4

WHY PROCUREMENT SOFTWARE? Do You Really Need Procurement Software?!

Procurement management solutions have been gaining momentum across a wide range of industries. This type of software has become so popular that you could almost call it a trend, albeit one that has serious longevity for organizations of all sizes. Nevertheless, you might wonder if this is something you really need, especially if your company’s current purchasing processes are well established. When asked this question, a high number of businesses are quick to express their desire to save time by automating tedious procurement tasks.

This acknowledgment is great, but these same organizations are usually unaware of the amount they can save through the use of this technology. Unfortunately, without this data, they may fail to realize the full value of a procurement management system and relocate its implementation to a lower position on the priority list.

In order to measure the savings, we should first shed some light on what to expect from this kind of software. Generally, the features offered by procurement management software fall into two categories: managerial tools and operational tools.

..

MANAGERIAL TOOLS: Plan The optimal approach to procurement planning involves a number of possible activities.

First is setting hierarchies (at the company, branch, and department level, if desired) for an effective task workflow.

Then user permission control keys can be set to ensure a precise delegation of responsibilities. When these two are combined with an established order approval procedures the likelihood of any maverick spending is greatly reduced.

To make your procurement planning even more successful, use tools like budgets and projects to monitor company spending at every level.

Organize

Control

An organized purchasing process is essential to enhance collaboration and minimize miscommunication throughout the entire organization.

Every manager understands the value of data that is updated in real-time, for control.

In order to implement a streamlined system, all stakeholders should be able to work together seamlessly.

Using operational tools - described below - guided by the established procedures facilitate and coordinate between the input from multiple individuals and departments.

It provides information about actual figures compared to targets and highlights the areas that need improvements. The purchasing software takes care of the tedious job of manual updates by automating tasks that typically demand very “hands-on� attention from managers.

..

OPERATIONAL TOOLS: Requisitions for procurement officers to receive, understand, and fulfill internal orders from everyone in your company. Quickly determine what needs to be purchased, while keeping all parties informed throughout every phase of a transaction.

Requests enable buyers, managers, and other stakeholders to work together to define what is needed, where, when, and from whom. Request forms can be used as an RFP or RFQ to convey this information to the designated suppliers, receive their quotes, and negotiate with them to achieve best terms. Cloud-based platforms allow team members in different locations to review and evaluate offers in real-time.

Purchase Orders can be sent to suppliers and tracked at every stage of a transaction. POs can also be completely customized with logos, specific fields, a serial numbering system, and standardized terms & conditions footer. Records of Purchase Orders can be a rich source of information for reports and business intelligence.

Contracts control costs by fine-tuning and reinforcing supplier agreements. Contracts can be auto-generated from awarded bids, eliminating manual data entry. The expiration date for a contract can be set and users will be automatically reminded when it’s time to renew. The contract information gets updated instantly after each transaction.

Deliveries to ensure that each order is delivered on-time and at the right location. If desired, an advanced delivery note can be requested from suppliers. A special form is made available for fast two-way matches; to compare deliveries with POs and book-in items to guarantee what was ordered is actually received.

Invoices a tool designed for effortless three-way matches between POs, deliveries, and supplier invoices. Confirm what has been paid, approved for payment, and is still pending approval. Use this feature to achieve greater cost visibility, which leads to increased financial control.

Providers of Procurement management software offerings vary from simple Purchase Order automation applications to platforms with multiple integrated solutions. Highend ones include Procure to Pay, Strategic Sourcing, Contract Management, Supplier Relations, Spend Analysis / Control, and Order Management. Their pricing strategies vary as well, some charge according to the solutions required, others charge according to the usage of data by applying restrictions on the number of transactions and/or items and suppliers. The easiest and most common are those who charge per user, which is preferred by those who need to work with a certain budget.

..

The benefits of procurement software are most noticeable within the areas of communication and documentation‌ ..

Communication is critical, for a seamless workflow that is free of preventable conflicts and discrepancies in the procurement process. x`Within every company, collaboration is required among managers, technical experts for a specific item, the individual actually placing the order, and the list goes on. External communication with suppliers is of equal importance, especially for avoiding discrepancies in quality and misunderstandings about delivery time or location, errors that can be potentially devastating. Overall, this kind of software improves the workflow and

.

Documentation of all purchasing activities is necessary in order to enhance visibility, which leads to preventing recurrent incorrect orders, overspending, and encountering legal problems. Procurement software offers an opportunity for real-time monitoring of transactions and custom report-building, two advantages which reduce the likelihood of future challenges. Automatic updates guarantee that all documents generated will be an exact reflection of the current status.

As mentioned earlier, without calculating the amount that can be saved through the use of this technology, decision makers fail to realize the full value of a procurement management system and therefore move it to a lower position on the priority list. After all, we all agreed that the reason for implementing a Procurement system is to see an encouraging ROI.

In order to measure the ROI, we need to calculate the savings that can be achieved by using the new system. It’s evident that each case is different based on their type of business and work structure, but the following metrics could be helpful guidelines for this “Need Assessment” study: ..

Time Savings Many studies were conducted to measure the time that can be saved, including saved time due to the process automation and due to easing accessibility to information.

The outcome of these studies varied between 60 to 80% timesaving.

Minimizing Maverick Spend Recent studies show that organizations spend an average of 35% more when there is no system in place for managing contracts. That’s in relation to indirect procurements, which is used primarily for the day-to-day running of the business.

Cost Savings The latest statistics show that companies that have been using e-procurement systems in negotiating with their suppliers lowered their costs by 5 – 15%.

60 - 80% 35% 5 - 15% Human Resources Large amounts of money are being spent in training employees, and in losses caused by human errors and incompetent staff. These costs vary largely from one company to another, so it’s hard to put a range that can be successfully applicable.

Finally, the best answer to why procurement management software is necessary can be found with Tradogram. Try using the application to discover the competitive advantage that smooth communication, safeguarded data, and attentive service can provide. Tradogram is best suited for companies that would like an optimal ROI - something that would be foolish to refuse! Tradogram users have access to all the aforementioned tools, plus the effortless functionality intrinsic with cloud-based application

www.tradogram.com