Everything You Need To Know About Procurement Systems

Are manual procurement processes causing your organization unwanted headaches?

True enough, it’s tiring to sift through paperwork and even handle costly errors because of manual processes.

Although the solution to this problem is simple, all your business needs to do is implement a procurement system.

In this blog, we will cover the game-changing solution of procurement systems. We will cover the most common questions on procurement systems, the types of procurement software you need, and even how to implement them effectively in your business.

By the end of this blog, you’ll clearly understand how procurement systems can benefit your bottom line.

Let’s dive in!

What Is A Procurement System?

A procurement system is a software solution that helps your business manage and optimize your purchasing process.

This automates necessary tasks within your operations, such as supplier selection, contract management, purchase order creation, invoicing, and inventory management.

Using a procurement system for your business can help you improve efficiency, reduce costs, and ensure compliance.

A procurement system should have basic features such as:

• Supplier Management
• Contract Management
• Purchase Order Management
• Invoicing Management
• Inventory Management

What Features Should A Procurement System Have?

A robust procurement system should have various features to streamline the procurement process and enhance overall efficiency within your business.

Here are key features that a comprehensive procurement system should ideally include:

• Supplier management: A procurement system should allow your business to manage supplier relationships effectively. This includes supplier registration, vendor performance tracking, and contract management.
• Purchase order management: A procurement system should streamline the purchase order process from requisition to fulfillment. This includes features like purchase requisition approval workflows, purchase order generation, and tracking.
• Invoicing management: A procurement system should automate invoice processing, including invoice matching, approval workflows, and payment processing.
• Spend analytics: A procurement system should give your business insights into spending patterns. This includes features such as spend analysis reports and dashboards.
• E-sourcing: A procurement system should allow your business to automate your sourcing process, including features such as request for proposal (RFP) management and supplier bidding.
• Guided buying: A procurement system should guide employees through purchasing, ensuring compliance with company policies and procedures.
• Integration with other systems: A procurement system should integrate with your other systems, such as enterprise resource planning (ERP) and financial management systems. This will ensure that data is synchronized across all systems and that businesses have a complete view of your procurement operations.
• Contract management: A procurement system should help your business manage your contracts throughout the contract lifecycle, from creation to renewal.
•  Inventory management: A procurement system should help you track inventory levels and reorder products.
•  Risk management: A procurement system should help you identify and mitigate risks associated with suppliers and contracts.
• Sustainability management: A procurement system should help your business track and manage your sustainability performance, including your business’s carbon footprint and social responsibility initiatives.

The best procurement system will depend on your specific needs and requirements. Your business should carefully evaluate your procurement process and requirements before you select a procurement system for your company.

What Are The 3 Types Of Procurement?

Did you know that procurement can be categorized into three primary types?

These are direct procurement, indirect procurement, and services procurement. Each of these types of procurement serves a specific need for your business.

Let’s briefly dive into each type of procurement one by one.

Direct Procurement

Direct procurement involves the acquisition of goods, services, or raw materials directly associated with the production of your company’s end product.

Example: In manufacturing, direct procurement would include purchasing raw materials, components, or parts needed for the production process.

Indirect Procurement

Indirect procurement refers to the acquisition of goods and services that are not directly tied to the production of the final product but are essential for supporting your organization’s overall operations.

Example: Office supplies, IT services, or facility maintenance contracts fall under indirect procurement.

Services Procurement

Services procurement involves acquiring various services your company requires to support your operations. This includes professional services, consulting, outsourcing, or service-related agreements.

Example: Hiring a consulting firm for business advisory services or contracting with an IT service provider for software development are examples of services procurement.

Learning these three types of procurement will help your organization strategically manage your spending. Aside from that, it also ensures that you acquire the necessary goods and services to operate efficiently.

What Are The 4 Types Of Procurement Systems?

Procurement systems can vary based on your organization’s specific needs and processes.

Here are the four common types of procurement systems that your organization may choose from:

Electronic Procurement (e-Procurement) Systems

E-Procurement systems leverage technology to automate and streamline the entire procurement process, from requisition to payment.

Here are the key features of an e-procurement system:

• Online requisitioning and purchase order creation.
• Automated approval workflows.
• Electronic catalogs for product and service selection.
• Integration with ERP systems for data consistency.
• Electronic invoicing and payment processing.

Cloud-Based Procurement System

Cloud-based procurement systems are hosted on remote servers, allowing users within your company to access the platform via the Internet. This type of system offers scalability, flexibility, and reduced infrastructure costs.

Here are the key features of a cloud-based procurement system:

• Accessibility from anywhere with an internet connection.
• Scalability to adapt to changing business needs.
• Automatic updates and maintenance.
• Collaboration features for remote teams.
• Enhanced security measures.

