Table Of Contents:
Introduction
2020 through 2022 was a set of years for the history books of supply chain management. You can rest assured that supply chain management programs will teach about this period for decades, if not generations. Disruptions to the supply chain have been par for the course and have increased risk to organizations across the globe.
Procurement leaders have been required to react fast when key suppliers fail to perform. We procurement and supply chain management professionals will be looking back and asking, "was there more we could have done to be proactive"?
At this stage in the game, the best thing to do is to keep working through the difficulties and establishing best practices regarding procurement processes and strategy. This will help reduce risk in the supply chain and allow for more efficiency. We may be thinking about what else could happen and for those of us that have been around awhile, the answer is anything.
It is best to prepare now, even in the middle of the storm. In this article, we will review procurement best practices and how to pair your procurement process with your procurement strategy to be the most robust procurement team you can be.
Best Practices In Each Procurement Process Step
So, this is why you stopped by to understand more about procurement best practices. We'll delve deeper into an example of procurement best practices for each of the procurement processes.
Better Scopes of Work
When it comes to better scopes of work, knowing who develops them is imperative. It's my opinion that only the stakeholder can do this. I've been in environments where stakeholders are engineers with decades of experience writing scopes. I've always worked in small organizations where that skill hasn't been developed.
The key best practice here is collaboration. You must establish a document that you walk down with the stakeholder to identify two things: Must haves and like to have. Building good scopes of work come down to those two things.
What must this thing we are buying do and that if it didn't do would be a failure.
What additional things would you like this thing to do but aren't mandatory?
To do this, you have to have good working relationships, and procurement leaders should provide training to their team to do this.
Strategy Development
Strategic sourcing groups know the procurement best practices all too well here. It evaluates the data to categorize the spend via the Kraljic Matrix method. This is one of the top procurement practices that the entire organization should understand.
Developing a plan to analyze data and then categorizing that spend as a leveraged item, strategic item, bottleneck item, or non-critical is crucial in taking the next step in developing a proper strategy around it. You'll need to implement some processes related to data analytics, but it's an easy step that will assist you in spend management.
RFI/RFQ/RFP Document Creation
Regarding RFI/RFQ/RFP document creation, I'll let you in on one of my secrets. Don't be afraid to ask potential suppliers for these documents. What do I mean? I've routinely asked potential suppliers to send me previous RFI/RFQ/RFP documents they've received in the past from other potential customers. You'd be surprised how eagerly they share it.
Create a template for each for best practices. For instance, create an RFQ template with a table with your part number, the manufacturer's part number, description, yearly or monthly volumes, and then a blank column for the bidder to enter their price.
For RFPs, write it in a template that relays ONLY the requirements we discussed. These are the items that the service or product has to have to be successful. Nothing extra!!
Allow room for bidders to provide their twist to fulfilling that, and remember you can always narrow the list and have them bid again with a more developed requirements list later.
Supplier Selection: Scorecard Development
Procurement best practices here revolve around the development of a scorecard. You've already used the requirements to weed through the potential bidders. Now is the scorecard's turn to evaluate the like to haves and the cost of those.
Selecting the right supplier makes supplier management much less taxing. Google is your friend here, and you can find many resources on this topic. I'll include some here.
Contract Management
Contract Management process is key to sustainable procurement practices. Being able to managed expectations of a supplier through how they perform, key performance indicators, quality assurance, and they should reflect your procurement policies.
This is an area that technology should be evaluated and leveraged as a part of your procurement technology. Contract management software that I have used before and recommend for the contract management process are below. They come with templates, storage, signature processes and much more.
Additional Best Practices To Think About:
Automate Non Value Added Actions:
Look for software systems that can bring in a level of automation to procurement functions. Some of the beset digital procurement processes revolve around your current process and matching that to the multitude of system on the market today to streamline purchasing and. Procurify is one of the latest and greatest procurement systems to help automate procurement that you should check out.
Supplier Communication and Engagement Improvement
Schedule QBR's (Quarterly Business Reviews) with your top suppliers by the Kraljic Matrix. Strategic suppliers should be constant contact and quarterly business reviews. Bottleneck suppliers should have a bi-yearly review. Leverage item suppliers should be quarterly to bi-yearly. Get an agenda and work through where your spend has been, where it's going, and what opportunities are ahead.
Conclusion:
Procurement professionals should constantly review the procurement function that they are a part of. Break down each step in your procurement process and see where you can streamline purchasing by creating standardization. The procurement system you work in should be an asset to the supply chain and the supply chain should relish the opportunity to work with you.
Evaluate ways to remove manual data entry, look for areas of inefficient processes like the procure to pay cycle to include purchase orders and purchase request. Keep manual processes to a minimum. Digital transformation isn't just the future of procurement, it's the present. However, it isn't a fix to bad processes. Use our keys above to get you on the right path!
Feel free to reach out to us anytime for more in-depth guidance opprotuntity and collaboration. I'd love to evaluate a way for us to partnership! Your an contact me at DerekThompson@procurementio.com
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