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Top 5 Tips to Improve Procurement Performance

by | September 19, 2018

The business world is changing rapidly with new technologies, industries and methodologies appearing every day. An organisation that was flourishing a couple of years ago, might be turning zero profit today, using the same technology or even the same strategy. Not only is technology evolving, but behaviors are also changing.

This also applies to procurement organisations. Procurement needs to be sure it “keeps delivering”, whether this means staying on top of new trends and technologies or making sure it is achieving its performance targets in harmony with the business strategy.

A couple of weeks ago we talked about how procurement can stay on top of tech trends. In this blog we’re going to talk about procurement performance and the top 5 tips that can help improve it.

1. Making use of technology

There’s been a lot of talk about incorporating technology and tech innovation into procurement processes. But do we actually understand why it’s important for companies to do so? It’s not just a matter of going with current trends, as technology has a lot to offer to procurement teams. From spend management systems and P2P software to fintech and SRM software, technology has changed the way we do procurement.

These are some of the benefits of using e-procurement tools:

  • Better visibility over spend and lower costs
  • Increased operational performance
  • Increased data accuracy
  • Better data integration and standardisation
  • Procurement globalisation (as e-procurement tools support various currencies, languages, helping connect buyers and supplier around the world)
  • Reduced risk

2. Strong risk management policies

Technology can visibly reduce risk when it comes to procurement processes. However, there are a few other things companies should consider, to benefit from a strong risk management program.

There are a lot of mishaps that can affect a company’s procurement processes. From security breaches and system failures to civil disputes and natural disasters. It’s important for companies to be aware of the risks they face and develop procedures in case they happen to ensure business continuity.

3. Supplier relationship management

Building strong lasting relationships with your suppliers will help your organisation’s performance on the long term. In addition to constantly evaluating supplier contracts on a regular basis, to ensure performance and compliance, procurement professionals need to establish good communication and build trust with their suppliers. It is essential to make sure that both parties are on the same page and have definitive goals and plans of action laid out.

Having a good supplier relationship management program has multiple implications:

  • It helps make your strategic sourcing efforts work
  • Integrated into source-to-pay efforts it helps strengthen the acuity of supply market intelligence
  • Increased competition has determined suppliers to invest more in technologies and share ideas with customers with whom they have good, collaborative relationships. In consequence, this promotes increased collaboration between buyers and suppliers, strengthening partnerships and building long lasting relationships.

4. Measure performance using the right KPIs

Performance is a measurable goal. Organisations just need to have a clear strategy in place to be able to make it an easily measurable goal, objectives are also an important part of your strategy. Have you clearly defined your strategic procurement objectives and made them clear so that everyone is working towards achieving them? Only then can you implement robust performance measurement that aligns with the corporate objectives through each functional team.

The appropriate performance metrics will give you an overview of how well procurement is operating and point out which areas can be improved. Companies should note that, over time, these indicators may change, which is why it is important to regularly evaluate your performance.

5. Outsourcing procurement processes

Often times companies decide to outsource procurement processes to save money. However, few companies opt for outsourcing their whole procurement function. Outsourcing is usually reserved for limited duration projects, training programs or projects where highly trained procurement professionals are needed.

In return this ensures cost reduction and reduced delivery time for companies. Also, it allows procurement management to focus on more strategic tasks.

According to Deloitte, more than a quarter of CPOs are looking to increase outsourcing for operational buying and 12 percent plan to do so for strategic sourcing and category management.

Organisations that don’t lose sight of these 5 areas should be able to create more stakeholder value while increasing their procurement performance. So, where are you on your procurement performance journey? Is there room for improvement, or do you have it under control? Have a chat with our procurement experts and see whether your procurement could do better.