Integrated Procurement System

Integrated procurement systems are designed to seamlessly integrate with other enterprise systems, such as Enterprise Resource Planning (ERP) or Customer Relationship Management (CRM) systems.

This integration ensures data consistency and facilitates end-to-end business processes.

Here are the key features of an Integrated Procurement System:

• Integration with ERP, CRM, and other relevant systems.
• Real-time data synchronization.
• Unified reporting and analytics.
• Improved visibility into the entire supply chain.
• Streamlined communication between departments.

On-Premises Procurement Systems

On-premises procurement systems are installed and run on the organization’s servers and computing infrastructure.

This type of system provides full control over the software and data but requires a dedicated IT team for maintenance.

Here are the key features of an on-premise procurement system:

• Full control and customization of the system.
• Compliance with specific security policies.
• No reliance on external internet connectivity.Suitable for organizations with strict data governance requirements.
• Potential higher upfront costs compared to cloud-based solutions.

Your choice of a procurement system will depend on important factors your organization wants to consider, such as your company size, industry, budget, and other specific requirements.

Although, a lot of organizations today are moving towards electronic and cloud-based solutions for better efficiency and scalability!

The choice of a procurement system depends on factors such as the organization’s size, industry, budget, and specific requirements. Many modern organizations are moving towards electronic and cloud-based solutions for their efficiency, scalability, and cost-effectiveness.

How Does ProcureDesk Work As A Procurement System?

ProcureDesk operates as a comprehensive procurement system by offering a range of features tailored to simplify and enhance the procurement process. Here’s how ProcureDesk works:

• Configurable Requisitions: ProcureDesk facilitates the creation of customizable requisitions, allowing organizations to establish a purchase requisition process that aligns with their specific needs.
• Budget Internal Controls: The system incorporates internal controls to manage budgets effectively. Users can define budgets at a detailed level, such as by account, class, department, and more, preventing overspending.
• Configurable Approval Workflows: ProcureDesk streamlines the approval process by providing configurable workflows. Once configured, these workflows ensure that purchase requests undergo review and approval at the appropriate levels, contributing to compliance needs.
• Punchout Catalogs: ProcureDesk enables the creation of a marketplace with top vendors through punchout catalogs. This feature eliminates the need for constant updates to price sheets and manual data entry, supporting integration with major vendors like ThermoFisher, Fisher Scientific, VWR, and others.
• Purchase Order Automation: The system automates the creation and transmission of purchase orders, saving valuable time for scientists who can focus on their core tasks while ensuring timely communication with vendors.
• Purchase Order Tracking: ProcureDesk includes tracking capabilities for purchase orders, allowing users to monitor order acknowledgment and Advance Shipping Notice (ASN). This feature ensures real-time visibility into the status of deliveries without the need for extensive vendor communication.
• Receipts with Lot Tracking: The system allows detailed receipts tracking, including lot tracking information. This ensures awareness of important details like items’ expiration date, such as reagents.
• Visibility Into Inventory Levels: ProcureDesk provides a clear view of inventory levels, allowing users to monitor the quantity of lab supplies in real-time and track inventory across specific locations in the lab.
• Invoice Matching: ProcureDesk automates matching invoices with purchase orders, saving time for Accounts Payable and the lab team. This feature reduces the need for manual invoice matching.
• E-Invoicing Capabilities: The system supports e-invoicing, automatically capturing invoices from vendors. This eliminates the need to import invoices from emails, as the system seamlessly receives, matches, and sends invoices to the accounting system.
• Reporting and Dashboard: ProcureDesk offers robust reporting and dashboard features, providing users with clear visibility into cash flow. This allows organizations to track expenditures for each experiment and forecast future costs.
• Mobile App Support: ProcureDesk ensures flexibility and convenience with mobile app support, enabling users to continue the procurement process on the go. This includes creating, approving, and receiving purchase orders and invoices without a computer.

Creating Purchase Request

Ensuring an efficient procurement process hinges on simplifying the requisition process for employees. It’s not about merely digitizing a paper form; the goal is to streamline the purchasing experience for your staff.

With ProcureDesk, employees can initiate a purchase request with minimal clicks and data entry. The system identifies the user and leverages this information to establish default values for various parameters such as departments, classes, charts of accounts, projects, class codes, and more.

Here’s an illustration of how user defaults operate:

Purchase Order Management

Upon approval of the requisition, you can dispatch the purchase order to the vendor, and this task can be automated through purchase order management software.

If you have a dedicated purchasing team, they may wish to evaluate various requisitions to identify potential cost-saving opportunities.

