This guest contribution comes from Samantha Wallace. Samantha Wallace is a veteran tech writer and editor who has worked in several eCommerce companies. She has been covering technology online for over five years. She is the Content Advocate for Greenwingtechnology.com.
Markets are dynamic, and businesses need to keep reinventing themselves to stay ahead of the competition and the technology curve. To ensure that a company has the best possible chance of doing so, it is necessary to reinvent procurement management. However, reinventing procurement management doesn’t have to be a ridiculously complicated process. Manutan contends that the procurement process has already reinvented itself many times over, with each significant new step in technology. For 2020, the idea of reinventing your procurement management starts with outlining your strategy.
Knowing Where You Are and Where You’re Going
Setting out a roadmap to where the company refines and develops what it wants for its new procurement management paradigm starts from the planning phase. As most companies are aware, a handful of issues typically plague procurement initiatives. Among these are:
- Analysis of Spending: This stumbling block includes trying to keep track of all the company’s spending and incoming payments.
- Customer Expectations: Businesses, on the whole, look at customer relationships and obligation fulfillment and keeping track of what works and what doesn’t as well as escalating the issues that are a priority can be difficult for an organization to juggle.
- Task Management: Daily, the company has to go through a series of individual tasks that add up to form the company’s negotiation strategy, administration of both vendors and clients, and management of the company’s internal resources.
- Operations Streamlining: Analyzing existing methods of doing things and figuring out more efficient ways of achieving the same goals is a significant time-sink that can, coincidentally, make the company less profitable.
From a business perspective, these stumbling blocks can seem impossible simply because of the form of the core concepts of a company’s procurement system. However, through the use of proper technology, a business can successfully sidestep these issues. Designing a modern-day procurement system that is both functional and efficient requires the company to adapt in two vital areas.
Look At the Business’s Procurement Processes to Optimize Them
When you initially designed your strategic plan, it was a rough series of steps that the company would have to go through to make their procurement process streamlined. However, within each of these steps, there is room for optimization. Utilizing procurement software will help this process measurably. Compatibility between formats used by different procurement management software has been an issue for a long time. However, advancements such as CXML has made life a lot easier for businesses that operate on different software systems to communicate effectively. Automatic optimization starts to occur once the software system has been implemented, and the staff is trained in its operation.
The implementation of software aids the business in several ways, including:
- using vendor feedback to develop stronger, more reliable relationships with them
- spend management and oversight, allowing the company to collect and analyze data regarding the levels of their spending
- informing personnel so that they can make the right decisions regarding renewals and cancellations
- more efficient acquisitions, with the business being able to leverage historical data to perform price comparisons, analysis of previous relationships, and ratings for each vendor, then using those to figure out where the company gets the best value for money.
A business that is seeking to reinvent its procurement management system needs to look at the act of procurement from a different perspective. By leveraging technological advances such as AI alongside spend data and analytics, a business can examine the viability of acquisition and discover opportunities that lay hidden within the data.
The focus is on combining a manual entry system alongside the use of AI for analytics. Spend data would take into account the volume of funds the company invests compared to what it receives but logging things like purchase order information and general ledgers. It would use verification through double-entry to ensure that the data entered is accurate. Key Performance Indicators (KPIs) such as risk ratings per supplier, spend per supplier, and average order value per purchaser can help the business rate their vendors. Arranging KPIs and using current and past data, the AI can then generate a best-case-scenario for each supplier, giving the business hard facts with which to back up its procurement decisions.
Is there any way that a business can make its procurement system so advanced that it never needs to be revamped? The Florida State University College of Business mentions that the process of procurement faces significant pressure to transform into something that embraces current and future technology. Implementing AI alongside existing methods of acquisition is a start, but a business has a lot more to do if it intends to future-proof its procurement system. Reinventing procurement management for 2020 heralds a change in attitudes towards transformative technology and should serve as a springboard to help companies realize the benefits embracing advances like procurement software offer. Whether there will ever be a way to dynamically adapt the act of procurement to existing market pressures is still unclear. What you should know is that if a method does come to light, it will hinge on the industry embracing new technology.