Most organizations purchase goods and services from a variety of different companies, and controlling these expenses is always important. In asset-intensive industries, however, like manufacturing, wholesale distribution and retail, where a great deal of money is invested in inventory, purchasing activities are strategically important.
The procurement process is often cumbersome. The buyer may receive requests from dozens of internal customers, which must then be researched and approved. If an item being requested hasn't been purchased before, a request for quote must be issued to multiple potential vendors, followed by back-and-forth negotiations before an approved vendor is selected and the purchase made.
Unfortunately, companies often lack effective tools for managing the procurement process. As a result, they may rely on manual record keeping, phone calls, emails and spreadsheets to manage sourcing events. This approach is not only inefficient, it makes it impossible to get a clear picture of vendor performance.
Source. Purchase. Pay.
A successful procurement practice is a balance of people, processes and technology. Software alone won’t solve all the problems, especially if underlying processes are conflicting or poorly defined, or the procurement managers lack an understanding of the company’s requirements.
A good place to start perfecting the procurement process(opens in new tab) is to document the key requirements all suppliers should meet. Without guidelines, procurement managers will use their own criteria, which may not align with the company’s goals. Guidelines tend to be pretty specific to each company, ranging from production capabilities and country of origin of goods to company size and ethics standards. Having that framework will help managers and other buyers evaluate vendors and products.
Next, automate some or all of the procurement process. Procurement software automates most manual tasks — from purchase requisitions(opens in new tab) to vendor management and invoicing. A procurement solution makes it easier to keep track of buyer-vendor communications and to enforce compliance by requiring that purchases be made only through contracted vendors and setting limits on spending and the types of purchases that can be made based on the user’s role.
Workflows can be set to require approvals at different stages of the purchase. Automation will also help procurement managers make better decisions with solutions that provide the ability to easily track every transaction, analyze it and then include it in the vendor scorecard.
Finally, it’s important to monitor all aspects of vendor relationships. Procurement professionals are sometimes accused of focusing only on price, but this is far from true. Experienced purchasing managers know that quality and vendor performance are just as important, whether buying complex equipment or raw materials. After all, the lowest-priced provider is of little value if it can't meet delivery dates or supply sufficient quantities. This is why managing vendor relationships is so important. Companies want to hold on to the suppliers they value and identify those that are unreliable as quickly as possible.
Optimizing the Procure-to-Pay Process
Best practice procurement means finding the right suppliers, with the right goods, delivered at the right time and price. NetSuite Procurement(opens in new tab) improves the accuracy of the procure-to-pay process by automating and linking key procurement transactions and providing approval and matching workflows to support internal controls and compliance requirements. With this, employees save valuable time with more automated processes, costs are reduced by channeling purchases to approved suppliers and pre-negotiated contracts and visibility is improved by having real-time information on company spend and vendor performance.
Join this webinar(opens in new tab) to learn more about NetSuite Procurement.