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What is procurement software?
Procurement software allows businesses to manage their purchasing cycle and maintain optimum inventory levels at all times. The software helps to generate purchase orders (POs), execute those orders, match invoices to materials received, and make payments to suppliers. It helps to connect and manage interactions between all stakeholders involved in the purchasing process including buyers, vendors, approvers, and receivers.
The benefits of procurement software
Businesses are increasingly using digital tools such as e-procurement software to improve their supply chain operations and increase productivity. It offers substantial benefits such as:
- Reduced cost: Procurement software transforms paper-based workflows into electronic transactions, thus reducing the cost associated with paper processes, printing, and physical storage. Digital copies of POs are more secure than physical papers which can be easily forged, stolen, or lost, leading to a dispute between supply chain partners.
- Shortened business cycle: Sending digital purchase orders to suppliers and vendors is far more convenient and quicker than sending physical POs through offline modes such as couriers. This reduces the overall procurement time and speeds up the supply chain process.
- Inventory control: Using pen and paper or Microsoft Excel spreadsheets to manually track and monitor hundreds of items and materials in stock can be a daunting task. With procurement software, businesses can easily monitor the in-house stock level of all items and can even set threshold limits to automate the reordering of items. This ensures sufficient stock quantity at all times leading to an uninterrupted supply chain process.
- Transparent spending: Procurement software keeps detailed records of every spend made by the company for purchasing materials. This brings transparency for accounting and support businesses while writing budgets for the next procurement cycle. Having detailed records of purchases made in the previous cycle enables businesses to analyze and identify their critical needs and the quantity of those items that have been consumed, which is a vital indicator in setting procurement targets for the next cycle.
Typical features of procurement software
- Supplier management: Manage interactions with suppliers including their contact information, supply and payment history, and communications.
- Requisition management: Review, approve, and cancel requests made for procuring goods and services.
- Catalog management: Create and manage digital catalogs of products and services with details such as product description, specification, and pricing.
- Invoice processing: Manage supplier invoices, match invoices with the goods received, and make payments accordingly.
- Purchase order management: Manage the entire PO lifecycle, from creating and issuing the POs to procuring goods and making payments.
- Spend management: Track the amount of money spent on procurement activities for various items.
Considerations when purchasing procurement software
- Integration with existing systems: Before you buy any procurement solutions, first check the system viability and application requirements. See whether the application is compatible with your existing IT infrastructure and if it requires any additional installations or upgrades for operating. Secondly, check ease of integration with any of your existing applications, such as enterprise resource planning (ERP) or supply chain management (SCM) software. Smooth integration with these existing systems will allow the incorporation of business structures and data already in place, such as workflows, supplier and vendor details, and catalog information. This will save you and your team from repetitive data entry.
- Mobile capabilities: Organizations are increasingly pushing their employees to perform more activities via mobile applications, as it increases operational speed, reduces reporting time, and improves stakeholder communication, both internally and externally. Therefore, it is recommended to choose solutions that offer mobile accessibility, either via native mobile apps or through a mobile web browser.
- Support: Support is one of the key factors that should be considered while evaluating a new procurement solution. There can be glitches with software at any time, which can disrupt your procurement cycle and halt the supply chain. It is recommended to have complete clarity on the level of support offered within your software, as well as costs for any additional ad hoc support. Also, check whether the vendor provides any training manuals or instruction videos to train your employees on how to use the software.
Relevant procurement software trends
- Cloud-based procurement software solutions are gaining traction: Businesses are shifting their procurement solutions from in-house to cloud-based models. This switch is driven by the number of benefits associated with cloud-based architecture including real-time data accessibility at a comparatively lesser cost.
- Businesses want analytics capabilities: An increasing number of procurement software vendors have started incorporating analytics functionality within their software applications. Built-in analytics capabilities can help businesses dig into past procurement data around items, volume, spend, supplier performance, etc. This will help businesses to draw meaningful insights from current procurement data and make fact-based procurement decisions.