Today’s procurement teams are facing all sorts of market volatility and increasing competition, among other issues. Despite this, most of these purchasing teams are still taking the legacy route of using ERP systems for acquisition management.. Most corporations work on the mantra - ‘if it ain’t broke, no need to fix it,’ and that stops them from improving their processes and optimizing their performance. This is also the reason for the extreme inertia in purchasing departments around the globe who are still sticking to the old operating methods.
In today’s age of automation and digitization, things are quickly moving to a stage where every process is being automated. That, in return, is saving ample time and resources for teams and allowing them to focus on more daunting, challenging, and rewarding tasks. They provide the flexibility and robustness required to properly manage your end-to-end purchasing cycle. Similarly, the e-procurement solution is scalable and allows you to expand your purchasing capabilities as your business grows. All in all, they help solve the most difficult challenges that were faced by the acquisition industry while improving efficiency and providing better results.
Before we dive deeper into how the software works, it will be good to get an understanding of purchasing processes that were conventionally carried out and some of their inherent drawbacks and limitations.
Traditional approaches to managing procurement processes
At its core, acquisition has always been about purchasing goods that will be later used for production processes. Clearly, this is an exhaustive activity and involves several sub-tasks like inquiring about different suppliers, selecting the right vendor, finalizing the goods, establishing contracts and terms, and making payment.
The conventional approaches to managing this cycle were largely manual and required intensive human labor and intervention. In essence, it was done by manually contacting and coordinating with different people, managing and handling piles of physical documents, creating POs, invoices, receipts, and so much more. That approach to managing purchasing processes was good while it lasted, but it was riddled with so many flaws and drawbacks that directly impacted the company’s purchasing process.
But, first it’s important to understand the challenges leading to the solution. Let’s see some such daunting challenges faced by the acquisition industry:
Risk mitigation: Businesses face risks at all stages of operation. This is especially true for purchasing teams dealing with all sorts of market risks, supply risks, cost, quality, fraud, and other equally damaging vulnerabilities. These risks can cause grave danger to the overall health of the overall cycle. In this sense, risk mitigation can truly be achieved with the correct information by your side. If you lack authentic, correctly sourced information, you are likely to fall into another risk trap, which will damage your purchasing processes. With e-procurement, this drawback is eliminated because the approach essentially works on data and information. The goal here is to ensure that you have all the information you require at your disposal. Further, preparing proper contracts and rules and building sustainable supplier relationships is ensured with the virtual solution.
No visibility into supplier capabilities apriori: Finding the correct supplier that not only understands the importance of quality but also delivers the required goods right in time can keep all the future dissatisfactions at bay and ensure a healthy relationship. However, at your end, having extremely high expectations without knowing the supplier’s capabilities is one way to damage the process. With the digital solution, you get end-to-end and comprehensive visibility into different suppliers’ offerings. All of that can be monitored from one dashboard while ensuring that you have the required information before having any expectations.
Lack of transparency and trust: Organizations often tend to withhold information that causes problems in the long run. Further, there is often difficulty in the entire communication between suppliers and organizations, making things even more cloudy. This can be avoided by using the virtual purchasing solution to ensure that all the communication is streamlined and is in one place. This will also ensure there is a mutual trust between all the parties participating in the acquisition processes.
Lack of data / inaccurate data: This is another challenge that completely riddles legacy purchasing systems. Sometimes, there won’t be enough data, or huge irrelevant data. This was a big challenge because, without proper empirical data, it gets difficult to make informed future predictions. This can be resolved by using e-procurement that is fueled by correct and precise data.
The challenges discussed above directly impact the company’s overall growth. So, in such use cases, it is best to turn to tools that have been designed to specifically tackle these challenges.
E-procurement software is one such tool, and it has simplified the work of purchasing teams around the globe. Despite that, a lot of confusion has resisted some companies from adopting the virtual route. To easen up the shift to technology, let’s understand how the e-purchasing process works.
How does e-procurement work?
At its core, e-procurement softwares digitizes the entire purchase cycle and centralizes all related data at one place. In doing so, it ensures that you don’t need any paperwork or physical documents to get the job done, and this goes on to minimize errors that could creep in due to manual intervention.
