pricing and email sequencing.
Procoto – Innovating Procurement
If you’re looking to change the way your business procures goods and services, then you should try Procoto! Start your 30-day free trial today and see why Procoto is the most innovative digital procurement software out there!