Procurement is an essential and valuable business function with the power to influence corporate profitability. At this moment, digitalization as a tool is playing an increasingly important role in procurement for both visibility and cost-effectiveness. However, most experts lean towards ERP software when it comes to digitizing procurement.
ERP software can integrate all corporate operations into a single platform, including HR, finance, supply chain management, customer relations, and so on. If you’re seeking for ways to automate the procurement process, ERP is a viable solution and can handle basic purchasing requirements.
But does one size really fit all? How well do ERP features handle specific business functions?
Sourcing and procurement is certainly one area which requires functions that go beyond what a normal ERP system can provide. Procurement is no longer viewed as a simple demand volume vs per-unit cost equation. Sourcing has become more complex, encompassing a wider spectrum of challenges. Even the most advanced ERPs lack the scope and depth of functionality required to address procurement’s ever-changing needs. The areas included are supplier risk management, category management, strategic sourcing, contract administration, and spend management.
Here’s a quick list of the top reasons why ERP is not the perfect solution for your procurement teams:
- Poor user experience
End-user simplicity is essential and ERP systems aren’t built with procurement in mind.
User adoption of ERPs is low due to unfriendly and overly complex processes, resulting in lowering procurement teams’ efficiency, visibility, and other metrics. These systems have grown in complexity to meet the demands of finance and accounting departments.
- Lack of Flexibility
ERP software allows businesses to handle all of their major business processes utilising a single data set. However, they fall short when it comes to the requisite levels of procurement flexibility.
ERP solutions do not always deliver the kind of transparency that businesses require. These systems are not designed to classify complicated cost allocations and uncover spend analysis unlike procurement systems. Furthermore, in an ERP system, supplier management and extracting critical data from the database are a significant letdown.
A good procurement system should be able to mobilize and automate procurement operations across departments, locations, and business models, which is something that older ERPs are not capable of.
- Lack of procurement analytics and unrealised ROI
While ERP systems have procurement modules or features, they only address the most basic requirements. To effectively cut indirect procurement expenses, it’s critical to provide all employees with mobile purchasing and expenditure requisitioning features.
You should be able to discover the following with a good procurement system:
- Supplier price differences
- Analyze spends with each supplier
- Progress in supplier diversity
- Compile and analyse from a list of authorised and high-performing providers
- Expectation versus Deliverable Gaps
Procurement teams need help making informed purchasing decisions, leveraging expenditure insights, and achieving economies of scale. ERPs, on the other hand, are built to categorise and integrate business processes across the enterprise. This explains why ERP systems struggle to handle complex procurement processes.
While there are alternatives for optimising modules, customizations are expensive and don’t justify the high cost. You’ll struggle to achieve healthy adoption levels without a procurement tool with an intuitive user interface, an accessible mobile app, and optimised multi-level functionality that complies to staff roles and responsibilities.
- High implementation cost
Buying ERP licenses for each user or department is expensive. In fact, the estimated price of software and services for an ERP implementation ranges from $150,000 to $750,000.But that’s only the start. Maintenance costs are usually in the ballpark of 20% part of the total software cost. Such high cost systems with less organization-wide utility are not an ideal choice for managing procurements.
What’s the solution here?
Thinking outside your ERP and adopting e-Procurement software is a far better solution to addressing these issues. E-procurement platforms are specifically intended to handle all of your procurement needs in one place.
These softwares are simple and intuitive to operate, and they don’t require much training. E-procurement solutions can be swiftly established and provide a fast return on investment because they are cloud-based.
Why an e-Procurement software?
Here are some advantages of using eProcurement software instead of an ERP for your procurement team.
- Employees obtain a simple, user-friendly tool for planning and controlling their purchase process.
- Employers have complete visibility of their procurement process, allowing them to discover areas where productivity and cost can be optimized.
- All aspects of the procurement process are supported, including sourcing, purchasing, supplier management, contract management, expenditure analysis, and much more.
- Greater clarity and adherence to overall organizational processes as well as industry norms.
Cloud procurement software gives your organisation the flexibility it needs to continue doing business as usual while providing a framework that informs purchase decisions and encourages a cost-conscious procurement culture, regardless of where your team is located.
By providing your employees access to mobile procurement software, you can minimise out-of-office delays, missing receipts, approval bottlenecks, and rogue spending. Overall, implementing a cloud-based procurement system can assist you in being more strategic, value-driven, and cost-effective.