A Brief Overview of Procurement Benchmarks
Procurement benchmarks are an effective way to measure the performance of your procurement organization and see how it compares to similar organizations and departments. These assess the efficiency, effectiveness, and overall impact of everything related to procurement, such as total cost of ownership, stakeholder satisfaction, and process velocity. By comparing your organization’s performance against these benchmarks over time, you can identify gaps and inefficiencies and continuously improve your procurement functions.
Common Procurement Pain Points That Indicate It’s Time for an Evaluation
How do you know when it’s time to elevate your procurement strategy? Many procurement departments deal with similar pain points, all of which indicate they need procurement optimization. Explore some of the most common issues below.
Lack of Visibility
If you’re unable to track the interplay of people, processes, and technology within your procurement department in real time, you won’t be able to remediate the inefficiencies that occur between them. In addition, a lack of visibility makes it challenging to track spend and make strategic, informed decisions regarding your procurement management.
Inefficient Procurement Functions
If it feels like you’re spending excess time, money, and resources to source, evaluate, or negotiate with suppliers, your procurement functions are probably inefficient compared to standard procurement benchmarks. Other issues may include needing to track changes manually or spend too much time on data entry.
Excess Maverick Spend
If you’re seeing more and more unplanned spend, it’s a clear indication that procurement policies and processes are not working as intended. Maverick spending is often a sign of poor budgeting and internal inefficiencies. To curtail it and ensure higher value for your money, you need to reevaluate your procurement strategy.
Missed Opportunities for Cost Optimization
If your organization is missing out on potential cost savings or other benefits because you don’t have clear insight into market trends, an in-depth review of your procurement strategy can help you identify lost opportunities and how to capitalize on them.
Poor Data Quality
Data is the driving force of many procurement functions. Without clear, accurate data, your procurement team is unable to make informed decisions. This can affect spend, efficiency, and even supplier relationships.
Unclear Roles and Responsibilities
Without clear roles and responsibilities for each participant in the procurement process, it can lead to confusion or delays in decision-making, which could negatively affect overall performance. Establishing well-defined roles and responsibilities helps ensure clarity.
Suffering Supplier Relationships
If the same problems keep arising in your vendor negotiations, it’s time to take a closer look at how you’re managing these relationships. For example, if you constantly have to renegotiate supplier contracts or deal with late deliveries, it’s a clear sign that your supplier relationships need to be addressed.
Transform Your Procurement Department with a Comprehensive Assessment
Dealing with one or more of the procurement pain points described above? By comparing your organization to key procurement benchmarks, Velocity identifies your capabilities and opportunities for growth so you can continuously improve your performance.Explore Our Procurement Assessments
Which Procurement Optimization Strategy Works Best for You?
When it comes to procurement optimization, many organizations struggle to decide whether to engage in a self-assessment or third-party evaluation to compare themselves to procurement benchmarks. Both provide crucial insight into your performance, so what’s the difference?
A self-assessment involves an internal review of all of the elements that make up your procurement system, such as policies, procedures, supplier selection criteria, communication, and more. Typically performed by stakeholders and decision-makers, self-assessments are a great way to identify pain points in your current system and find ways to improve. However, they may be biased, making it difficult to gain a clear understanding of your system.
Third-party evaluations offer an objective approach to procurement optimization. However, many organizations think that reaching out indicates a failure on their part. In reality, a third-party assessment provides you with the greatest opportunity for growth. Procurement professionals take an objective look at your operations and offer valuable insight into how they can be improved. They help you compare your performance to industry procurement benchmarks so that you can improve efficiency, cut costs, and continuously improve your operations.
How to Improve Your Procurement Process
Once you’ve identified your pain points and gone through a comprehensive procurement assessment, it’s time to get to work. Here are a few critical steps you need to take in order to improve your procurement process.
- Develop a procurement strategy that aligns people, processes, and technology with your overarching business goals.
- Thoroughly evaluate vendors before forming a partnership.
- Implement automation to streamline repetitive tasks and eliminate human error.
- Regularly review performance metrics and KPIs to track progress and adjust course as needed.
- Track spend closely to ensure your budget is allocated appropriately.
- Analyze procurement-related data to gain deeper insight into your operations.
- Foster collaboration between different teams, departments, suppliers, and other stakeholders
Elevate Your Procurement System With Velocity
Ensure your processes keep up with procurement benchmarks by partnering with a dependable provider like Velocity Procurement. We strive to help businesses evolve their people, processes, and technology so they can establish cost-effective, efficient processes and become leaders within their industries. Contact us today to learn more.