In terms of working across the acquisition cycle, here is how e-procurement facilitates that:
Identifying the requirements
Every procurement cycle begins with identifying the goods that need to be procured. The software takes care of this and streamlines the step by centralizing everything on the database. Doing so provides the purchasing manager with all the insights they need to have an idea of the current inventory, what needs to be purchased, and making all the budget-related calculations. On the other hand, the traditional approach would take a lot of time because it relies on manual calculations and paper-based approaches.
This step is generally about verifying the suppliers or vendors from whom the inventory will be purchased. With e-procurement, this problem is kept at bay, and the entire process is accelerated. The software does all the verification and validation without requiring much human intervention. Most of this validation is carried out in a non-paper manner, and all the information is stored in the database to keep you up to date.
Ordering the goods
Once you have identified what needs to be purchased and validated the suppliers, the online purchasing system enables order processing and automatically orders your inquiries to the vendors. You get the ability to manage inventory using dedicated inventory management modules that help you optimize inventory levels, eliminate requirements, and effectively manage stock at all points in time. Further, it easily gets integrated with other business tools so as to ensure that you get a comprehensive view of all the moving parts and are able to base your decision on factual data.
Tracking the order
Once the order has been placed, it is important to track the order to ensure timely delivery. But, with a traditional approach you utilize human resources to track orders, which gets automated with the software solution. The platform keeps getting real-time data about your suppliers so that you can know all the whereabouts in real-time, without much effort. This speeds up the entire process and gives you certainty, which allows you to better plan your next moves.
Finalizing The Purchase Order
This step is all about making and finalizing contracts, creating invoices, and making the required payment. This is also simplified using digital acquisition systems that easily integrate with different payment methods and ensure that you can easily make the payment. Further, all the invoices generated are shared digitally and stored on the cloud, which eliminates the possibility of losing or misplacing your purchasing invoices.
Reporting and analyzing the past purchases
Since acquisition is an ongoing process, your cycle should not stop at just making the purchase; instead, it should be cyclic. You should have a mechanism to be able to track, report, and analyze your past purchases and identify patterns for future. Since the system stores all of your invoices and payments, it is in a position to generate on-demand reports in the form of charts and graphs. These reports give you a visual understanding of your past purchases and their trends. That way, you are in a better position to make further decisions. Plus, these reports are also convenient when you want to share financial information related to acquisition with other people in your team.
Benefits of E-procurement Solution
Improved visibility into spending: It works to give you all the data you require to find patterns and derive information from. In doing so, you get the utmost visibility into your spending. With an amazing feature of smart analytics and data centralization, you can monitor your spending and ensure optimum purchasing decisions.
Automation for most mundane yet important tasks: It gives you the chance to automate most internal processes such as RFX events and supplier evaluation, PO tracking, and more, which translates to higher operational efficiency. Since these tasks can be done without human labor, the software solution accelerates these tasks and mitigates risks.
Higher integration: It integrates with most of your business tools and processes. This includes all the internal departments and the tools used therein, like HR, customer support, and so on. This integration allows you to get all the information in one place and view things in the true dynamic that exists and is not statically isolated.
Digital storage leads to quick documentation and fewer errors: Since all the data is stored digitally on the cloud, it is possible to quickly replicate the documents when needed. It also enables us to work with different templates and reduce the turnaround time even more. Further, this approach reduces the vulnerabilities and chances for errors.
Take your procurement global: It performs purchasing operations in different languages, currencies, and logistic operations. You can connect to suppliers from across the globe, which gives you a wider scope of finding the correct fit suppliers for your business.
Data and information fuel today’s world. There is no reason why you shouldn’t fuel your purchasing processes with the same. E-procurement gives you the perfect opportunity to streamline and simplify your processes without burning a hole in your pocket or in your business finances.
With this, you can easily gear up your purchasing approach to a smart and simplified virtual procurement solution - Procol. It assures fastest deployment, variable/ flexible costing, user-friendly interface, and round the clock support for consistent growth of your acquisition process. It’s time to step towards a more optimized future by adopting the virtual purchasing solution for your business!