Tune-up your procurement operations in 2024

Procurement operations drive effective business function by sourcing and managing various company needs, from office supplies to raw materials. A dedicated procurement team working with relevant stakeholders to achieve strategic sourcing is fundamental to a smooth-running and profitable organization.

The procure-to-pay process is far more complex than first meets the eye. Take the procurement operations for a 3D-printing startup. Business needs would include machinery, filament for printing, sophisticated CAD software, and a warehouse from which to operate, alongside an entire SaaS stack for marketing, workflow management, sales, security, enterprise resource planning (ERP), and more.

A procurement department’s work doesn’t end at sourcing these requirements. Procurement operations include initial stages like market research and competitive bidding alongside later initiatives to monitor supplier performance, spend analysis, and risk management using key performance indicators (KPIs).

Team members must understand the lifecycle as largely iterative: a continuous pursuit of cost saving, workflow optimization, and increased ROI. Effective procurement operations significantly improve an organization’s bottom line – it’s the indispensable fuel and engine behind the machine.

What is operational procurement?

Operational procurement is a specific function within the broader procurement operations ecosystem. This area focuses on short-term delivery for day-to-day business operations rather than complex types of procurement for high-value equipment or SaaS providers.

For example, the 3D-printing startup’s operational procurement activities would encompass the sourcing of filament and office supplies, optimized inventory management, quality control to consistently ensure optimal partnerships, and fast invoice processing.

This is essential to effective supply chain management and keeps the business ready to respond to purchase orders at all times.

The department would also need to handle indirect procurement requirements for 3D print maintenance (cleaning tools, lubricants, spare parts etc) and workforce satisfaction (office coffee supplies, canteen options etc). These examples are also fundamental to a robust and scalable 3D printing business.

Building an operational procurement strategy differs from other procurement practices. It’s more dynamic and agile in nature, with team members working on more time-sensitive cycles. Finding a new supplier, for example, can take much longer for complex requirements that aren’t mission-critical.

The 3D printing business might function without a 360º payment processing SaaS provider, allowing procurement operations more time to research, negotiate, and implement a solution. On the other hand, operational procurement for raw materials is high-priority – the business cannot function in any capacity without it.

The benefits of effective operational procurement

Organizations have numerous services procurement can help to optimize, with many falling under the operational umbrella.

Here are some of the main benefits of an effective operational procurement strategy:

• Optimized purchasing process – Operational procurement requires streamlined workflows using automation for tasks like purchase orders and invoice processing. This improves accounts payable efficiency, cost management, and general supply relationships.
• Streamlined supplier relationships – Building strong partnerships with reliable vendors is key to effective operational procurement. Positive offshots include clear communication, timely deliveries, continuous workflow integration, and potential cost-saving initiatives for both parties.
• Reduced supplier risk – Operational procurement mitigates the risks involved with depending on a small supplier base, ensuring organizations are constantly covering potential areas of concern for their operational requirements.  
• Better decision-making – Leveraging real-time insights and spend analysis is key to effective operational procurement. This leads to better decision-making at the core level, helping to optimize everything from costs to company efficiency.
• Increased profit margins – Operational procurement strategies work alongside FinOps principles to help maintain resource optimization and cost allocation. This can significantly increase profit margins, as the scope of use for these products or services is much larger than less mission-critical areas.
• Robust supply chain – Focusing on operational procurement creates a more robust supply chain, minimizing disruptions to overall business operations by ensuring a steady flow of essential resources and proactively identifying potential risks.  
• Simplified procurement management – Streamlined workflows and automation for operational procurement free up time and resources within the procurement department. With the day-to-day foundation in place, team members can focus on strategic sourcing for longer-term projects.
• Integrated procurement operations services – Businesses benefit from optimized integrations with procurement operations services, allowing a holistic overview of the entire procure-to-pay process and enhancing various organization aspects.
• Highlights supply chain discrepancies – Operational procurement processes highlight supply chain issues and discrepancies due to the recurring orders and focus on spend analysis. Consequently, businesses can prepare better for price fluctuations or potential delivery days with a more proactive approach.  
• Emphasis on direct procurement – Focusing on direct procurement takes up the largest portion of operational procurement workloads, opening up more significant and regular cost-saving opportunities than indirect procurement.
• Targeted procurement function – By focusing on operational efficiency and cost savings, operational procurement becomes a targeted function that directly contributes to a company’s bottom line, business operations, and FinOps optimization.

Procurement operations best practices

Successful procurement works on several different levels. Best practices include:

1. Define a procurement process – Develop a standardized procurement strategy with clear guidelines and KPIs on the lifecycle, approvals, sourcing, and purchasing. Creating an actionable blueprint underpins successful procurement operations and can be instrumental for negotiation and other areas.
2. Comprehensive market research – After receiving a purchase request from a relevant department, the procurement operations team must undergo comprehensive market research to identify the best solutions. Utilizing requests for information (RFI) and searching for previous reviews are two useful tactics.
3. Competitive bidding and targeted negotiation – Successful procurement operations require organizations to encourage competitive bidding by sending requests for quotation (RFQ) to an established supplier checklist. This fosters healthy competition and helps secure the best value for your specific needs by ascertaining clear pricing benchmarks.
4. Build strong supplier relationships – Work closely with suppliers after the initial procurement stages to create a more robust, efficient, and cost-effective working relationship. Open communication and collaboration is key here. Payments teams must also ensure swift payment to sweeten the deal.
5. Embrace automation – Procurement operations services leverage automation to streamline repetitive tasks like purchase order generation, three-way matching, and cost management. This reduces manual errors, saves significant time, and free resources for more strategic endeavors.
6. Continuous data analysis – Use a procurement operations tool like the Vertice SaaS Purchasing Platform to unify supplier performance and cost data. Real-time insights help optimize costs and improve your bottom line. Identifying trends for operational procurement with data analysis also significantly improves supply chain and general business robustness.
7. Implement effective contract management – Establish a system for contract management to ensure clear terms, pricing, and delivery schedules with all suppliers. Regularly maintain commitments to ensure watertight compliance and strength partnerships.

Procurement operations tooling

Procurement operations services assist teams in various areas, especially IT. The Vertice cloud-based procurement software platform can be a valuable tool for SaaS purchasing and general upkeep, leveraging automation and strategic negotiation to drive costs down by up to 30%.  

Our white-glove service offers an alternative approach to e-procurement. We negotiate on your behalf to get an optimized price and consistently maintain software licenses and contractual commitments to free resources for other procurement operations.

The Vertice platform uses unified dashboards to visualize spending patterns and supplier performances across an organization’s cloud environment. Consequently, procurement operations teams have greater access to useful real-time information and can make swift data-driven decisions.

It’s not just in the IT field where this can help. Streamlined and well-managed procurement software also optimize physical supply chains via better time resource management and a more holistic approach to financial management.