Purchasing and supply chain risk management is an essential part of any strategy across all industries or corporate structures because the supply chain is bound to the financial health of the company. These risk management strategies may determine to what degree your business reaches the required production levels in the event of a disruption. Supply chain risk management is no longer seen as a reaction to a problem, but a strategy and plan that is in place for when the problem occurs. Many case studies have shown that supply chain is always accompanied by risk and improper risk management can significantly cripple your business or in extreme cases cause it to shut its doors; that is why risk management is something that cannot be ignored.
There are few events in recent times that have disrupted the supply chain worldwide. Consider the Persian Gulf War in 1990-91, the 1995 earthquake in Kobe, Japan, the terrorist attacks on World Trade Center in the year 2001, the great Indian Ocean tsunami of 2004, hurricane Katrina in 2005, and the list goes on. It could be a natural disaster, a war, or a manmade tragedy. While all resulted in loss of life and are tragic in their circumstances, they also all impacted businesses around the world. There are countless other smaller events that made differences in certain regions of the world. The point of this article is not to examine or debate the political or humanitarian aspects of these tragedies, but to open the discussion regarding the unknown risks facing your supply chain and how you can prepare.
We all know that natural disaster or accidents can create a domino effect stretching across oceans, continents to business, suppliers, vendors and impacting end users, investors and everyone at every step of the supply chain. Professionals at the top companies recognize this fact that improper risk management strategies can ultimately be responsible for the failure of any business unit. As a responsible business owner, it is up to you to set the right supply chain risk management guidelines.
However, creating supply chain risk management strategies is not always easy because you are dealing with the unknown. In order to define the right risk management strategies for your business, you should have skills and proper knowledge on how to reduce risks. Make sure that you are implementing all the practical guidelines that are effective as well as easy to follow. It may also be necessary to do some refined research to gather information about the political, environmental and natural disaster risks in the areas in which you do business. Having a complete picture of the potential risks will help you formulate your plan. Accidents can happen without warning but with the right preparation your supply chain risk can be minimized or eliminated entirely.
If you own a small business and you have been considering supply chain risk management strategies, then now is the right time for you. As we close out this calendar year and you are making plans and projections for the next year, make risk management part of the plan. No company, big or small, can expect to survive and compete in today’s market without having risk management strategies in place. The challenge facing you is the unknown. What will be the next tragedy? Will it be a natural disaster or a war? Will be in Europe, the Orients, or right here at home? When it happens will you react or will you have a plan that goes into immediate effect?
First, let’s establish a general understanding of maverick spend and then look at ways to limit or stop it entirely. Have you ever been called a maverick? A maverick is generally someone who does not go along with the group and is viewed in a negative light. According to merriam-webster.com the term originated around 1867 when Samuel A. Maverick refused to brand his calves like the other American pioneers. Maverick spend is where people take a different path other than the accepted one, spending money in unaccepted ways. Maybe a relationship exists with a supplier where terms and pricing has been negotiated, but someone takes it upon themselves to go outside of that vendor and order elsewhere costing the company extra money.
There are two major factors that are responsible for growing problem of maverick spend and they are: continuously increasing outsourcing of services and goods for business use and secondly, increased market competition. Companies try to boost their bottom line by controlling or reducing spend. However, maverick spend that goes outside the procedures they have in place can have a significant impact on profitability.
However, as a responsible business person, you can create a proper and effective procurement strategy for your business; one that includes cutting out maverick spend. So what are some useful tips regarding how to reduce the maverick spend?
The first step that you need to follow in order to reduce your maverick spend is that you should set procurement goals and objectives for your business. Enforcing them will be your most difficult challenge, but it can be done with appropriate safety measures such as:
Make sure that you observe and determine all the necessary scenarios that you will have to face in order to purchase goods from your suppliers. As you begin to implement these new strategies and preventative measures be flexible. Even good plans are susceptible to change so don’t feel like once you have a plan in place that it is set in stone. If the plan is not working then be ready to make changes as you go until it is running smoothly and doing what it is intended to do: stop maverick spend.
