How to apply a procurement strategy with vendor management software

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How to apply a procurement strategy with vendor
management software

• by eplatformtech 

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• Vendor management software  Well-conceived
  procurement strategies are key to creating a
  reliable, cost-effective and resilient vendor
  base for your businesss most important areas of
  spend. There are different choices to be made
  when it comes to the approach with supplier
  optimisation, risk mitigation and cost reduction
  often being the main priorities.
• Creating a procurement strategy isnt just a
  one-off task. It requires dedication and
  meticulous planning from the outset and evolves
  as the vendor base matures and the business
  grows.
• A universal procurement strategy will require
  multiple iterations as you look to stay ahead of
  your competitors and to get the best value at all
  times.
• In this article, we take a look at how you can
  create and apply a coherent procurement strategy
  and how vendor management software can support
  your approach.

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What Is A Procurement Strategy?

• Put simply, procurement is the action of
  obtaining or procuring something. For your
  business, procurement means obtaining services or
  goods that are relevant to its overarching
  objectives, internal requirements or customer
  needs. A procurement strategy needs to be aligned
  with the businesss overall objectives.
• A procurement strategy is an organisation-wide
  effort and requires collaboration between the
  leading Procurement Team and other departments
  such as Legal and Finance.
• The purpose of the strategy whether its to
  streamline the supplier base, minimise levels of
  risk or save costs should be agreed and
  understood between teams at the outset for a
  robust and coordinated approach.

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What Should Your Procurement Strategy Include?

• Regardless of the ultimate goal behind the
  procurement strategy, there are a number of
  common factors every process should have whether
  youre starting from scratch or looking to
  optimise your current process. These include
• The overarching business objectives that need to
  be achieved
• Deliverables (goods or services) that are needed
  to achieve these goals
• An understanding of current organisational spend
• Awareness of current operating conditions, trends
  and expected outlook
• The means to conduct market research
• A reliable RFP process
• A defined set of KPIs to measure various aspects
  of vendor performance
• Risk mitigation plans
• Regular reviews of the strategys effectiveness

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• Data collection and market analysis will be key
  to informed decision making across the supply
  chain and will require input from a variety of
  teams and stakeholders. Resources will be needed
  to complete market research, make comparisons
  between different vendors and collect vendor
  information for any evaluation to take place.
• Once vendors have been selected as part of the
  procurement process, cost and KPIs need to be
  negotiated and agreed.
• There are a number of things your business needs
  to do once services have been procured and vendor
  management software can support your business
  through each stage.
• Lets take a look at how.

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1. Create A Central Record Of Vendors And
Contracts

• The ability to apply a successful procurement
  strategy across your business relies on a deep
  understanding of current relationships, current
  spend and any gaps in services or goods. By
  creating a central record of vendors and
  contracts you can minimise the potential for
  business risk and delinquent spend.
• Vendor management software offers a central
  repository that makes it easy to access all the
  information you need from a single location,
  increasing your visibility of the contract
  portfolio and each of your vendors.
• With this centralised view, you can more easily
  spot any potential issues such as unplanned
  duplicate spend or insurance certifications that
  are coming up for expiry and act quickly.
• A complete understanding of your vendors, their
  risk status and upcoming key dates will underpin
  stronger relationships and a more sophisticated
  strategy for maximising value across the supply
  chain.

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2. Optimize Collaboration With Third-Parties

• The way you onboard, communicate with and manage
  your vendors will have a defining impact on the
  quality of the relationship moving forward.
  Dedicated software that includes a Vendor Portal
  creates greater efficiencies for your business
  and a streamlined experience for your vendors by
• Automating vendor onboarding and compliance
• Accurately building vendor profiles through data
  capture
• Capturing all relevant information in a desired
  format
• Notifying vendors when they need to update
  information
• Creating a fully defensible audit trail of all
  communication with vendors
• Digitising your procurement processes at every
  stage from RFPs to renewals.
• Using vendor management software to automate and
  optimise your collaboration with third parties
  will reduce manual errors, save your internal
  teams valuable time and allow your business to
  make informed decisions with your vendors based
  on accurate information.

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3. Minimise And Mitigate Risk

• If your approach to vendors is fragmented, you
  are exposing your business to numerous risks
  including financial, regulatory and reputational.
  Fragmentation can ultimately lead to chaos within
  your business and within your vendor
  relationships, causing different scenarios such
  as
• Missing documentation that leads to
  non-compliance
• Lack of awareness around poor vendor performance
• Unfulfilled contract obligations going unnoticed
• Poorly timed escalations that can lead to
  operational failure
• A lack of audited history evidence to help
  resolve disputes
• Poor user and vendor satisfaction
• Ineffective business continuity planning.

