The use of procurement software platform is rapidly growing among businesses, regardless of their size, seeking to improve and automate their purchasing process. However, what is procurement software platform and how does it operate?
A procurement software platform is a single central digital hub for an organization’s end-to-end source to contract procurement processes. One of the main functions that procurement platforms serve is to enable companies to purchase goods and services more efficiently by digitizing, automating, and analysing purchasing workflows as well as spend data.
On a macro level, procurement platforms seek to provide visibility, control, compliance and cost reductions for the procurement teams. These systems offer a number of key capabilities such as sourcing, supplier management, contract management, purchasing, invoicing and analytics.
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Simplifying Complex Procurement Processes
Many businesses have complex procurement workflows that span various departments, suppliers and locations. Requests need to be directed for approvals, orders prepared and monitored, invoices accounted for, and contracts renewed. This complexity results in the reduction of efficiency, poor supplier relations and maverick buying when employees go round the processes.
Procurement software consolidates these intricate workflows onto a single platform. Standardization of workflows across the organization, and a single intuitive portal for employees to request, purchase and manage suppliers. Automated work flows direct orders and approvals to the proper individuals so purchases flow easily through the system.
With a single platform that governs all aspects of procurement, organizations have full visibility and control over spending. Procurement software allows to find opportunities for consolidation and savings, while making sure that policies and preferred suppliers are followed. When off-contract and maverick spending is minimized, compliance increases.
Key Capabilities of Procurement Software Platforms
Procurement platforms vary in their specific features and capabilities, but most provide some combination of the following functionalities:
Sourcing and Supplier Management
A procurement system enables centralized management of suppliers and contracts within a single database. Sourcing tools aid in identifying, evaluating, and onboarding new suppliers to create a robust, competitive supplier network. Supplier profiles provide pricing, capabilities, performance ratings, and other relevant data to inform sourcing decisions.
Supplier management tools simplify collaboration and relationship-building with existing suppliers. Features like supplier portals and direct messaging facilitate ongoing communication and feedback. Procurement teams can easily monitor and manage supplier compliance, performance, and risk.
Contract Management
Procurement software centralizes contract creation, templating, and storage for easy access and version control. Automated alerts notify teams of upcoming renewals, expirations, or non-compliance. Standard contract templates help drive consistency and efficiency. Integration with e-signature tools facilitates rapid contract finalization.
With all supplier agreements housed in a centralized repository, procurement has greater visibility into contract terms, pricing, and obligations across the organization. This visibility enables them to leverage master agreements and optimize contract compliance.
Purchasing and Approvals
Online catalogues, punchout to supplier sites, and integrated e-procurement streamline purchasing workflows. Employees can easily compare pricing to identify savings opportunities. Shopping cart functionality enables batch orders to preferred suppliers.
Configurable approval workflows route each purchase order or requisition to the appropriate stakeholders before submitting to suppliers. Rule-based workflows determine approval chains based on spend thresholds and procurement policies. Approval automation reduces purchase order cycle times.
Invoicing and Payments
Procurement platforms facilitate invoice processing, validation, and payment. E-Invoicing tools allow fast receipt and reconciliation of supplier invoices against purchase orders. Invoice matching algorithms flag any discrepancies for review. Following validation, invoices can be scheduled for payment based on terms.
Integrations with ERP and payment systems enable seamless data exchange and automated payment issuance. Procurement gains control and visibility over invoicing to prevent duplicate payments and take advantage of early-pay discounts.
Reporting and Analytics
A key aspect of procurement software is the ability to generate data-driven insights about spend. Embedded analytics, custom reports, and spend dashboards allow analysis from different perspectives – by supplier, category, product, location, department, and more.
Users can track procurement KPIs like cycle times, policy compliance, savings delivered, supplier performance, and contract coverage. Analytics identify opportunities for competitive bidding, consolidation, contract optimization, and working capital improvements.
Benefits of Procurement Automation
Implementing a purpose-built procurement automation platform can transform an organization’s purchasing function. Benefits typically realized include:
Increased Efficiency
Automating formerly manual procurement tasks reduces cycle times and frees up employees for more strategic initiatives. Self-service purchasing portals empower employees and reduce transactional workloads for procurement staff.
Improved Compliance
Centralized, policy-driven workflows and preferred supplier lists ensure purchasing complies with company guidelines and contract terms. Procurement gains visibility over spend to identify any non-compliant activity.
Enhanced Visibility and Control
With a unified view of spend across the organization, procurement can identify savings opportunities, analyse trends, minimize maverick buying, build leverage with suppliers, and track budget vs. actuals.
Reduced Supply Chain Costs
Analytics enable the optimization of supplier selection and sourcing decisions that minimize material costs. Competitive pricing is enabled by features such as contract management, e-auctions, and volume consolidation.
Stronger Supplier Relationships
Supplier management tools help in close collaboration with the supply network. Performance dashboards offer objective evidence that can be used to reward top performers and address issues with partners performing below par.
Lower Total Cost of Ownership
Though procurement software is an initial investment, the automation and efficiencies savings deliver a lower total cost of ownership than manual processes. Research indicates that ROI from procurement automation initiatives can be realized in a period of 1-2 years.
Evaluating Procurement Platforms
With the advantages of procurement automation evident, many institutions are interested in incorporating such systems. On the other hand, given that there are several solutions in the market, choosing the best platform can be a daunting task.
Conclusion
However, in the modern dynamic business world manual procurement purchase order processing are not sufficient to meet stakeholder requirements. Source-to-contract processes are optimized with the help of procurement software platforms that provide digital tools and automation.
Companies achieve unparalleled transparency in spend by consolidating procurement data and processes. Procurement gains control and visibility to drive down costs, improve compliance, and support its top suppliers. In the long run, procurement automation platforms help purchasing teams to become more strategic business partners who provide great value throughout the organization.
But to fully enjoy the advantages, organizations need to carefully evaluate stakeholder needs, investigate technology solutions and spend time defining workflows and requirements before choosing a platform. Companies can change yesterday’s disjointed procurement process into a centralized, cloud-based digital engine driving growth and competitive advantage with an informed procurement automation strategy and change management plan.