Minimizing maverick spend will automatically increase the operational efficiency of your business and help you to save money over time.
There are multiple layers and angles to every aspect of business and the procurement industry is no different in this respect. One thing that is becoming increasingly important is the environmental aspect of purchasing and procurement. On the surface and at its core, procurement is referred to as the purchasing of services and other essential goods for business purpose. Generally, a special department is set up within the business or the individual who owns a business handles all the sourcing or buying of business goods or services. However, sourcing of goods and services for business purpose affects many different areas including the environment.
As a matter of fact, procurement includes small as well as large scaled projects and hence, it affects our environment at varying levels. This is one of the major reasons that many companies are looking for sustainability. As a responsible business owner, you can make the right use of green sourcing strategy and set up the business climate according to the necessary environmental standards. Many studies have shown that purchasing of goods and services for business use puts our environment under a particular scrutiny. However, one does not have to take precedence at the expense of the other: you can put have efficient buying practices while also helping to support the environment. Below are listed some excellent guidelines that can help you in saving money on goods and services and it will also boost the environmental profile of your company.
Monitoring the goods purchasing practices of your business and improving them according to the current environmental standards can help you to become both environmentally responsible and more economically sound. It may take some extra effort on your part, but the long term effects will be worth it for your business, your profitability and the world.
Purchasing software is now considered an essential piece of the puzzle for inventory related issues for Small to Medium Businesses or SMBs. The software is designed to provide simple utilities to help manage inventories. Use of software helps the enterprise to ensure efficient and accurate reporting for inventory use and maintenance. In the past, conducting inventory audits was a painstaking task for SMBs. Purchasing software is an outstanding tool to employ all the best digital techniques for best management of inventories and audits.
Purchasing software eliminates the work of manually analyzing each and every detail and paper records while conducting inventory audits. Sometimes in SMBs, an auditor needs to wait for the user to complete their task for recording inventory data. After collections and synchronising the data, you can generate the results. Purchasing software allows for reports to be provided with the click of a button, always ready.
If you feel frustrated and overwhelmed by manual inventory audits then it may be time to consider the automatic management of inventories with successful and accurate reports generated through purchasing software. This software can be connected to various systems in the organization which will ensure better access to inventory data and its availability.
Purchasing software for SMBs is not limited to the basics of purchase orders, requests for quotation and the actual acquirement of necessary items. The software goes a step further by tracking inventory data, changes to that inventory, and all aspects from the PO, to placing the order to fulfilment and delivery. The software enables the organization to analyze the cost of inventories. It can effectively and efficiently manage the flow of inventory as it is utilized within the SMB along with an eye on the low or high quantities. Excessively high or low inventory levels can be detrimental to the growth of business. One of the most important tasks of purchasing software is that it always maintains and regulates the correct quantity of items in the stores and the various sales locations. Purchasing software monitors the stream of purchases and shipment of finished inventories to your business or multiple branches spread out geographically.
It is also not limited to inventory of essential office items like copy paper, printer ink, pens and pencils. Purchasing software can be successively used in warehouses that SMBs use to store inventories for retail sale. The software can track multiple items including receipt date of raw material, finished goods, the quantity or number of items as stock in hand and also the history of sale transactions, purchase orders and important descriptions as well.
Inventory management, from basic office supplies to large volumes of materials, is part of every business; purchasing software is an essential tool to assist in the management and audit of these inventories.
In simple terms, procurement management is a process by which a business buys resources that it would need to operate. This is the basic input that would be received by all the businesses, no matter their niche, industry or economical sector. The purchasing process has to be very transparent and equally effective so that the businesses can handle their basic inputs and manage them properly in favor of great outputs. Procurement does not depend on the size of the business. Therefore, you must always make sure that you are handling all your business processes well and taking adequate financial measures to manage your company.
