Demystify procurement efficiency and effectiveness with Spendflo in 2024

In 2023, The Hackett Group reported a 10.6% increase in global procurement needs, which reflects a growing demand for procurement professionals due to expanding business requirements. This rise in demand is also a response to productivity and effectiveness gaps of 7.4% and 7.8%, respectively.
Therefore, achieving superior procurement efficiency and managing the entire process without bottlenecks is a top priority. It can help organizations navigate time-consuming SaaS procurement cycles and reduce time spent on negotiation while securing excellent deals.

In this blog post, we'll explore procurement strategies and methods that will save resources and help you make better decisions in procurement.

Ways to enhance procurement efficiency and speed

Before we understand how to make procurement efficient and less time-consuming, let's highlight the fundamental aspect of procurement: contract management.

1. Contracts: The backbone of procurement

Contracts function as formal agreements between a company and its vendors. These define the mutually agreed-upon terms and conditions under which business transactions occur, setting clear expectations and obligations for both parties.

2. Why swift and smart contract management matters

Did you know that companies can waste up to 30% of their budget on SaaS expenditures and often spend approximately 3.5 hours per contract in purchasing, negotiating, and renewing subscriptions?

To resolve this, smart contract management becomes a cornerstone. It uplifts operational efficiency and strategic agility by streamlining processes. This enables quick finalization of critical agreements, reducing startup and operational delays. 

This approach not only curbs overspending through astute negotiations but also mitigates risks, ensuring legal and compliance safeguarding. Moreover, it fosters robust vendor relationships through clear communication and well-defined expectations while offering flexibility and scalability. 

Therefore, smart and data-driven contract management is a prerequisite for growth. Here are some benefits of efficient contract management:

• Defined responsibilities: Efficient contracts spell out who's responsible for what. This avoids confusion and disagreements.
• Time-saving: Fast contract management means businesses can finish agreements quickly. 
• Seeing clearly and staying in control: Procurement managers can see what's happening when contracts are managed well. They can quickly identify problems and make smart decisions to keep things running smoothly.
• Avoids overspending: Businesses might spend more than they should if contracts are improperly managed. Efficient contracts help control costs and secure better deals.
  

3. Digitizing contract management

Digitizing contract management involves using cloud-based tools for contract lifecycle management (CLM). This acts as a high-tech control center, bringing all SaaS and non-SaaS contracts to one platform.

This unified approach allows businesses to create, manage, and monitor the details of the contracts while making the most of resources. Here's how adopting a CLM can level up procurement efficiency:

• Streamlined Workflows: Digital CLM automates many aspects of contract management, from drafting to approval. This reduces the time spent on manual tasks, speeds up the contract cycle, and minimizes the reliance on paper-based processes.
• Enhanced Accessibility and Collaboration: With contracts stored in the cloud, stakeholders can access, review, and collaborate on documents from anywhere.
• Cost Reduction: Businesses can save on storage and printing costs by moving to a digital platform. This also reduces the need for physical infrastructure and resources.
• Improved Compliance and Risk Management: Digital contract management systems often include features that help in tracking compliance with legal standards and internal policies, thereby reducing risks associated with contract non-compliance.
• Data-Driven Insights: Digital CLM systems can analyze contract data to provide vital insights on spending, vendor performance, and contract lifecycles.
• Enhanced Security: Digital platforms typically offer advanced security features to protect sensitive contract data.

Four proven methods to optimize procurement efficiency

Here are some expert-recommended approaches that can help businesses boost procurement efficiency:

1. Embrace digital procurement

Transitioning manual business operations to digital procurement methods improves efficiency. An integrated cloud-based system unifies all procurement data, streamlining operational procurement and providing better cost visibility. 

Regular procurement audits within this digital approach ensure ongoing assessment and enhancement of the process.

2. Collaboration with vendors 

Effective procurement relies on solid vendor relationships. While sticking with the same vendor is convenient, companies must explore other options for better quality and cost-effectiveness.

Working with dependable vendors is crucial for consistent performance. To measure this, monitor these metrics: 

• Quality
• Vendor availability
• Delivery times

3. Enhance transparency 

Effective communication enhances supplier relationships and the productivity of internal teams. It prevents misunderstandings, saves time, and boosts vendor satisfaction.