Effortlessly obtain price quotes from various vendors using the supplier quote module. Here’s an example of comparing the costs of servers from two different vendors:

Once you have completed the quote process, you can convert the quote to a purchase order and issue the purchase order to the vendor.

Automated Purchase Order Creation

You don’t have to worry about changing purchase requests to purchase orders because of the automated purchase order creation.

This saves time, especially when you don’t have a purchasing team. You can determine which suppliers accept purchase orders, and the system can do the rest.

Here’s an example of a purchase order that ProcureDesk automatically creates.

You can customize the purchase order template to include additional fields.

If you want to explore the features of ProcureDesk further, we have a team of experts who can walk you through our tool. See it in action today!

How To Implement Procurement Software?

Implementing procurement software involves a series of well-planned steps to ensure a smooth integration into your organization.

Here’s a simple guide to help you and your team implement your chosen procurement software:

Assessment and Planning

Begin by evaluating your organization’s procurement needs. Identify key stakeholders and gather their input. Outline the specific goals and objectives you aim to achieve with the procurement software.

Research and Selection

Research different procurement software options. Consider factors like features, user-friendliness, and compatibility with your existing systems. Choose a solution that aligns with your organization’s requirements.

Budgeting

Establish a budget for the procurement software implementation. Consider the initial costs and ongoing expenses, such as maintenance and support.

Training and Education

Plan training sessions for your team. Ensure that they understand how to use the new software effectively. This may involve tutorials, workshops, or online resources the software vendor provides.

Customization

Customize the software to match your organization’s specific needs. This may include configuring approval workflows, setting up user roles, and adapting the system to your procurement processes.

Data Migration

If transitioning from an existing system, migrate relevant data to the new software. Ensure a smooth transfer of information, including supplier details, purchase history, and other essential data.

Pilot Testing

Before a full-scale rollout, conduct a pilot test with a small group of users. This allows you to identify potential issues, gather feedback, and make necessary adjustments.

Rollout and Integration

Once the pilot is successful, roll out the procurement software across the entire organization. Integrate the software with other relevant systems, such as ERP or accounting, to ensure seamless data flow.

Monitoring and Optimization

Regularly monitor the performance of the procurement software. Gather feedback from users and make continuous improvements. This may involve updates, patches, or additional training sessions.

Documentation

Create documentation, such as user guides and manuals, to help users navigate the new procurement system. This ensures that everyone has access to resources for reference.

Support and Maintenance

Establish a system for ongoing support and maintenance. Work closely with the software vendor for technical assistance, updates, or bug fixes.

Evaluation

Periodically evaluate the effectiveness of the procurement software in meeting your organization’s goals. Use feedback and performance metrics to make informed decisions about the software’s continued use.

Effective communication and collaboration with your team throughout the implementation process are key to successfully integrating procurement software into your organization.

What Are The Benefits Of A Procurement System?

A procurement system for your business can offer many advantages, from accelerating processes to improving visibility, reducing errors, and enhancing supplier relationships.

Let’s quickly discuss the benefits of a procurement system that can bring an overall impact within your organization:

Improved Speed

A procurement system streamlines the entire procurement process, reducing the time it takes to create, approve, and fulfill purchase requests. This leads to faster and more efficient procurement cycles.

Better Visibility

Procurement systems provide enhanced visibility into the entire procurement lifecycle. Your business can easily track the status of requisitions, purchase orders, and deliveries, promoting transparency and informed decision-making.

Efficient Business Transactions

A procurement system facilitates smooth and efficient business transactions by automating and optimizing procurement workflows. This efficiency extends to creating purchase orders, approvals, and supplier communication.

Eliminate Manual Errors

Automation in procurement processes significantly reduces the risk of manual errors. By minimizing human intervention in routine tasks, the system helps maintain data accuracy, reducing the likelihood of mistakes in orders and invoices.

Enforced Compliance and Guided Buying

Procurement systems often come with built-in compliance checks and guided buying features. This ensures purchasing activities adhere to your organization’s policies and industry regulations, minimizing non-compliance risks.

Better Supplier Relationship

Procurement systems enable your organization to manage your relationships with suppliers more effectively. The system fosters stronger and more transparent relationships with your suppliers by providing a centralized platform for communication and collaboration.

What Features Should You Look For In A Procurement System?

