In most organizations one way to gain more profit is by reducing expenses and increasing savings. How can organizations reduce expenses incurred when purchasing events? This article also looks at how an organization can makes savings through procurement and the importance of digitizing the procurement process.
In the contemporary world, more organizations are realizing that they are spending a lot of money on procurement. These developments are a result of the need to outsource and cater to things like insurance, business travel, marketing and communication as well as event. The fact that the procurement department has added responsibilities in a company means that it requires good management in order to make savings.
How procurement helps make savings
One way in which procurement reduces expenses is through the reduction of maverick buying (where employees buy good/services for the organization without following the proper channels). Studies have shown that for large companies a reduction of between 5 - 10 per cent could lead to significant amount of savings (millions of dollars). In order to minimize maverick buying organizations need to train the staff on the importance of abiding by the purchasing policy in order to reduce excessive spending.
The procurement manager also needs to ensure that only the necessary products are purchased in order to avoid making losses and analyze what supplier is offering the required goods. It’s advisable to use one supplier to provide various goods and services. Organizations which opt to buy more products from a supplier usually get higher discounts hence more savings.
Benefits of digitizing the procurement process
Technology makes work around us easier. Almost every industry has inventions or innovations which improve efficiency of its operations. In the past, the procurement manager had to deal with lots of paperwork, errors and unnecessary costs. Digitization solves all these problems. There is a misconception that e-procurement is complex and exposes the organizations’ data, but in reality it has many advantages. One is transparency. The electronic system enables the procurement department to analyze the procurement system to ensure that the company’s policies are adhered to. It also saves time on an operational level which means increased productivity, for instance the availability of templates reduces paperwork. The digital process is a great time-saver. It simplifies and hastens the purchasing and transaction process and also improves communication with the suppliers. This allows the organization to focus on other productive activities. Companies should embrace e-procurement because it produces results.