This can be achieved by setting clear-cut objectives, routinely assessing performance, and promoting mutual understanding to enhance buying processes.

Integrating an intuitive procurement management tool improves operational efficiency with automation and ensures the timely delivery of quality products. In addition, this software comes with features like instant messaging and alerts for critical actions, contributing to transparent processes. 

4. Optimize inventory management 

Inventory management is integral to optimizing process efficiency. You need to develop a thorough plan to reduce unnecessary spending. 

Streamlining the procurement process helps businesses track inventory accurately and know when to reorder. Building a robust distribution network also allows for easier stock tracking across geographies. 

Steps involved in a procurement process

Now, let us go over the key steps involved in ensuring procurement efficiency and effectiveness:

1. Identify needs

Carefully evaluate each purchase request to prevent overspending. Continuous assessment of usage and user communication ensures alignment with real needs. An effective contract management system can streamline purchasing and ensure orders meet specific requirements, reducing waste.

2. Create purchase request

Purchase requisitions are written or electronic documents from internal users/customers seeking the procurement team's help to fulfill an existing need. It comprises information about what is needed, the quantity, and the purpose. 

3. Review request

The procurement process starts once the purchase requisition gets approval and a check confirms that the budget can cover it. During the review phase, heads of departments or functional managers examine the requisition package. They ensure that the request for goods or services is valid and check if the required funds are available.

4. Get bids

Once a requisition is approved, the procurement team develops a detailed plan and initiates the solicitation process tailored to the complexity of the requirement. Following budget approval, they issue multiple requests for quotation (RFQ) to vendors, allowing for evaluating and selecting the most appropriate vendor based on the bids received.

5. Evaluate and make contracts

After bidding, the procurement team evaluates vendors' quotes and delivery schedules to select the most suitable one. Once a vendor is chosen, contract negotiations are completed, leading to a legally binding agreement when the vendor acknowledges and accepts the purchase order.

6. Manage orders

The purchaser issues a purchase order to the chosen vendor, which can be based on a new contract, an existing agreement, or a list price. The vendor is then responsible for delivering the agreed goods or services within the set timeframe.

Upon receipt, the purchaser inspects the order and communicates with the vendor about any problems with the items delivered.

7. Approve invoices and resolve issues

After receiving goods or services, invoices are verified and approved. Any issues like quality discrepancies or delivery delays are addressed. This stage is crucial for ensuring that payments are justified, and any problems are promptly resolved.

8. Keep records

Following the completion of the payment process, purchasers document the transaction for accounting and auditing purposes. All relevant documents, from initial purchase requests to approved invoices, are kept in a centralized repository for easy access and reference.

AI-driven procurement process

Adopting artificial intelligence in procurement is transforming how companies buy things. Here are some key reasons why forward-thinking companies should leverage AI to boost procurement efficiency: 

1. Use AI to turn around contracts faster

Implementing AI in contract management speeds up the process significantly. AI algorithms can analyze and draft contracts, identify key clauses, and ensure compliance with legal standards. This reduces manual workloads and accelerates contract finalization, leading to more efficient and timely procurement processes. 

Flo AI, the AI-driven automation assistant offered by the SaaS procurement and renewal solution Spendflo, streamlines procurement workflows quickly. With intelligent automation at every stage of SaaS buying, it ensures up to 30% savings, delivering a solid 3X ROI by analyzing spending data.

2. Accurate pricing and product data mapping

AI excels in accurately mapping and updating pricing and product data. It can analyze market trends, compare vendor prices, and update procurement databases in real time. 

As a result, the company has constant access to the most current and accurate pricing information. It helps in making data-backed decisions during procurement.

3. Accelerate procurements with a co-pilot 

AI also acts as a digital co-pilot in procurement, automating routine tasks, offering predictive insights, and suggesting optimized procurement strategies. It can process vast amounts of data to forecast supply needs, indicate best-fit suppliers, and predict potential disruptions. 

Promote procurement efficiency with Spendflo's AI engine

Spendflo's integration of AI into the procurement process is a significant accelerator. By automating tasks, extracting contract data, and providing valuable insights, Spendflo streamlines procurement operations. 

This unified cloud infrastructure and SaaS management approach in one platform streamlines processes, reducing costs and improving contract visibility. 

To know more, you can get your free saving analysis with us today!