What is procurement, and how can a management system help users streamline procurement and purchasing? At its most basic, procurement is the overarching term for finding, negotiating, and purchasing goods and services. Regardless of the industry, every business has to interface with procurement tasks at some point. However, chasing down suppliers, getting quotes and negotiating prices is a drain on valuable employee resources.
Procurement software can take over many of the time-intensive tasks that would normally keep employees wrapped up for hours.
Align procurement with corporate strategy
Procurement is directly affected by the way a company is positioned and what type of products they intend to carry. Businesses that procure and store items requiring special considerations have an identity that is directly tied to procurement practices. The regulations by which their items can be stored and the length at which they can be stored can vary widely from a retail business selling clothes. In order to get the most out of procurement tasks, many organizations leverage the variety of features a software platform can bring to the table.
When setting up procurement practices, a management platform can identify which areas require special consideration while providing guidance on keeping up with regulations. By keeping important considerations front and center, every business can make sure they fall in compliance with the unique requirements of their industry. Procurement software can automatically reorder items that move out quickly to keep enterprises of any size on top of demand. Having a proper procurement strategy is vital to the long-term health of a business; keep an eye out for these features when considering a new procurement system.
- Automatic reordering
- Customizable dashboards
- Compliance and regulation checklists
- KPI management
- Demand management
Streamline supplier selection
Suppliers are the lifeblood of procurement, and maintaining good relationships with preferred suppliers is a vital part of the process. A procurement management can help users identify suppliers that fit within their requirements. By analyzing past purchases and current inventory, a management system can pair users with suppliers that are the best fit. Management tools give users the ability to easily create job postings that suppliers can bid on. This way, suppliers can get a good look at your inventory, any other relevant statistics and decide if they are right for the job.
Some management platforms can loop you into valuable networks that contain many different suppliers that could help you down the road. To achieve this advantage, choose a solution that contains features similar to these:
- Supply catalog access
- Review past purchases
- Supplier networks
- Customizable job postings
Manage supplier performance
Finding a supplier that fulfills your requirements is great, but maintaining that relationship is key to maintaining healthy procurement practices. Procurement management can take some of the stress out of fostering healthy supplier relationships. Customers depend on a business for their products. If a supplier is underperforming, the company they supply fails as well. Business owners need to keep track of how their suppliers perform; if they routinely miss deadlines or lack communication skills, these shortcomings can be noted on scorecards. Collaboration tools keep lines of communication open between suppliers and business owners so that issues can be resolved.
When searching for suppliers to bring into an enterprise, procurement management can assess risks attached to each supplier and show past relationships with other organizations. This way, users get a good look at who they are about to work with without any unpleasant surprises down the road. Analysis tools and metrics help keep companies up to date on how their suppliers are doing while managing any underperforming aspects that may arise.
Cut costs associated with daily processes
Optimized procurement management is vital to save money. Purchasing goods and services add up to a significant bill for businesses of all sizes, but these costs can be managed with a proper procurement system. Even the slightest cut in procurement and purchasing costs can have a huge effect on the overall budget. For starters, a procurement management automates and simplifies the purchasing process. With these tasks streamlined by the system, users can focus on more lucrative opportunities and not get caught up in tedious manual input.
A procurement system can also link up inventory and accounting systems for better organization and error reduction. This allows for a reduction in staffing, better accounting accuracy, and fewer errors to chase down and correct. Users can set up purchasing rules so that only necessary items are bought, which can help cut down on costs associated with storage and superfluous spending on unneeded products. Those looking to find a way to save money should keep an eye out for these helpful features:
- Purchasing requirements
- Accounting integrations
- Automated accounting
- Automated purchasing
- Inventory management integrations
What is the Difference Between Procurement and Purchasing?
The terms procurement and purchasing are often used interchangeably. However, these are two separate processes that involve different steps. Firstly, purchasing can be found within the greater umbrella of procurement. Procurement has to do with the work that goes in before the actual purchasing of the goods or products. Selecting a vendor, vetting them and establishing terms for payment are processes that you would find within the wheelhouse of procurement.
Purchasing would purely involve the transactional steps that wrap up the entire procurement process. The entire process of purchasing goods beginning in procurement is known as the Procure-to-Pay-Cycle and contains numerous steps, including:
- Requirements identification
- Purchase request authorization
- Request approval
- Supplier identification
There are many more steps, but you get the idea. Procurement makes purchasing possible, and a procurement management system has the tools to handle both of these tasks.
Procurement and E-Procurement: What’s the Difference?
We’ve covered some of the basics of procurement, but what is e-procurement and how is it different? Traditional procurement and e-procurement practices are quite similar; in fact, e-procurement is the next stage in the evolution of procurement as a whole. Procurement involves physical interactions and face-to-face negotiations when hiring suppliers and finalizing deals. The most logical continuation of this practice involves software and the internet. Instead of long phone calls and face-to-face meetings, users can exchange information through procurement management, schedule deliveries and negotiate beneficial prices with suppliers.
Procurement is the past and e-procurement is the future. As time goes on and more businesses adopt software to manage their procurement tasks, the old time-consuming methods will fade out. Effective organizations are always on the lookout for anything that can boost efficiency and cut costs, and moving toward a paperless e-procurement environment has too many advantages to ignore.
How Do I Select Procurement Software?
Selecting procurement software that is right for you can be a difficult task. In order to narrow down the large field of potential vendors, prospective users can ask themselves a few probing questions. What size is the business? How much room in the budget is there for a new software system? What deployment strategy best fits the unique requirements of the business? These simple questions can cut the vendor field down into a manageable form. If you need some more guidance, we have resources available to help, whether it be our Procurement Requirements Checklist or our guide to creating a strong Procurement RFP.