vendor management

E.O.W (End of Week) Notable Tip: Key Performance Factors for effective Supplier Selection

Happy Friday! Hope you all had an amazing week!

Today, I want to discuss the 12 most important factors you should consider when choosing a supplier. These are important because they ensure supplier selection success and help you realize quality opportunities. Without further ado, please read below for the top 12 factors to consider when choosing a supplier, and as always, remember, “Success is continuous improvement.”

  • Type of product (new tech vs mature product)
  • Quality
  • Quality Assurance (certifications, audit processes)
  • Flexibility
  • Reliability
  • Location
  • Price
  • Delivery Capability
  • Lead times
  • Financial stability
  • Length of time in business
  • Relationship strength
  • *Of course, you can always add to the list based on your business requirements*

A Visual Management Approach to Accounts Payable

Purchase order approval audit trails and visual bill entry controls can be an effective way to reduce the time it takes to resolve Accounts Payable errors and keep your vendors happy.

Visual management allows for standardized visual controls that are visible to all Accounts Payable (and also accounting team) on how approvals should be obtained for a purchase order, how to document these approvals, and how to enter bills into the accounting software. Visual controls are effective because the accounting team will see them everyday and there should be a constant review of them and essentially they should all be processing Accounts Payable the same way.

Visual controls are like visual checklists for your Accounts Payable team. These controls should be placed in high traffic areas where your accounts payable team will see them. A copy should be placed by each members desk as well and update them of course accordingly to business changes.

For recurring fixed bills, automation is a given. For example, lets say company HBN gets billed from Microsoft $17.95 for a productivity application every month a recurring transaction can be created in Quickbooks that will automatically create the bill every month. This significantly reduces manual entries and overall cycle time.

To reduce manual entries of non-fixed expenses you can create templates in Quickbooks (or other accounting software) in which they can be duplicated and make the changes needed per your company’s data entry controls and new bill specifications (purchase order, invoice #, et cetera).

Critical KPI metrics that your company should be tracking and analyzing in regards to Accounts Payable are the following:

  • Total Cost of an AP invoice
  • Overall time to complete the AP process
  • Overall time to resolve an AP error
  • Percentage of manually entered invoices
  • Number of full-time employees that perform the AP process, per 1 million (billion) in revenue
  • Percentage cost to perform the AP process as a percentage of total process cost

You should periodically compare these metrics with industry and competitor data to see where you stand and where you need to improve.

In conclusion, standardized visual controls for Accounts Payable is a great way to ensure the AP process is done the same way by all AP personnel.

Simple Procurement Hacks to realize Savings

To elaborate further on previous article,  “Price focused Sourcing is bad for Business”, I have created a list of procurement hacks for realizing savings. saving-clipart-yTkeraBAc

1) Audit invoices and purchase orders to identify unapproved vendor charges, price discrepancies, and unapproved purchases.

2) Audit vendor database to ensure accurate data, remove duplicate information and ensure vendor has proper approval.

3) Share sales demand and budget data with procurement team.

4) Share inventory data with suppliers and have them do the same.

5) Develop a quality plan.

6) Focus on total cost instead of price.

7) Build strong supplier relationships by working with vendors to improve quality, delivery and logistics; and encourage the use on long-term contracts with quality stipulations and year by year locked in prices.

Are your procurement expenses deteriorating your bottom line? Could your sourcing process use a re-design? Contact me now http://bit.ly/2prHowW

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