Ensuring maximum operational transparency as well as automating time-consuming manual processes is a real trend in the business world in recent years. You can see these changes virtually in all fields, and even in government sectors, but these advances can be especially useful in retail and e-commerce.
Manufacturers, suppliers, sellers and end consumers - with so many players, businesses in these niches include a lot of working elements, such as order collection, production, testing, supply, delivery, and selling. The gap or negligence in one link may cause some troubles for the business owner, who usually doesn’t delve deeply in each minor operation. What’s more, it takes a great deal of time for him or her to organize an effective supply chain, from the moment of creating a purchase requisition up to the product marketing.
That’s why more and more trading entrepreneurs have started to implement the use of a procurement system. What do they get as a result of that?
Procurement System Definition
For those who are not already familiar with this sophisticated term, we’ll give a simple explanation: a procurement system is a software synchronizing all components and sides of the supply chain. Typically, this system сonsists of three crucial parts: operational department ordering systems, e-markets, and vendor websites. By integrating it into an e-commerce business, you not only automate the routine tasks (getting orders, paying to suppliers, invoicing to buyers), but you can also manage your processes in a more effective, predictable, transparent, and secure way.
For example, a procurement system provides you with the actual information on buyers’ needs so that you can quickly sign a contract with a seller regarding automatic shipment of goods when the stocks of consumer favorites move to zero.
Benefits of the Procurement Software
- By using this kind of software, first of all, you implement one of the major points of your corporation’s strategy, managing budgetary funds more effectively by scaling down expenditures.
- Secondly, an automated procurement approach allows you to optimize the workflow, significantly reducing the time spent on searching for and purchasing resources. By creating e-catalogs based on the procurement indexes, this software uniquely identifies what products should be replenished, thereby eliminating the necessity of your participation in repeat purchases.
- The next advantage is that from the first request to the final invoice, you have full control over all processes in the supply chain. Therefore, you can easily determine whether your procurement politics match the company needs and what should be modified.
- One of the central benefits you get is the increasing transparency of the procurement process so that there are no loopholes for corruption. This also proves that products meet the highest standards of reliability and safety adopted in a particular industry.
- Also, for medium and small enterprises willing to bargain, the procedure for taking part in various auctions is simplified.
- Finally, with the help of the e-procurement system, businesses can choose the best products, both in price and quality, as well as by parameters of reliability and functionality.
Types of Procurement Software
When deciding to introduce the procurement system into your own business, you should understand clearly what type of software will fit your business needs. We’ll touch on nine areas where this technological innovation can help your business:
Your spendings equal how much you spent on production and sales, which also includes the total consumed resources, the cost of labor, etc. The lower the costs are, the higher the effectiveness of the production is and the greater profit your enterprise gets. The main spend analysis tasks of the procurement system are:
- Assessing the implementation of the cost plan and its changes compared to the previous year.
- Evaluating the influence of factors on cost changes.
- Identifying reserves to reduce costs.
- Proposing the ways of leveraging identified reserves to reduce costs and increase the profitability of production.
Such an analysis is truly indispensable in case of the incomprehensible profit decreasing tendency to figure out the “black hole” where the majority of your costs go to. For example, if you released a new series of goods expected to be more profitable than the previous one, but despite its high popularity, your budget is still stuck in neutral, you can figure out what the issue is quickly.
Not so long ago, there were practically no services providing supplier lists, but with the emergence of procurement systems, this issue doesn’t bother entrepreneurs anymore. In special built-in catalogs, you can find thousands of reliable candidates with reviews and ratings. According to your buying needs, you’ll be able to instantly connect with suppliers ready to compete for your business and help cut your supply costs and risks. All you need is to structure your requirements, go through proposals, and select the most suitable supplier.
Supplier management solutions
When managing purchases, you can face such a challenge as the necessity of optimizing business processes, due to the company growth and workflow complication. You can feel a lack of transparency during the work with suppliers and you strive to ensure that purchases are carried out at optimal prices, while the goods are of good quality, the warehouse is not filled, and everything is delivered on time. How do you solve these problems?
Supplier relationship management solutions, as a part of the procurement software, allow you to reduce costs, minimize risks in dealing with suppliers, build a positive connection with them, and systematize the operations of purchasing goods and services within the company. The SRM concept increases the transparency of transactions, meets all regulatory requirements related to the procurement process, and helps to select the most reliable suppliers.
E-sourcing is an electronic auction of the reverse type, where suppliers compete to provide the customer (initiator of the competition) with the lowest price. You can take part in a tender via the procurement software or having access to specialized websites. With this approach, the bidding occurs in real time with limited frames. This leads to a dynamic, fierce competition and, therefore, allows the buyer to get the best prices quickly.
It’s a perfect solution for business owners who don’t have a lot of time to analyze and choose suppliers in the price-quality ratio, such as when you urgently need to fill an order but all your resources are exhausted.
Contract management system (CMS)
To execute customer orders and plan purchases more competently, give a try to a contract management system. This software keeps information about potential and existing customers, sales volumes, and competitors.
It’s an essential tool for most sophisticated projects involving contractors who refuse to use paper format. Such a system allows you to monitor numerous activities with cost implications and can be especially helpful for automating administration, guaranteeing compliance, tracking risk, running reports, and triggering alerts. In addition to these possibilities, contract management software provides a centralized repository for workers to access all contracts worldwide in one place immediately.
For example, it can come in your handy when analyzing an authority and decency of contractors to define who it would be better to end the relationship with.
It’s becoming increasingly popular to conduct purchases in electronic form. Buying services in the e-procurement system is the same profitable as buying goods. The difficulty here may be that the recommendations and feedback of colleagues guide many customers, not market research. However, the rich database and broad possibilities of electronic procurement systems will help you choose the best offer with a limited number of participants. This means that instead of a one-year market analysis, you can find an appropriate supplier during the weekly auction without the fear of contracting with a low-skill or unreliable candidate.
The idea of e-invoices originates from the moment of an increasingly popular paperless trading tendency. Electronic invoicing is a low-cost transaction processing model that effectively applies digital technology to transform the manual and paper billing process into a faster and more convenient electronic messaging and accounting system.
In terms of logistics, this approach reduces the amount of paper used to document and store payment information. By issuing electronic invoices, sellers get rid of a large number of manual processes, such as printing, mailing, recording, saving, and reconciling paper invoices. The adoption of e-invoicing standards scales down sending cycles. In addition, timely notifications and invoice status updates, faster invoice transfer for payer approval, and dispute resolution systems improve customer service. Payers receive regular messages on the status of invoices and payment terms, which allows them to estimate cash outflows with greater certainty and manage their capital more efficiently.
Having an integrated procurement system, buying companies pay suppliers according to the procure-to-pay, or P2P model, which differs from the traditional way when they use an ERP system. However, users are provided with a convenient combination option allowing them to add a source-to-pay solution to solicit quotes from suppliers.
Examples: Ivalua, Puridiom
Some procurement systems offer the majority of the possibilities presented described above in one software. Such a combination of features is called a suite, and it’s up to you what set of functions to choose.
The Innovative Way of Procuring
Now you have a general understanding of the incredible opportunities procurement systems open for commerce entrepreneurs. They change a traditional way of managing a supply chain and can help boost your profit through the optimized and transparent workflow. Due to the abundance of procurement solutions on the market, you can conduct a digital revolution of your business right now.