5 Best Practices for Procurement in 2023 – SAP Business One

Procurement involves the sourcing and obtaining of goods and services from suppliers to carry on the productive activities of a business. The goal of every purchaser is to acquired quality goods at a reasonable price in the quantity and time it is required.

An efficient procurement process not only streamlines your employees’ tasks, but also enhances visibility into your suppliers’ performance and cost-benefits analysis, empowering your procurement team to make the best decisions to maximise profitability.

Here are the 5 best practices for procurement in 2023:

1) Put in place a well-defined procurement process.

The greatest obstacle to an efficient procurement workflow is when there is lack of a clearly defined process. This causes inefficiency as employees face difficulty coordinating purchase order approvals for material procurement or for internal usage.

A complete procurement process should specify the following:

• Inventory quantity management – for example, the Maximum Quantity and Minimum Quantity for each inventory item. If any inventory item exceeds maximum quantity, purchases for the inventory item should be blocked or only allowed to proceed with approval. If any inventory item falls below minimum quantity, sales transactions should be paused and an alert should be triggered to reorder inventory.
• Approval routing levels and sequences, from purchase requestors to approvers.
• When to trigger purchase approval routing according to internal controls, for example Item Code, Order Quantity, Total Item Amount or Total Purchase Order Amount.

 2) Monitor supplier performance to ensure that they are meeting your requirements. 

The objective of your procurement team is to procure the correct inventory at the best price, without compromising on lead time and product quality. 

Hence, it is recommended to carry out a performance review of your suppliers at least annually to evaluate them on key performance metrices such as On-Time Delivery Rate, Rejection Rate and Cost-Effectiveness. If there are aspects of your supplier’s performance where improvements are required, you may need to raise their attention to these areas. 

3) Streamline bulk purchase contracts as much as possible. 

To streamline procurement, you may have a purchase contract with your supplier in which the contract terms such as Contract Period, Inventory Items, Quantity and Inventory Price are negotiated in advance. Additionally, some suppliers offer a discount or rebate to their customers for achieving a set purchase quantity and these benefits should be tracked and recorded for audit purposes.

Therefore, it is critical that everyone in your procurement team is aware of the blanket agreements in place with your suppliers, the conditions to meet for a supplier discount, as well as when contracts are nearing a renewal so that they have ample time to renegotiate the blanket agreements with your supplier. 

4) Intelligent reporting dashboard analytics for higher efficiency and shorter response times. 

We have so far provided several suggestions on how you can optimise your procurement process above – while certain optimisations can be implemented manually or with a simple accounting system, it can be difficult and time-consuming to track inventory analytics and order statuses in real-time. 

A fully integrated ERP system such as SAP Business One integrates data across every business function from sales, purchases, inventory, logistics and finance to give you a complete operational overview of your business as well as real-time order statuses and analytics. 

In addition, the HANA version of SAP Business One comes in-built with an interactive dashboard to provide users with timely and clear data visualisation of their most important tasks and metrices. Users can add a variety of dashboard widgets to configure their own dynamic dashboards, as well as interact with widgets – hovering over data points reveals additional information instantaneously, while clicking into them enables the user to easily drill into and access related transactions. 

5) Set up procurement automation mechanisms to automate ordering processes. 

We have come to our last point – after all, there is a significant increase in efficiency when your users move from performing a task quickly to automating the task as much as possible. 

In addition to the standard procurement features and analytics, SAP Business One comes with these value-added features to automate your procurement process:

• Inventory Forecast and Materials Requirement Planning
  Based on your existing inventory levels, historical sales data and ongoing sales/purchase transactions, SAP Business One is able to forecast the quantity needed and required date for the inventory item and therefore trigger a Production Order, Purchase Order or Inventory Transfer Request to best match your lead time requirements. 

 

• Automated Approval Routing
  SAP Business One automatically routes purchase transactions to the specified parties and management levels for approval according to set configurations in purchase transactions, such as Item Code, Order Quantity, Total Item Amount or Total Purchase Order Amount. This reduces manual work substantially as your users need not manually qualify and follow-up personally for each purchase transaction. 

 

• Purchase Quotation Generation Wizard
  If your business involves a high volume of SKUs, it can be time-consuming and error-prone to duplicate purchase quotations for different vendors to shortlist their best offer for conversion into a purchase order. With the Purchase Quotation Generation feature in SAP Business One, your users need only input the Inventory Code, Item Quantity, Required Date, Vendor Selection and the system will automatically send emails to vendors to ask for their sales quotation. Once your vendors submit their sales quotation information, the data is sent back to your SAP Business One purchase quotation automatically for your procurement team to finalise the best offer. 

 

• Blanket Agreements 
  SAP Business One supports Blanket Agreements for your bulk purchase contracts – you can indicate contract terms such as Contract Period, Inventory Code, Quantity and Item Price in the system, and these prices will be automatically reflected in your purchase transactions. Additionally, SAP Business One sends an automated alert to your users before the blanket agreement expires, so that your team can contact your suppliers for a renewal. 

These procurement features are just one aspect of the variety of features in SAP Business One amid other modules such as financial, sales, manufacturing, project cost management and service/repair– to find out more about how SAP Business One can optimise your organisation’s specific workflow and operations, contact our team for a no-obligations discussion.

Related topics:

• See further information on Inecom’s PSG Packages for SAP Business One.
• Sign up for our upcoming webinar on 21st June 2023 (Wednesday), ‘SAP Business One for SMEs and automation of tasks’.