If you’re looking for a procurement system for your business, here are some of the features you must look out for:

• Customization: Look for a procurement system that allows customization to align with your organization’s unique processes and requirements. This ensures that the system adapts to your specific needs.
• Approval Workflows: Robust approval workflows are essential for ensuring purchase requests go through the appropriate channels for review and approval. This feature helps maintain compliance and control over expenditures.
• Three-way matching: Three-way matching involves reconciling purchase orders, receipts, and invoices. This feature is crucial for accuracy in financial transactions, helping to prevent overpayments and discrepancies.
• Cloud Hosting: Opt for a cloud hosting system for increased accessibility, scalability, and flexibility. Cloud-based solutions provide the advantage of remote access and reduced infrastructure costs.
• Spend Reporting: Comprehensive spend reporting features enable organizations to analyze and track their spending patterns. This data-driven insight is valuable for strategic decision-making and cost management.
• Vendor Management: Effective vendor management features help maintain a centralized supplier database, track performance, and foster positive relationships. Look for tools that streamline communication and collaboration with vendors.
• Integrations: Choose a procurement system that seamlessly integrates with other essential business systems such as ERP or accounting software. Integrations enhance data consistency and eliminate silos in information.
• Punchout Catalogs:Punchout catalogs streamline procurement by providing instant access to up-to-date supplier catalogs, minimizing manual data entry, and enhancing the overall efficiency of the process. Users can effortlessly add selected items to the shopping cart within the procurement system, contributing to a user-friendly ordering experience. The seamless integration with procurement workflows ensures automated document generation, enhancing system efficiency

ProcureDesk’s Punchout Catalogs

The punchout catalog feature with ProcureDesk allows users to establish a centralized marketplace with their preferred vendors.

Unlike traditional methods requiring constant price sheet updates or manual data entry from various vendor websites, ProcureDesk simplifies the process.

With punchout catalogs, users can seamlessly connect with major vendors such as ThermoFisher, Fisher Scientific, VWR, and more.

This integration eliminates the need for repetitive tasks like updating prices or copying and pasting data, ensuring users have real-time access to accurate product information and pricing directly within the ProcureDesk system.

[screenshot: procuredesk punchout catalogs]

FAQs

Why Are Automated Procurement Systems Popular?

Automated procurement systems are popular because they offer several benefits to businesses of all sizes, including:

• Improved efficiency: Automated procurement systems can eliminate manual tasks like data entry, purchase order creation, and invoice processing. This can free procurement staff to focus on more strategic activities like supplier management and contract negotiation.
• Reduced costs: Automated procurement systems can help businesses reduce costs by streamlining the procurement process, eliminating duplicate payments, and negotiating better prices with suppliers.
• Increased visibility: Automated procurement systems give businesses real-time visibility into their spending and inventory levels. This can help businesses to make better purchasing decisions and avoid stockouts.
• Enhanced compliance: Automated procurement systems can help businesses comply with complex procurement regulations. For example, they can help businesses track vendor performance and ensure suppliers meet all requirements.

 

What Are The Types Of Procurement Automation Software?

Here is a brief overview of the different types of procurement automation software:

• Spend analytics system: A spend analytics system helps businesses to track and analyze their spending patterns. This information can be used to identify areas where costs can be saved, negotiate better prices with suppliers, and make more informed purchasing decisions.
• Guided buying system: A guided buying system helps employees purchase the goods and services they need promptly and efficiently. Guiding buying systems typically use approval workflows and pre-approved vendors to ensure that purchases comply with company policies.
• E-procurement system: An e-procurement system automates the entire procurement process, from purchase requisition to invoice processing. E-procurement systems can help businesses to improve efficiency, reduce costs, and increase visibility into their spending.
• Electronic invoicing (e-invoicing) software: E-invoicing software automates sending and receiving invoices electronically. This can help businesses to reduce paper costs, improve efficiency, and speed up payments.
• Electronic sourcing (eSourcing) software: E-sourcing software helps businesses automate supplier selection. E-sourcing software can help businesses identify and qualify suppliers, create and manage RFPs, and negotiate contracts.
• Contract management: Contract management software helps businesses to track and manage their contracts throughout the contract lifecycle. Contract management software can help businesses ensure that contracts are compliant, identify and mitigate risks, and improve contract performance.
• Purchase order software: This software automates creating, sending, and tracking purchase orders. Purchase order software can help businesses improve efficiency, reduce costs, and improve visibility into their spending.
• Supplier relationship management platform: A supplier relationship management (SRM) platform helps businesses manage their relationships with their suppliers. SRM platforms can help businesses improve communication and collaboration with suppliers, identify and mitigate risks, and negotiate better prices and terms.

 

 

These are just a few different procurement automation software types available. The best type of software for a particular business will depend on its specific needs and requirements.

The Bottomline

Without a doubt,  a well-designed procurement system can be a game-changer for your business. It can provide you with a structured and efficient approach to acquiring the goods and services you need to operate.

With the right system, your business can navigate procurement complexities seamlessly, promoting cost savings, transparency, and overall operational excellence.