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• An effective procurement strategy means taking
  control of data, centralising your information
  and standardising your processes. Vendor
  lifecycle management software can eliminate the
  chaos by helping you to visualise and automate
  even the most complex processes through a
  dedicated workflow engine.
• This level of automation gives you greater
  control at every stage, enhancing the risk
  mitigation efforts within your procurement
  strategy through escalation workflows that
  trigger exactly when you need them to.
• One way to trigger escalation workflows to help
  you mitigate risk is to assign a Risk Score to
  each supplier. Calculated from the probability of
  events happening and the impact it will have
  across your business, a high risk score can be
  used to automatically trigger escalation and help
  you to put your mitigation plans into action.

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4. Measure Performance

• Successful procurement strategies are ones that
  keep monitoring and measuring the success of the
  vendors involved. Before onboarding vendors, a
  set of KPIs should be defined that they can be
  continuously measured against.
• A performance review should occur at a frequency
  commensurate with the vendors importance such as
  once a quarter up to once a year, but how do you
  plan for the time, the workload and the resource?
• Vendor management software can be used to
  streamline this review process as well as provide
  an accurate up-to-date snapshot of how your
  vendor is performing through Balanced Scorecards,
  data-driven dashboards and automated performance
  tracking.
• Not only can you measure, collect and analyse
  data about your vendors performance, but you can
  also share this information with them. This in
  turn helps drive corrective actions to improve
  areas of weakness.
• By using vendor management software to support
  your procurement strategy, not only will you
  drive better performance across your supply chain
  but you will also be able to hold your vendors to
  account, extract maximum value and increase ROI
  across your business.

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5. Assess Vendor Spend

• Hidden and indirect spend are two areas that
  commonly weaken a procurement strategy and drive
  costs up across a business.
• Its crucial to understand the spend culture
  across your organisation and adjust vendor spend
  accordingly. Spend analysis can help you to drill
  down into business-critical issues such as
• What forecast vs actual spend is
• How direct spend vs indirect spend is impacting
  your business
• If there are multiple vendors supplying the same
  goods or services
• Cost differences between multiple vendors
• The true cost of third-party expenditure
• Vendor management software will give you a
  centralised view of this essential information
  and help you to automate your processes around
  spend capture.

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6. Manage Renewals And Negotiate Effectively

• Spend analysis and negotiation go hand-in-hand
  and can help you to streamline your supplier
  base. By analyzing your spend, you can use the
  information gathered such as the ongoing value
  of the contract to strengthen your negotiating
  position to achieve better terms ahead of
  renewal.
• Spend analysis can also be a key factor in
  deciding whether you do decide to renew or if
  close-out is simply the more cost-effective
  option for your business.
• There are some key steps you need to build into
  your procurement strategy so that you can
  effectively manage your renewals and reach a
  powerful negotiating position
• Record key dates centrally
• Build in time for a contract review
• Have a clear strategy for engaging your supplier
• Determine if expected benefits and
  value-for-money have been achieved.
• A successful procurement strategy will open up
  opportunities to realize greater value and
  results for existing vendors within the portfolio
  and to identify cost-effective alternatives
  available on the market.

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• Procurement should focus on obtaining the desired
  quality and value goods and services at all times
  not just at the start of a relationship.
• Use vendor management software to optimise this
  process with automated alerts ahead of key dates
  so you can understand the current value being
  delivered by third parties and make renewal
  decisions ahead of time. Pre-emptive action will
  mean you never miss another renewal opportunity
  again.
• You can learn more about building renewal
  processes into your procurement strategy by
  watching the webinar below

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Conclusion

• Procurement strategies should be applied after
  careful consideration and with business structure
  and goals in mind. Acknowledging that procurement
  is an ongoing process rather than an activity
  that ends at the point of contract initiation
  will help you to better align different
  departments across the business and improve
  collaboration with third parties. Investing in
  a vendor management platform can support your
  processes. 
• Eplatform Tech helps businesses to identify
  cost-saving and performance improvement
  opportunities, and helps them to better manage
  their renewals and negotiations. This means
  business can minimise risk, maximise value and
  yield the benefits of deep, collaborative
  relationships across the supply chain.
• If you want to know more about how vendor
  management software can support your procurement
  strategy, book your Eplatform Tech demo today.

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