The B2B procurement process, which involves finding, ordering, and buying goods or services, is usually carried out manually. It involves sharing data, purchase requisitions, approvals, orders, budgets, and other relevant information with various departments to complete the procurement process. There is a huge possibility that the shared data is misrepresented, ignored, or completely misunderstood with manual processing. Therefore, it results in an increased cost of procurement. Procurement management software provides the ultimate solution to automate the procurement process, thereby reducing the overall operational cost of the business.
Challenges In Procurement
The procurement teams should find solutions to challenges that influence spending money, time, and effort in purchasing goods and services to run the organisation. Some of the key challenges are:
- Risk mitigation – Supplier risks, market risks, fraud risks, and delivery risks increase with new suppliers and changing manufacturing process demands.
- Dark purchases – Without automation, it is impossible to stop making purchases outside the defined purchase requisitions. It can quickly become expensive for the organisation.
- Poor transparency – Handling huge volumes of data and sharing only relevant information becomes tedious without automation. Poor transparency in data handling will result in increased procurement costs.
- Inaccurate data – Without a centralised data solution, organisations must manually share data, resulting in data discrepancies.
- Inadequate supplier relationship – Suppliers and vendors are major building blocks of any organisation. Maintaining a good relationship with them is essential to reduce operational costs.
Technology has enabled organisations to look for automation solutions for key problems. Many organisations have started adopting automation of multiple departments. The procurement process is in desperate need of automation. The right procurement management software can address all of the challenges mentioned above.
How Does Procurement Software Benefit Organisations?
A research firm called Level presented a report in 2019 highlighting the improvements that an automated procurement solution can offer. Companies that integrated procurement management software with their enterprise resource planning (ERP) system experienced multiple benefits directly impacting profitability. They were able to reduce the procurement processing time by 56%. The supplier performance metrics improved by 33%. The automated software proved beneficial in every aspect of the procurement process.
Before incorporating organisation-wide procurement software, a thorough understanding of the concept is crucial. The procurement team may inhibit automating the process because people are not always interested in changing their ways. Setting up the automation software and training the procurement teams to use the software has a learning curve. Once the automated system is in place, your organisation can drastically reduce costs while improving the quality of procurement and supplier relationships.
#1 Standardise The Process
Integrating cloud-based procurement software with the existing ERP system improves communication and collaboration between multiple departments. Templates for all documents, including purchase requests, purchase requisitions, purchase orders, approval orders, contracts, etc., are readily available. The input can also be automatically populated to ensure compliance.
#2 Improve Scalability
As the automated procurement solution supports global currencies, languages, and logistics, you can buy supplies from another continent with the same ease as a local supplier. The automated solution eliminates or minimises staffing requirements, thus making scalability a reality.
#3 Improve Spend Control
The automated system instantly reduces processing time and improves accuracy. High volume tasks and time-consuming procurement steps are simplified, resulting in lowered procurement costs. The procurement teams can develop strategic payment options based on funds availability in real-time. Dark spending, a bane of the procurement process, is eliminated with the automatic three-way matching of purchase orders and invoices.
#4 Optimise Supply Chain Management
Supply chain disruption is one of the biggest hurdles for the procurement process. In manual procurement management, accurate data is unavailable, making it impossible for the procurement team to solve supplier issues proactively. Automated procurement systems process massive volumes of data to generate data analytics that define supplier behaviour. The procurement teams can use this data to discontinue unreliable vendors and maintain strong relationships with reputable suppliers.
#5 Improve Inventory Management
The inventory management team can also reap benefits from an integrated procurement solution. The reporting feature is useful in maintaining a perfect balance in the inventory to ensure the smoother running of the business. In addition, the overhead cost of maintaining excess inventory and production halt due to supplier malfunction can be eliminated with accurate inventory control.
One of the biggest selling points of procurement management software is that it can bring all the departments together in making procurement decisions. It will improve procurement visibility by 52%. The automation system supports various optimization models, making continuous improvement possible. Procurement solution enables the organisation to manage the procurement process as a companywide process incorporating multiple departments to supply input for adequate optimization. It will help increase return on investment (ROI) and reduce the total cost of ownership (TCO).