Best procurement practices

There are 4 procurement practices that I have found in companies that have managed to implement a stable purchasing operation fully integrated with the operation.

Procurement framework

Before you can begin to address any inefficiency in your procurement process, you need to establish a strong procurement management framework. Take in consideration the following issues.

• Define strategic procurement policies: Your procurement/Purchase policies should focus on optimizing the ROI of your purchases, optimizing the cash flow cycle and must be aligned with your company’s mission.
• Constantly monitor and update your supplier lists: Make sure your existing suppliers information and conditions are updated and keep looking for new and alternative vendors.
• Have simple but robust procurement agreements: Make sure your agreements cover all risks and clearly state the quality required of vendors.
• Define your strategic Procurement KPIs: Evaluate your supplier performance of regularly and make sure they add value to your operation.

. Centralize your purchases

The worst thing you can do when coming to purchasing is have purchases silos. I have seen this mainly in large companies where category buyers report to different departments. This usually results in multiple procurement policies, duplicate purchases, and mixed information.

Focus on the management of the Inventory

Keeping inventory at an optimal level is an essential practice. Planning purchase quantities to minimize product expiration, while delivering on customer expectations, is game of careful balancing. Your inventory should rotate smoothly and regularly, lowering overall risk and unnecessary expenses.

Use the right technology

Technology and automation is a most in any distribution operation and purchasing must be part of the system.

Have a system to manage changing reorder points

In other articles I have written about how a buyer needs changes depending on the time of the year or external events. Most companies base their purchases on fixed max-min values; thus, when peak demands come, they are unprepared, leading to dissatisfied customers and loss of sales.