Most organizations have a robust and dedicated direct procurement process. However, indirect procurement is often unstructured and overlooked – it can silently and pervasively erode the organization’s finances and affect the bottom-line. It has been observed that, improving indirect spend efficiency can help an organization save up to 25 percent.Traditionally perceived as a fixed expense, indirect procurement needs to be transformed into a sophisticated, organization-wide, data-driven process that can drive cost savings and help an organization achieve higher efficiencies. Here are three best practices that can help in managing indirect procurements efficiently:Implement Strategic SourcingStrategic sourcing involves understanding the buying process through fact-based analysis. It takes into account the total cost of ownership as opposed to only the purchase price and thus improves the overall spend efficiency.
Procurement specialists use the vendor information obtained through strategic sourcing and implement standardized vendor contracts across the organization. The overall savings are improved by limiting transactions with preferred suppliers. In addition, you can leverage the purchasing power of your organization to negotiate best value for your procurements.Through strategic sourcing, you can define the rules to validate purchases, set buying limits across the organization, and move to a purchase order based system. This ensures that all the purchases are monitored and only the requisitions falling within the pre-defined budget are approved.Ensure ComplianceOnly by checking vendor compliance can organizations gain from the negotiated terms. It ensures that all the purchase requests made under various categories are delivered as per the terms negotiated in the contractual vendor agreements. This allows the “negotiated savings” to be translated into “realized savings”.In addition, compliance enforcement helps in minimizing exposure to legal complications and financial risks. In case of non-compliance, the vendors can be held accountable for losses and credit can be recovered as per the contract.Enable Source-to-Pay AutomationEnabling source-to-pay automation optimizes an organization’s indirect procurement process. The automated system employs sophisticated analytics, technology and processes to enable strategic sourcing and improve compliance at every level of the enterprise spend system.
With such an integrated system you can, collaborate spend data, automate purchase and extract vendor invoices in e-format in a systematic and regular manner without administrative intervention thus, minimizing human-error and reducing the use of paper. The automated process is data-driven, intuitive and enables improved user adoption while offering real-time spend visibility and insights about the organization-wide spending pattern. This enhanced, fact-based spend visibility enables improved compliance, empowers your organization with predictive analysis, and provides insights into market intelligence factors that can be used to access new savings opportunities.