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One of the greatest challenges facing chief procurement officers is the lack of agility when responding to changes in the supply chain.  In a recent report, 35% of CPOs cited a lack of tools as a hindering factor in their response times. Examining how you manage your supplier relationships and looking for gaps in your procurement process can go a long way in improving your ability to make decisions quickly based on real-time data.  

With so many choices on the market today, finding a solution that works best for your business can be challenging.  How do you know what options are most important when choosing vendor management software?  We’ll look at the top 5 features CPOs should consider when evaluating a new vendor management software solution.

 

Purchase Order Tracking

Anytime you can automate a manual process is a win.  Tracking with spreadsheets can become overwhelming, and they can’t provide the real-time data necessary to make proactive changes when unexpected issues arise. Using vendor management software that allows you to speed up purchase order creation and  track the PO status throughout the procure-to-pay cycle reduces order entry errors and helps answer the question “where’s my stuff?” 

On the back end, these software solutions make matching purchase orders to invoices and goods received seamless, saving time and ensuring data is verified and accurate.   A vendor management software that provides visibility into your workflow is key to becoming more agile because you can’t change what you can’t see.

Inventory Visibility

Poor inventory management can mean increased costs, impaired customer relationships, and overall operational inefficiencies within your organization.  The dollars are in the data, yet only 24% of organizations describe themselves as data-driven using their data to inform decision-making, wasting time and money. A good software solution will allow real-time tracking of current inventory which can lead to the following improvements within your procurement process:

  • Reduce costs associated with excessive inventory
  • Prevent stockouts and subsequent lost sales
  • Decrease time spent looking for inventory 
  • Increase in order fulfillment

Knowing what inventory is in stock is vital to making informed purchasing decisions.  Having an accurate product count can impact sales, improving a business’s bottom line.  

Demand Planning and Forecasting

Another area where vendor management software can add efficiency to the procurement process is through demand planning and forecasting.  Gartner reported that less than half of sales leaders and sellers have high confidence in forecasting accuracy.  Using real-time data to provide insights into customer buying patterns allows the alignment of current inventory with customer demand.  

Having the right mix of products in the right amount can boost sales and help predict future revenue.  Intangent noted that companies with accurate forecasting are 10% more likely to grow annual revenue and are twice as likely to lead in their industry.

Reporting Functionality

The ability to take data from your vendor management system and create reports for tracking your company’s specific KPIs is essential to developing a more agile procurement process.  For example, monitoring your purchase order cycle time and looking for potential bottlenecks can help improve turnaround times.  This can result in a faster procure-to-pay cycle saving time and reducing purchase order processing costs.  

Managing service-level agreements also becomes easier when you have all the data for price breaks, minimum order quantities, and delivery requirements for vendors at the push of a button. 

Using AI-powered software can allow you to generate reports reflecting company-wide savings goals or get more granular and track metrics for just your team such as purchases in time and budget and cost reduction.  These reports compile actionable data that can allow you to shift more quickly when targets are not being met.

Data Capture and Analysis

Tracking supplier performance and improving vendor management technology remain a top focus for CPOs, but despite the numerous disruptions to supply chains as of 2021, 44% of procurement teams did not have any solutions in place to manage supplier performance. 

When it comes to vendor management software, if you’re not generating and using data to rate supplier performance you’re missing an opportunity to compile a list of preferred suppliers based on key metrics such as:

  • Customer Service
  • Defect Rate
  • Policy Compliance
  • Vendor Availability
  • Financial Risk Assessment

Utilizing a few preferred vendors to purchase specific categories of products and services can  reduce costs through negotiated pricing and payment terms.  This also saves staff the time used processing separate purchase orders to multiple suppliers.  In addition, having preferred vendors makes narrowing down choices easier when there are multiple bids.  

Final Thoughts

Agile decision-making fosters flexibility and openness to change.  Adjusting your approach to maintaining supplier relationships can help remove bottlenecks and streamline your process allowing you to react more quickly when things don’t go according to plan.  Using the most up-to-date software for vendor management can reduce inefficiencies caused by using spreadsheets and other forms to manually track your procurement process. Having the right software solution in place can help bridge the gap between data and decision-making by giving you visibility into what could be working better within your procurement process.

Looking for more ways to improve your supply chain, click here.