Recent years have exposed weak points in the corporate procurement process. Supply chain disruptions have prompted many business leaders to look for ways to streamline their procurement procedures to save time and money while retaining access to their deliverables. Here’s what CFOs and controllers should know about how to streamline procurement.
Strategic Sourcing
Financial leaders can start by thinking more strategically about their procurement process. This can involve multiple aspects of the supply chain, ranging from inventory management to your supply network. This strategy is invaluable during supply chain disruptions and keeps companies resilient regardless of prevailing economic conditions.
Inventory Management
First, CFOs can institute inventory management processes that monitor a company’s current and projected needs. Not only does this prevent companies from running out of their inventory, but it will also ensure that you optimize your ordering processes based on past sales cycles. By doing so, you’ll also use your physical warehousing and storage space more efficiently rather than stockpiling unsold products.
Diverse Supplier Network
The efficiency of your procurement process depends largely on your supplier network. CFOs can streamline their procurement process by diversifying their supplier network.
Suppliers with distribution centers or warehouses in your area make convenient choices since their proximity reduces the time and cost of transportation. But finding vendors in multiple locations (even around the world) can ensure that you keep your supply chain moving even if one supplier fails to come through or there are regional disruptions.
Market Research
Don’t neglect the influence of external data on your procurement process. Industry and consumer trends might prompt you to increase your stock of certain items or even look for new product lines that might appeal to changing consumer needs. With the right research, you can make sure you stock up on the latest products before the demand drives up their prices.
Supplier Relationship Management (SRM)
Supplier relationship management (SRM) strategies empower your business to continually evaluate current and prospective suppliers. CFOs can give shape to this process by:
- Developing a standardized onboarding process for new suppliers
- Evaluating the track record of a particular supplier
- Determining the best ways to partner with a supplier
- Assessing and reviewing supplier relationships
- Negotiating new contracts and terms with current suppliers
- Comparing contract terms across suppliers
CFOs can tap into SRM software that puts key data right at your fingertips. Some providers can integrate with your company website, providing an opportunity for new suppliers to send you proposals and bids. CFOs can screen new suppliers and evaluate the performance of current supplier relationships to maximize the efficiency of their procurement strategy.
Procurement Software
Procurement software can help you standardize and centralize the procurement process. The most immediate benefit is that you can rely on teams to execute and manage the procurement process without the input of a CFO. Many software platforms also allow the creation of recurring orders and electronic payments to keep your AP processes running smoothly.
As a result, CFOs and other financial leaders gain greater visibility into their procurement operations, all while saving time and reducing errors. CFOs can also use this software to monitor the process through a centralized dashboard, which allows users to assess the ROI of varied suppliers.
Supplier Negotiation Techniques
CFOs can improve their procurement and AP processes by negotiating with suppliers to secure the best rates. Here are some tips for negotiating with your suppliers to find the best terms.
Build a Rapport
Negotiations are built on strong relationships. By nurturing supplier relationships, CFOs have more bargaining power, especially if they partner with the same supplier long-term.
Use Multiple Suppliers
Tapping into multiple suppliers prevents you from being captive to the terms of any one vendor. Having a diverse supplier network allows you to select the most affordable option, and it can even be used as a bargaining tactic when negotiating lower prices.
Stay Flexible
Set clear expectations, but don’t grip them so tightly you’re not willing to make compromises. Staying flexible during the negotiation process will allow you to consider alternative solutions. It can also give you the confidence to walk away if a supplier isn’t meeting your needs.
Meet the Vendor’s Needs
You may find more traction if you can identify and meet your supplier’s needs. Active listening can help you pinpoint your supplier’s priorities and concerns. Perhaps if you agree to a high enough volume to satisfy your vendor, they’ll be more willing to extend a discount.
Improving Efficiency Across the Organization
These tips and strategies can keep a company’s procurement and AP processes aligned with its goals. CFOs and other financial leaders can guide the process based on past and present data. By tapping into new technologies, CFOs can save their companies time and money while gaining insight into how their purchasing processes impact the bottom line.
