3 Procurement Best Practices You Should Be Following

As the roles and functions of purchasing departments develop, procurement best practices have to evolve to take these changes into account. Procurement used to be heavily focused on cost containment, whereas now it plays a much more wider role. But nowadays, purchasers are responsible for quality sourcing, cost control, stock management and building relationships with key suppliers. As such, they are an integral part of a company’s success.

Boosting procurement performance will improve the overall productivity of your business. That’s why we’ve put together this list of procurement best practices for you.

1. Form strategic supplier partnerships

The key to successful procurement is to form strategic partnerships with suppliers. Strategic partners are those with which you build a mutually beneficial relationship. These partnerships tend to develop over time, and require genuine, conscientious effort from both parties. The important thing is that both sides understand the needs and limitations of the other, and work together to overcome challenges. In short, they share a common goal – to maximise productivity and gain maximum value.

Although these relationships take time and effort to build and maintain, they are critical to the success of the procurement department. So, how can you establish strong strategic supplier partnerships?

  • Ensure the vendor shares your vision and values
    • Aligned values are the foundation for a strong, long-term relationship
  • Share planning of key activities, resources, responsibilities, etc.
    • Mutual planning ensures both sides are on the same page and prevents any misaligned expectations arising
  • Maintain open communication
    • Structured, transparent communication allows for genuine collaboration and helps to minimise risks

procurement best practices

2. Employ smart supplier relationship management

The best procurement professionals understand that supplier relationships do not end with the signing of a contract. On the contrary, they know that that’s where they truly get started. For that reason, supplier relationships management (SRM) is a vital part of procurement success.

By dedicating the necessary time to fostering and nurturing these key relationships with their suppliers, purchasers will reap the benefits down the line. Those companies who employ smart SRM practices often find that they see overall improvements in key areas, such as:

  • Cost control
  • Stability
  • Innovation
  • Continuous improvement
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An easier way to manage multiple supplier relationships from one place is by using Contact Relationship Management (CRM) software. This helps procurement departments to build a centralised database of company suppliers. Some CRM softwares are tailored for procurement departments, like Xpo-Online‘s Supplier CRM, and will let you monitor supplier performance, record vendor offers, contracts and contact details, and much more. Click here to give it a try – it’s free and easy-to-use.

 

3. Actively manage supply risks

Unfortunately, losing one key supplier can be highly detrimental to a business. That’s why robust risk management is a key procurement best practice.

In order to manage risk as effectively as possible, the key steps to follow are:

  • Risk identification – establish all risk elements that may arise
  • Probability assessment – determine the likelihood of risk elements occurring
  • Potential cost planning – assess and prepare for the potential costs that will arise if risk elements occur
  • Prioritisation – prioritise risks for monitoring and prevention

More often than not, risk management goes hand-in-hand with clear policies and plans. By doing so, you’ll be able to ensure minimum detrimental impact. For example, purchasing departments should be prepared with back up suppliers in case of default by their usual supplier. This is another instance in which making use of CRM software for supplier relationship management is useful. Don’t consider your Supplier CRM as only for current suppliers – make use of it for potential new suppliers and backup suppliers, too.

 

We’d love to hear your opinions – let us know your thoughts in the comments section below.

 

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