Procurement System at a Glance.

The responsibility of ensuring an uninterrupted supply of goods and services required for the smooth functioning of the organization lies with the procurement department. The procurement manager ensures that the right quantity of goods at optimal costs are available for various departments of the organization, without compromising on the quality of goods/services. In addition to this responsibility, the manager also needs to ensure that policies and regulations are adhered to and costs are maintained within the budget. Having a solid procurement system in place helps the business streamline expense management.

procurement management system

Importance of Procurement Management System

A well-managed procurement function improves business outcomes significantly. Before making a purchase, the procurement department needs to analyze the market to ensure that the best deal is made. Here are some of the important functions carried out by the procurement department:

Working on Purchase Deals:

Purchase managers need to perform an in-depth analysis of the market before concluding a purchase. Getting the best deal for goods and services in terms of pricing and quality is an important procurement function. Thorough evaluation of all the vendors based on their reputation, timely delivery of orders, and quoted price needs to be done by the procurement team. In addition to evaluating the vendors, market changes also need to be factored in while making the buying decision. An e-procurement system provides a list of approved vendors from which the procurement team can choose the right supplier.

Compliance Management:

One of the most important responsibilities of the procurement manager is to ensure that every purchase order adheres to the policies and processes defined within the organization and compliant with the procurement laws and regulations. To ensure compliance with laws and regulations, the procurement manager needs to stay updated on the changes in laws and regulations and update the company policies accordingly. An e-procurement system that flags inconsistencies and non-compliance will aid the procurement manager to identify and resolve compliance related issues efficiently.

Establish Strong Vendor Relationships:

Maintaining a strong and reliable vendor base is extremely important in procurement. Continuous review of vendor contracts and relationships is needed to ensure that the organization’s requirements are adequately met. All vendors approved by the procurement department must provide good quality service and goods and adhere to terms and policies while in contract with the company. Procurement KPIs on vendor performance must be reviewed periodically to ensure consistent performance.

Management and Coordination of Procurement Staff:

The procurement manager must enable seamless communication between all the stakeholders. The procurement management system must ensure that daily tasks and operations within the procurement team are well planned and coordinated. Completing tasks before deadlines, quick resolution of issues and process bottlenecks, and quality inspection of delivered goods and services are some of the routine tasks performed by the procurement staff.

Maintaining and Updating Data:

Procurement data needs to be maintained and updated for audit and regulatory compliance. Data on the items purchased, cost price, supplier information, inventory list, and delivery information must be updated by the team. Accurate documentation forms the basis for reporting and budgeting.

An e-procurement software empowers the procurement team to carry out its functions efficiently with optimal resource utilization. Procurement solutions ensure seamless communication and coordination between various procurement tasks, accurate and consistent documentation, and cost and time savings. Procurement staff is free from repetitive tasks so that they can focus on finer details and contribute more towards organizational growth. An e-procurement system enables CPOs to make data-driven business decisions.

Archaic procurement systems are not equipped to deal with the complexity of modern procurement processes. Manual procurement systems slow down the processing speed and introduce errors and discrepancies in the procurement process. Deploying a cloud procurement system eliminates the inefficiencies and discrepancies in the procurement workflow.

What is a Procurement System?

A procurement or purchasing system helps organizations streamline and automate the process of purchasing goods or services and manage inventory. All the processes related to the procurement function can be efficiently handled through the procurement management system.

What is the meaning of procurement management? Procurement management is also referred to as the source-to-settle or procure-to-pay process. The procurement management system manages all the steps from sourcing to payout. In addition to managing the entire purchase lifecycle, procurement management is also about managing vendor relationships and streamlining the procurement process.

Procurement systems empower procurement managers to manage all the steps in the purchasing process with ease. Procurement management is a complex process that spans several interrelated activities like transactional purchasing of services and goods, inventory management, integration with accounts payable, and updating supporting documents. A procurement application helps manage activities like:

  • Preparing and sending purchase requisitions
  • Preparing and approving purchase orders
  • Choosing vendors through quotation managemnet
  • Managing vendor relationships
  • Approving delivered goods and services
  • Review and approval of invoices

Components of a Procurement System

Procurement systems or solutions are designed to overcome the disadvantages of manual procurement systems and accelerate and streamline the procurement lifecycle. All the components of the procurement system should be taken care of by the e-procurement software. The modules of an ideal procurement system are:

Purchase Requisitions:

Purchase requisitions contain all the information regarding the requirement for goods or services. Any department having a requirement for goods or services prepares a purchase requisition with all the necessary information to the procurement department. An automated procurement system helps in quick approvals so that the procurement team can start vendor identification. The status of purchase requests can also be viewed transparently by all stakeholders.

Purchase Orders:

Purchase orders (PO) are generated by the procurement department and sent to the vendor for procuring goods or services. A digital procurement system allows users to automatically generate purchase orders from the information derived from purchase requisitions. Automated procurement solutions enable the procurement team to track, review, and manage the status of POs at all times from any device at any time.

Purchase Invoices:

2 way or 3-way matching of purchase invoices for validating the information contained in the purchase requisitions, purchase orders, and invoices is an important step in the procurement process. The procurement system must enable automated matching of invoices for quick and timely approvals and processing of payments without any delays.

