Leverage Procurement Software to Effectively Rationalize Suppliers

Feb 12, 2022 | Supplier management

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Feb 12, 20224 min read

Procurement software streamlines supplier rationalization, reducing costs and improving supplier performance. By evaluating software types, defining clear objectives, utilizing automation, and establishing KPIs, businesses can make informed decisions and receive the best value from their suppliers. Supplier rationalization is an ongoing process, making a supplier relationship management system essential for successful management.

Procurement software is an important tool for businesses to manage their suppliers and to ensure efficient, effective supplier rationalization. In this article, we will explain the different types of procurement software, the benefits of supplier rationalization, and the steps to take to successfully use procurement software for supplier rationalization. 

Evaluating the Different Types of Procurement Software 

Procurement software comes in many forms. Some of the most popular types are e-procurement, reverse auction, and enterprise resource planning (ERP) software. Each type of software has its own unique features and benefits that can be used to streamline the procurement process and reduce costs. E-procurement software is designed to streamline the purchasing process by enabling suppliers to submit bids electronically. Reverse auction software allows buyers to post an item for sale and then wait for bids from multiple suppliers. ERP software is designed to integrate all of a business's processes, from procurement to finance, into one system. 

In addition to the features and benefits of each type of software, it is important to consider the cost of implementation and maintenance. E-procurement and reverse auction software can be relatively inexpensive to implement, while ERP software can be more costly. It is also important to consider the level of technical support available for each type of software, as this can be a major factor in determining the success of the implementation. FactWise Source-to-Pay is an e-procurement software that is cloud-based with no lengthy implementation timelines, costs, or technical support. It is built for self-serve, and so teams can start using FactWise with their data immediately, while we integrate with your other systems if required within a couple of weeks.  

Understanding the Benefits of Supplier Rationalization 

Supplier rationalization is a process that allows businesses to identify and select the best suppliers for their needs. This helps businesses save money by reducing unnecessary costs associated with too many suppliers. Other benefits of supplier rationalization include improved visibility into supplier performance, reduced risk of supplier failure, and improved communication between buyers and suppliers. Furthermore, supplier rationalization helps ensure that businesses are getting the best possible deal when it comes to price, quality, and delivery times. 

In addition, supplier rationalization can help businesses reduce their environmental impact by reducing the number of suppliers they use. This can help reduce the amount of packaging materials used, as well as the amount of fuel used for transportation. By reducing the number of suppliers, businesses can also reduce their carbon footprint and help protect the environment. 

Defining Clear Objectives for Supplier Rationalization 

Before using procurement software for supplier rationalization, it is important to define clear objectives for what is needed from your suppliers. This includes identifying which suppliers are essential for your business operations, analyzing their performance, establishing measurable KPIs, and setting realistic expectations. Establishing goals and objectives helps to ensure that the right suppliers are chosen and that your business is receiving the most value from its suppliers. 

It is also important to consider the cost of supplier rationalization. This includes the cost of the procurement software, the cost of training staff, and the cost of any additional resources needed to manage the process. Additionally, it is important to consider the potential savings that can be achieved by rationalizing suppliers. By understanding the cost and potential savings associated with supplier rationalization, businesses can make informed decisions about how to best manage their supplier relationships. 

Utilizing Automation to Streamline Supplier Rationalization 

Procurement software can help streamline the supplier rationalization process by automating certain tasks. This includes automating the selection process by automatically comparing bids from multiple suppliers and making recommendations based on criteria such as price, quality, and delivery times. Automation also helps by eliminating manual paperwork, allowing businesses to quickly and easily find the best supplier for their needs. 

In addition, automation can help to reduce the time and effort required to manage supplier relationships. Automated systems can be used to track supplier performance, monitor supplier compliance, and ensure that suppliers are meeting contractual obligations. Automation can also help to ensure that suppliers are providing the best value for money, as well as helping to identify potential areas for cost savings. 

Establishing Key Performance Indicators for Supplier Rationalization 

Establishing key performance indicators (KPIs) for supplier rationalization helps businesses measure their suppliers' performance and identify areas for improvement. Examples of KPIs for supplier rationalization include cost savings, order accuracy, delivery times, lead times, and customer satisfaction ratings. By regularly measuring these KPIs, businesses can ensure that their suppliers are meeting their expectations and make adjustments if needed. 

In conclusion, procurement software is an essential tool for businesses looking to streamline their supplier rationalization process. By understanding the different types of procurement software, understanding the benefits of supplier rationalization, defining clear objectives, utilizing automation to streamline the process, and establishing KPIs, businesses can use procurement software to ensure they are getting the best deal from their suppliers. 

It is important to note that supplier rationalization is an ongoing process. As businesses grow and change, their supplier needs will also change. Therefore, it is important to regularly review KPIs and adjust supplier rationalization strategies as needed. Additionally, businesses should consider investing in a supplier relationship management (SRM) system to help them manage their supplier relationships and ensure that they are getting the best value for their money. With FactWise, SRM features are integrated into our end-to-end procurement software and no additional software solution is required, ensuring data integrity and minimized costs for our customers. 

FactWise Source-to-Pay empowers you to discover new and prioritize preferred suppliers that fit price, quality and delivery requirements. Generating win-win outcomes is easier with comprehensive performance metrics and diverse supplier lists. 

About the Author

Stawan is the founder and CEO of FactWise. Before founding FactWise, Stawan was the NA TMT-Procurement Leader at McKinsey. Passionate about procurement, Stawan has 15 years’ experience in enabling clients of all sizes to achieve business impact via procurement.


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