Procurement management involves several benefits. First of all, the process would become streamlined and help the managers in understanding business input behaviors, their supply chains, developing forecasting techniques and making better products that would satisfy the customers. Here are three key elements that make the process of procurement even more important for an organization.
The Sarbanes-Oxley Act or Sarbox has been one of the most debated acts of the corporate world in the latest times. The act was passed by the Senate by 99 votes in support and 1 vote abstained. This act was passed so that the investors can be sure about the practices being adopted by the publicly listed companies. Though the act was signed by President George W. Bush as one that would be bringing a new wave of financial responsibility and accountability to the firms. Though it has been opposed in the corporate sector due to its high cost implications ever since it was brought into force, there is no way out for the companies. You have to ensure that you comply with Section 302 of the act.
This act is a wonderful opportunity for the corporate sector to bring better financial practices to their businesses. However, the only issue here is the cost. If you depend on quality cloud-based purchasing software, you would be able to reduce the costs and also make sure that the financial health of the company is kept in check. By getting cloud based purchasing software, you would be keeping all the tensions of manual bookkeeping and inventory management at bay. The software has been designed especially for handling all the major aspects of a business’s financial needs.
The software itself will help track stock and inventory levels, handle daily transactions and even provide your period reports. All these are essential steps as per Section 302 and 401 of the Sarbox Act. SOX Compliance goes beyond this with the use of eprocurement software. As everything is digitalized and becomes more accurate than ever, an internal control is easily maintained in the organization. There would be a single standard for handling all the business financial transactions. Therefore, it would be complaint with Section 404 as well. Therefore, you would be getting a fully automated structure in which the only thing that would be left to do with the PO manager was to enter the right strings in the software. The rest would be handled by the software itself and easily assist in bring you into compliance.
As the software is cloud based, the senior management would also be able to keep the inventory and finances in check. The data would be accessible to all the people involved in the process and even archiving would be possible. As a result, any attempt at financial fraudulent activity becomes next to negligible. It would be a small step that would not only benefit the whole enterprise through SOX compliance but also help in enhancing its overall productivity.
The Sarbanes-Oxley Act of 2002, popularly known as SOX was passed by the United States Congress for investor protection. The act was passed in 2002 so as to avoid fraudulent accounting practices by some corporations so that the investors can remain safer. The SOX brought about some strict rules and guidelines in order to reform the way financial disclosure were being handled by corporations to date. It was made as a result of the exposure of many accounting scandals and fraudulent affairs that emerged in the beginning of the 2000s. Some of these scandals include Tyco, WorldCom and Enron because of which investor trust was shaken to the core.
The act is composed of 11 titles that define various responsibilities of the corporate boards as well the criminal penalties that would be levied if the companies do not follow the rulings of the Securities and Exchange Commission or SEC. The most important parts of the SOX act are Section 302 and Section 404. In Section 302, it has been made mandatory for the top management of the company to certify that the financial statement is true and verified. On the other hand, Section 404 defines a new requirement for the management for devising internal controls so that the adequacy of the reports can be judged. This section has become a matter of debate for the publicly listed companies as it increases the cost of these companies significantly and the challenges that must be met by purchasing managers.
The Sarbanes-Oxley Act had many implications. In fact, Harvey Pitt, the SEC Chairman adopted more than a dozen of new rules to properly implement this act. The Public Company Accounting Oversight Board (PCAOB) was also designed as a quasi-public agency in order to review, regulate, inspect and even displace the accounting firms to abide by the law. The Sarbox Act was approved by the Senate with 1 abstaining and 99 in favor of the act. The Sarbox act talks about independence of the auditors, corporate responsibilities and more financial disclosures. It also enhanced the penalty on white collar crime. Moreover, it made the firms and their top management more accountable for all the financial decisions and practices being adopted in their firms.
The act also turned into a public debate because of its high cost implications, as per Section 404. Some opponents suggest that the Act has reduced the competitive advantage of the US by making financial regulation lengthier and more complex. On the other hand, supporters suggest that the SOX has rightly pulled the trigger for making sure that the investors retain confidence in their investments.