A Guide to Procurement Best Practices Benchmarks

A Guide to Procurement Best Practices Benchmarks

Organisations should be constantly looking at how to improve. A great way to see how your organisation can improve is by understanding the best practices to follow . At times, altering your organisation  can be a challenging  process, which is why our guide has been developed to help make it much easier.

eXceeding is a procurement consultancy that was founded on the principle of providing impartial, best practice, procurement advice to organisations of all shapes and sizes. Working with both the public and private sector, eXceeding has years of experience in delivering procurement solutions to the marketplace.

In this guide, we will cover  the best practices for your procurement team to follow, how to use benchmarking, and the results you should expect.

What are Procurement Best Practices?

Best practices are defined as a set of guidelines and ideas an organisation should follow to garner the most efficient and effective results. In terms of procurement, it’s important to work out which practices are most suited to your organisation. When collaborating  with suppliers and managing  each part of the busy supply chain, there are many best practices procurement teams can follow.

Some examples of the best procurement practices include the following:

• Optimising supply chain communications – establishing strong relationships with your supply chain will always have a positive impact. Effective communication will also lead to better results and minimise human error.
• Automate manual processes – automating processes will save the procurement team time and reduce human error in comparison to executing the process manually.
• Improve collaboration with critical suppliers – a close connection with your most important suppliers will lead to possessing more negotiating power regarding price and timeframes.

What is Procurement Benchmarking?

The focus of benchmarking the procurement process is to measure its current results and see how they can be improved. By looking at the best practices, an organisation can evaluate the process, procedures, and policies they have in place. Benchmarking first starts when an organisation sets a baseline from its current performance, which can then be used to see how it compares to its competitors or peers.

Standardised benchmarks for an internal review will evaluate all the following areas:

• Cost effectiveness
• Staff productivity
• Process efficiency
• Cycle time
• Quality

Effective procurement teams also set benchmarks to evaluate their suppliers’ performance. These benchmarks will look at the following areas:

• Average supplier lead time in days on purchased materials
• Percentage of supplier on-time delivery
• Quality vs cost
• Comparative market data

With thorough evaluation and benchmarking of the above areas, a procurement team can understand which areas need to be improved. Looking at internal and external factors allows an organisation to evaluate where to implement new procedures, where they need to negotiate with suppliers, or run procurement processes.

How Benchmarks Enhance Procurement Performance

As previously stated, benchmarking is there to help evaluate procedures, policies, processes, costs and supplier performance. This helps an organisation understand what they can improve and enhance. By identifying the root of any issues in the procurement process, it becomes easier to make improvements and refinements.

Through the benchmarking process, procurement teams will look to gain an understanding of what other organisations and peer do and look at alternative supplier cost data. This enables them to see what they might be missing or find pre-existing processes that may benefit the organisation.

An organisation should also look towards their customer base to see where enhancements can be made. Seeing how they meet customer expectations will help identify any areas within their supply chain that can be improved.

Benchmarking is there to facilitate enhancements and, by constantly evaluating and updating them, processes can be improved. The roles of improvement, monitoring, and evaluating are perpetual, because markets, organisations, and customer needs are ever-changing. Benchmarking is what can help procurement teams to meet these changing, difficult objectives with ease and success.

Top 10 Procurement Benchmarks

There are many KPIs and benchmarks a procurement team can choose from. So, we have narrowed down 10 of the most important benchmarks to help your organisation evaluate their processes:

• Spend Under Management
• Total Cost Savings
• Procurement ROI
• Cost Avoidance
• Implemented cost savings
• Procurement Cycle Time
• Percent of active suppliers accounting for 80 percent of total spend
• Contract Compliance
• Quality
• Delivery

In Summary

Every organisation should be putting best practices and benchmarking in place for your procurement team. By making improvements to your processes, it allows your company to better meet and hopefully exceed your customer and stakeholder expectations. Best practices are there to help you thrive and improve in every way possible, so it’s time to embrace them!

At eXceeding, we  help organisations enhance their procurement processes. By implementing the best practices and tailored strategies, we not only deliver cost savings, but also create a streamlined process to save  your organisation time. With over a decade of experience helping organisations such as CRFCA, ICAEW and WorldRemit  improve their procurement strategies, we’re confident we can help you achieve your goals. So, why not get in touch?

Check out our procurement ebook for more information about procurement best practices and how we can help deliver value to your organisation.