Third-party Integrations:

The procurement software must integrate with third-party applications such as sourcing databases and vendor systems. Seamless integration with these apps ensures that work is not interrupted, and procurement team need not spend too much time gathering data manually from external sources.

Vendor Management:

Timely processing of purchase invoices ensures the strengthening of vendor relationships. The procurement management system must provide a centralized database that captures all the vendor information accurately and consistently. Enrolling new vendors and evaluating existing vendors can be done quickly and easily with a centralized vendor database.

Procurement Analytics:

Procure-to-pay software must provide key actionable insights from the procurement data. The solution must enable real-time tracking of key performance metrics and generation of customized reports for leadership to make strategic business decisions.

Need for Procurement Management System

Saving business costs in an increasingly complex and dynamic market scenario requires intuitive and agile tools that streamline the procurement process. Online procurement software improves the performance of the procurement function by integrating supplier management, sourcing, PO management, and risk management into a single procure-to-pay platform.

Here are why businesses need procurement software:

Spend management: Managing organizational spending can be done by streamlining the procurement process. Controlling the purchases that occur beyond the formal processes and policies is a challenge for organizations. Implementing a procurement software system standardizes the operations within the procurement system. Standardized procurement workflows enable employees to follow a clear process and direct purchases to authorized vendors. A procurement system makes it easy to implement spend management policies through compliance management and audit-ready purchase order workflows.

Streamline source-to-settle lifecycle: Redundant and cumbersome manual processes bring down the efficiency of the organization. Procurement software streamlines the entire procurement cycle, from sourcing to settlement. Automating the repetitive steps in procurement enables easy management of purchase approvals and frees up resources for strategic activities.

Standardize contract management: Purchase contracts are legally binding documents that need to be free from deviations and inconsistencies. Procurement applications standardize and streamline the contract management process so that deviations are instantly identified, approvals are accelerated, and alerts and notifications are issued to concerned authorities for timely contract renewals.

Improve vendor management: Qualifying and evaluating a potential supplier’s capacity, compliance with the company policies, and viability is important to ensure that the vendor provides more strategic value. Procurement software makes vendor management more effective by automatically verifying vendor credibility and issue alerts when contracts are due for renewal.

Top 6 Must-Have Features of a Procurement System

Powerful procurement systems are packed with features that handle all the tasks of the procurement function. Businesses must choose a procurement solution that is easy to deploy, scalable, customizable, and value for money. Above all, the procurement solution must fit the unique requirements of your business. Here are the top 6 must-have features of a procurement system:

  1. Integrated and Intuitive Interface: Manual procurement systems are decentralized and siloed systems that result in standalone records and separate documentation. Automated procurement solutions provide a unified view of purchasing information. Complete information of order requests, order status, approvals, supplier information, and invoice information is presented in a centralized user interface.
  2. Vendor relationship management: Vendor relationship management is a core procurement function that helps identify, onboard, manage, and analyze vendors that span across multiple departments. Top procurement software allows the procurement team to manage vendor relationships effectively. The software enables easy and quick onboarding, qualifying, and managing of vendors. Allowing vendors into the procurement system will empower them to track the status of orders, delivery schedules, payments received, and product shortages electronically.
  3. Compatibility with other systems: The procurement system should seamlessly integrate with other business systems. Compatibility with other business systems allows users to get visibility of finance data, scan data history, deduplicate, and update data across finance and procurement systems.
  4. Flexible, Scalable, and customizable: Procurement software must fit the unique requirements of your business. Easy customization of the features based on business requirements enables companies to derive value for their investment. As a business grows, the procurement solution must be able to scale up to increasing business workload. And the procurement system must be flexible to adapt to changing market requirements.
  5. Robust data analytics and reporting: The management looks to get actionable insights from the procurement system for budget forecasts and making strategic business decisions. The relevant data should be presented to the management in an easily understandable, prescriptive, and predictive manner. The procurement system must be able to manipulate and display procurement data in easily understandable formats like charts, pivot tables, etc. for analysis and reporting.
  6. Cloud-based access: New age businesses require omni channel, on-the-go, always accessible procurement solutions. Cloud-based procurement solutions provide anytime, anywhere access to procurement data and on-the-go approvals. The core functionality of cloud-based procurement solutions includes supplier management, contract management, sourcing, requisitioning, payment, and purchasing.

Advanced features like integrated payment settlement, inventory management, product search, and automated expense controls are also provided by procurement systems.

Cflow is a powerful workflow automation platform that can optimize key business functions within minutes. Customized workflows pertaining to purchase requisitions, quotation management, purchase orders, and invoice payments can be created and connected seamlessly. Cflow’s document designer enables automatic generation of purchase orders based on a configurable rules engine. Our no-code cloud BPM solution helps businesses to skip cumbersome paperwork and streamline the procurement process.

Conclusion

Procurement management has become more complex and demanding in the last decade. While each organization has varied sourcing and purchasing requirements, the primary intent of deploying a procurement solution is to improve the performance of the procurement function. The procurement management system is all about bringing efficiency and optimization into the procurement function. Automated process workflows improve productivity significantly and eliminate the chaos from manual procurement processes. Build the best procure-to-pay systems with Cflow. Explore Cflow by signing up for the free trial right away.

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