Procurement plays a crucial role in an organization due to the major influence it has on the overall cost of the business. Most organizations still use spreadsheets to manage their purchases. This can lead to critical problems, including carrying excess or less inventory, missing out cost-saving opportunities, and more. The best way is to use an end-to-end procurement management system that helps you efficiently manage your purchasing.
Depending on your industry, various cloud-based systems allow you to manage the complete procure-to-pay process. Here, we present a few areas where electronic procurement can streamline your buying and save you money.
In procurement management, the first important thing is to know what you have in stock, what goods have been ordered, and the status.
If the procurement process is not handled well, there will be no visibility for the other people in the organization who need the information.
The inventory management system allows you to track stock levels as goods are received, stored, and used. Information can be tracked more quickly and efficiently with a scanner that works with bar-coding. The application can be integrated with your accounting system to provide timely financial reporting. Once you have data in your system, you can quickly generate reports and make better decisions.
Purchase Order Management
Failing to plan purchases properly can lead to excess inventory or shortages that delay production and order fulfillment. This can be more damaging to manufacturers that practice just-in-time inventory management.
Advanced procurement systems can make buying suggestions based on inventory on hand, preset minimum and maximum levels, purchase orders that have already been placed, and even projected customer demands. The system can also analyze historical data to regulate your buying for seasonal demand and other variations.
Supplier Relationship Management
The best way to have an efficient procure-to-pay cycle is to develop a network of reliable vendors. This automatically removes the need to start from scratch for every buying need that you have. If you have a good relationship with your vendors, you can get the right quality, better awareness of market demand, increased ROI, and shortened order fulfillment lead times.
Supplier management capability allows you to track interactions with vendors, including evaluations, contracts, pricing, and performance. Real-time monitoring puts you in a position to find the best vendors, provide performance feedback, and ask for discounts, among other benefits.
Accomplishing Your Purchases
Once you know what’s in stock, it’s time to issue purchase orders for the supplies you need. A procurement management system tracks your purchase orders, ensures they’re from approved vendors, and assists in the approval process. When the goods arrive, delivery documents can be scanned, quantity and price can be easily reconciled with the PO, and a receipt confirmation is generated.
Managing Procurement Fraud
Procurement fraud is a major problem in many businesses. Whether that’s billing fraud or buying more items than required, procurement fraud can drastically hold companies back.
An online system offers full visibility into purchasing – organizations are less likely to experience general fraud. Procurement managers can easily track who bought what and when – and verify if those transactions were necessary and authorized. Also, with standard purchasing rules and proper approval workflow, businesses can reduce risk and avoid most cases of fraud altogether.
Negotiation is an essential part of developing good relationships with your supplier network, and it is crucial to have a policy in place, which is helpful for both parties involved. Negotiations mainly involve a contract, and often that means that documents are sent back and forth, in order to reach an agreement. This could confuse, as several people may have been involved in multiple conversations at different times. A contract management system makes project planning, supplier management, tender management, and negotiation much simpler as everyone involved in the process can review orders in one place.
Having a 360-degree view on every aspect of your buying process helps you track your projects and keep your finances in check. Most companies work with hundreds of suppliers every year, and managing multiple contracts becomes time-consuming, making analysis difficult. A procurement management system with advanced AI not only makes managing contracts easier but also provides you with powerful analytics and reports. You can use analytics and technology to make the right decisions at the right time.
Successful procurement starts with having the right process in place, ensuring that the significant areas are being addressed, and a plan in place will set your company up for success.