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Key Policies and Tools for Successful Procurement

A fluid procurement policy will drive an organization’s success and maximize sourcing practices with the right tools, processing methods, and philosophies. The organization has the responsibility to set general guidelines, implement best procurement practices, and equipment, and take profound actions for professionals to meet their objectives and work efficiently. The policy is able to endorse the highest standards of economic, social, ethical, and environmental practices to identify and moderate risk associated with the procurement process and able to communicate the policy with internal and external stakeholders. Digital tools help procurement creates collective value for their strategy and achieve their targeted goals. It can be automated to solve complex tasks, and huge transaction data, leverage supplier competencies, and provide accessible analytics on multiple platforms to improve the speed, efficiency, and quality of procurement, reducing risk, and solving complicated tasks.

Sustainable Procurement Policy

Sustainable procurement policies help an organization structure a long-term procurement strategy to align with the core business strategy to ensure supply chain continuity, and the ability to cope with volatile market demand. It is necessary to understand the product and service well to derive the correct standards. These standards must be consistent with strict requirements to ensure compliance. Such policies must be reviewed and updated regularly to continuously reflect the best practices and be relevant to market trends. The supply chain management shall be focusing a set of robust capabilities that have the potential to generate value for the company regardless the business is short-term and direct or long-term and indirect, on cost competitiveness, and supplier loyalty.

Digital Procurement Policy

Digital Procurement Policy is used to set direction and influence decisions that involve substantial digital technology. Organization management to ensure digitalization is more effective about value saving, cost reduction, innovative quality, and risk avoidance and aligned with the core businesses. Besides that, it enables alignment to be built across all levels within the organization and partners. Policy created clear requirements in a statement of work for the purchase or services. It is set to identify prospective vendors in core products, quality, and technology, and evaluated, and scored proposals to identify potential prospective suppliers.

Supplier Performance Policy

Supplier Performance Policy is a setting to monitor their performance with respect to contractual agreements versus quality, time, costs, and services. By using key performance indicators (KPIs) to measure and determine supplier performances. The company must set the criteria of what to measure and when to measure. The setting should be fair and not biased on personal preferences. It must be clear and measurable to be aligned with the business objective and goals. The company can measure the supplier’s capabilities through quality, delivery, order accuracy, and order fulfillment with a specific timeline. KPIs can produce data to allow the company, and stakeholders to review the goal setting and analyze the current performances across the organization. The company must review the KPIs regularly to make the necessary adjustment from time to time with the right decision.

Procurement Performance Policy

Procurement performance policy is a setting to measure procurement performance roles in an organization, especially in supply chain. Procurement’s responsibility is to explore and create strategies that align with an organization’s business goals, mission, and objectives of an organization. Therefore, procurement policies must involve the strategies and implementation of purchasing and interact with internal customers and external suppliers. Purchasing Management must determine which activities and services are key criteria for evaluation justification to ensure that procurement is sustainable, and stakeholders are constantly looking for ways to improve procurement processes and achieve goals. From a procurement point, calculate the percentage of managed spend against total spending on purchases for external products and services. This KPI goal is to have more spend standard procedures, thereby saving on costs. From the supplier’s point, intensify competition among suppliers for cost-saving, better quality, and delivery lead time e.g., bench-marking and comparing supplier participation rate results.

Spend Visibility Tools

Spend visibility tool able to retrieve historic purchase order (PO) and invoicing data including daily operation, delivery data, and payment transactions. There are numerous spend visibility tools in the market to help organizations manage their purchasing, sales, and operation expenses e.g., SAP, Oracle, MYOB, etc. Such tools can automate data clean-up and classification with algorithms that make use of artificial intelligence and self-learning method, which help to identify and capture accurate and effective sourcing opportunities. They can also work with the potential supplier that offered the special package value price, optimized operational flow, delivery lead-time, and more.

Procure-to Pay Payment Tool (PTP)

Procure-to-pay (P2P) is the function of the end-to-end process, from sourcing to payment to the vendors, and extending from requisition management to adjacent areas, like expense management. This tool can support cross-functional stakeholders e.g., receiving quotes for the approved purchase order to shipping of the supplied materials and services. It helps to track and analyze the vendor’s performance from the collection of records in the ERP system. The scope includes verification that the vendors have fulfilled the contract terms with committed delivery of the promised materials or services. It can provide visibility throughout the supply chain, giving buyers and vendors the convenience to view invoices and payment status. P2P tools also automate multiple repetitive manual tasks, to improve productivity and reduce errors, particularly in operations and automate workflow for procurement, warehouse, and accounts teams to reduce workload and increase efficiency.

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Alan Kan Kim Huat, DPSM. (2021). Technologies for Implementing Digital Procurement. SIPMM Publications. Available at SIPMM: https://publication.sipmm.edu.sg/technologies-implementing-digital-procurement/. (Accessed: 8 June 2022).

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Liong Sze Pei, DPSM. (2020). Fraud Prevention Strategies for Construction Procurement. SIPMM Publications. Available at SIPMM: https://publication.sipmm.edu.sg/fraud-prevention-strategies-construction-procurement/. (Accessed: 9 June 2022).

Philip Charles Loges, PDPM. (2018). Key Performance Indicators for Evaluating Purchasing Performance. SIPMM Publications. Available at SIPMM: https://publication.sipmm.edu.sg/key-performance-indicators-evaluating-purchasing-performance/. (Accessed: 9 June 2022).

Rachel Ooi Huiju, DPSM. (2019). Key Indicators for Measuring Procurement Performance. SIPMM Publications. Available at SIPMM: https://publication.sipmm.edu.sg/key-indicators-for-measuring-procurement-performance/. (Accessed: 9 June 2022).

Wong Siu Hung Evelyn
Wong Siu Hung Evelyn
Evelyn Wong Siu Hung has several years of procurement experience, specifically in the semiconductor industry. Her current work responsibilities include material planning, supplier negotiation, and expediting delivery. Evelyn is a member of the Singapore Institute of Purchasing and Materials Management (SIPMM). She completed the Diploma in Procurement and Supply Management (DPSM) in June 2022 at SIPMM Institute.

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