Procurement is a vital function within any organization, and improving its efficiency is a continuous goal.
What is Procurement?
Procurement involves acquiring goods and services from external sources essential for business operations. This process includes preparation, solicitation, and payment, with various steps in each stage.
Main Types of Procurement
Procurement falls into two main categories:
- Direct Procurement: This involves purchasing goods and services directly related to producing end products, such as raw materials and components.
- Indirect Procurement: This refers to acquiring goods and services that support business operations but are not directly tied to production, like software or hardware.
What is a Procurement Cycle?
The procurement cycle is a step-by-step process that begins with identifying the need for goods or services and ends with the acquisition and payment of those goods.
What is a Procurement Dashboard?
A procurement dashboard is a visual tool that provides insights into key metrics related to procurement. It helps organizations monitor performance, identify trends, and make informed decisions, ultimately revealing areas for improvement.
A good procurement dashboard that accurately reflects essential metrics helps organizations understand the current state of procurement, allowing you to easily identify areas for improvement.
What Data Can You Track with Procurement Dashboards?
Procurement dashboards enable tracking and analysis of various aspects, including:
1. Cost Management
With procurement dashboards, you can manage costs more efficiently. You can track different areas of business spending and identify specific trends and patterns with ease. Also, dashboards allow you to utilize the side-by-side comparison feature. For instance, you can compare whether or not suppliers undercut others for goods and services of the same quality.
At the end of the day, procurement dashboards will provide your procurement department with actionable insights, allowing them to easily identify cost-saving opportunities.
2. Supplier Performance
Important metrics to keep an eye on are delivery times, lead times, quality of products, and supplier compliance. Well, all of these metrics fall under the category of supplier performance. Procurement dashboards allow you to keep an eye on each of these metrics and compare supplier performance side by side to choose the best ones for further collaboration.
3. Spend Analysis
Procurement dashboards will provide your team with a comprehensive overview of business spending patterns and trends. These insights will allow you to discover high-priority spending categories and the overall effectiveness of procurement cost management strategies.
Spend analysis also will help the procurement team identify areas where expenses can be cut, such as hidden costs, overhead spending, etc.
4. Internal Processes
You can leverage the power of procurement dashboards to track internal processes, operational efficiencies, and compliance rates and even gain an understanding of future demand.
The procurement dashboard will show you the average number of days that each activity in the process takes to be completed. For instance, if it takes over 35-40 days from the purchase requisition to the actual purchase, then certain process inefficiencies must be addressed.
KPIs to Track with Procurement Dashboards
You should track a few key KPIs with the help of your procurement dashboards to gain actionable insights into the procurement process and elevate it. These KPIs include the following:
- Spend Under Management | Formula = (Managed Spend/Total Spend) x 100
- Supplier Performance Score | Formula = (Weighted Factors of Supplier Performance / Total Possible Points) x 100
- Inventory Turnover Rate | Formula = Cost of Goods Sold / Average Inventory Value
- Cost Savings Percentage | Formula = (Amount Saved / Original Cost) x 100
- Compliance Rate | Formula = Number of Compliant Purchases / Total Number of Purchases) x 100
All of the KPIs mentioned above are vital to track and understand the effectiveness of your procurement efforts. For instance, tracking spend under management metrics allows one to gain an overview of financial health. Monitoring supplier performance scores provides insight into supplier performance, allowing for efficient evaluation and prompt addressing of issues.
The inventory turnover rate is another useful metric necessary to check the organization's financial wellness. Cost saving percentage is essential to track to understand how efficient strategies the procurement team implements in regards to cutting expenses are. Finally, the compliance rate allows you to gain insights regarding compliance and understand how well procurement aligns with internal and external regulations.
8 Benefits of Procurement Software and Dashboards
In order to track procurement activity and leverage the power of procurement dashboards, businesses need high-quality procurement software. Choosing the right procurement software will provide you with real-time insights on procurement activity business spend visibility and allow you to streamline processes. Let’s take a look at each of the benefits in more detail.
1. Streamlined Processes
One of the main benefits of procurement software is streamlined processes. Procurement software automates routine tasks like purchase orders, approvals, and invoice matching. It helps to reduce manual input, minimize errors, and speed up the overall process.
2. Cost Savings
Procurement software and good analytics, including dashboards, provide insights into supplier performance and enable bulk purchasing. Thus, such tools help identify cost-saving opportunities and optimize spending across departments.
3. Improved Efficiency
The entire procurement cycle, from requisition to payment, is accelerated through automation and systemized workflows, allowing procurement teams to handle larger volumes of work with fewer delays.
4. Enhanced Visibility
When talking about the benefits of procurement software, especially dashboards, we must mention enhanced visibility in procurement activities. Your procurement department will gain better control and visibility into procurement activities, budgets, inventory levels, and other areas necessary to track and ensure smooth procurement.
5. Better Compliance
Procurement software ensures that all purchases are in line with company policies, legal standards, and regulatory requirements. Ensuring high levels of compliance with internal and external regulations allows for reducing risks associated with fines or legal issues.
6. Supplier Management
A good procurement solution allows the centralization of all supplier data, such as contracts and performance history, enabling better supplier relationship management. With better insights, your team can continue informed negotiations and improve contract terms.
7. Data-Driven Insights
Procurement dashboards and software generate detailed reports and analytics. These reports are crucial for organizations to gain actionable insights into a business’s spending patterns, supplier performance, and overall market trends. By gathering data about all of these aspects, organizations can make informed and strategic business decisions.
8. Collaboration
It enhances communication between procurement teams and other departments, ensuring smoother coordination, better visibility into procurement needs, and faster approvals across the organization.
The key is to choose the right procurement solution. Thus, when making the decision, make sure that your chosen software offers high scalability and is user-friendly.
Leverage the Power of Procurement Dashboards Today
If you’re looking for a solution to track KPIs and gain insights into procurement performance, consider Tradogram’s Spend Analysis Tools. These tools offer customizable reports, real-time analytics, and data organization capabilities.
For more information on how Tradogram can optimize your procurement processes, contact us, and our team will be glad to assist you.
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