Procurement Software

What is Procurement Software?

There are different types of procurement software. All the different solutions vary based on different terms of core technology, functionality, and price. Generally, organizations use procurement software to help cut costs, manage and control their budgets, and enhance aspects of their spending and approvals processes.

Procurement solutions are designed to help organizations manage all interactions at every step. This includes interactions between category managers, approvers, receivers, buyers, originators, and vendors. A few of the critical tasks that these solutions execute are final payments, request initiations, bid analysis, invoice approvals, and purchase order placements.

What Does Procurement Software Do?

Some vendors label procurement software as RFQ software, which means purchasing management software, but regardless of the name, this type of software is used to help organizations manage all of the purchasing processes throughout their entire supply chain. Overall, this type of software helps with initiating monetary transactions and finalizing deals. These systems also help an organization in maximizing their profit with every PO (purchase order), which makes it an important part of all supply chain management systems.

Procurement Software Common Features

This type of software is used to help take research and turn it into viable and successful purchase orders, via several user-friendly processes. They help to promote and support positive asset management over the long haul. Reverse auctions can be from multi-round private offers or through public bids. The requisitioning phase actually starts after a reverse auction takes place. After this, organizations can buy supplies through their system's electronic purchasing services. Finally, the application is used to analyze receipts for reconciliation and invoice approval.

One of the best benefits that this type of software can provide is the ability to manage large amounts of data effectively, while accumulating after all purchases. Once a company has agreed on terms for purchasing items from their suppliers, e-procurement software can use all of the information that was submitted to ensure that everything receives immediate approval. It also has future benefits. It will store any approved documents for future expense figures to make sure that everything in the organization is carried over through each sourcing cycle. This allows organizations to see data from their purchasing orders to see where they can effectively cut costs, when needed.

Some of the features of electronic procurement systems are:

• Delivery & Purchasing order approval - By having all data in one place, organizations can approve purchase orders and identify products easier. Plus, it helps to ensure that the right people know about any orders being placed. Finally, the POs are delivered to an organization's vendors by their preferred method of delivery.

• Ordering & Selecting - This feature allows organizations to view their choices and compare them in a single place, which allows them to make the best selection for their needs. It definitely makes purchasing anything easier, but it really shines because of its commodity selection, which helps with products that have the same features and quality.

• Spend data analysis - The intelligence part of these applications are used to help in analyzing different trends of purchasing, and it helps to evaluate different vendors to see which will provide the best negotiating position.

• Billing - This feature is used to help organizations match their orders to their invoices and make sure that bills are handled as the organization desires.

Evaluating Procurement Systems

One of the biggest things to remember when evaluating procurement systems is not to get side tracked by individual features. Organizations need to find something that matches with what they have used in the past and are currently doing. This will help to expedite any decisions that the organization has made.

The top decision that organizations need to decide on when purchasing this software is if they want a software-as-a service "e-procurement" system or a traditional installation-based system. Procurement applications are responsible for handling any compliance issues, including Sarbanes-Oxley Act of 2002. This act was passed to put an increase in regulations on accounting practices, and therefore, it is imperative that an organization makes sure that the procurement application they purchase will provide SOX compliance disclosures for their financial reporting needs.

Questions that an organization should ask when evaluating which solution to buy:

• Will this program support your organization's commodity purchasing and how?

• Does an organization's procurement department deal mainly with indirect procurement or direct procurement?

• Does this system match an organization's uses?

• What's the delivery process and PO approval?

• Does this system help with SOX compliance?

Understanding Market Trends

It is important to make sure that organization's evaluate industry trends when considering a procurement software solution. Selecting vendors and how they are selected is just one of the many trends that can impact viability of a software. Below, there are several trends that should be considered when purchasing procurement software:

• The Cloud - Organizations and their procurement teams are always investing in new technology, but most of them have not fully brought the cloud to their full organization. The procurement process can actually use cloud technology in various ways, like supplier collaboration. A few things that the cloud can offer any procurement department is smoother executions of various changes, streamlining orders, and enhancing visibility across an organization's supply chain.

• E-procurement enhancements - These types of enhancements have to be carefully thought about before making the final selection. This type of technology will help in speeding up all of their buying activities, removing any existing roadblocks, and decreasing any policy breaches.

• Analytics Growth - Analyzing data is critical for organizations, in today's world. Using analytics is a trend that is constantly growing among organizations' procurement teams. It has helped them keep track of their direct and indirect spending, and it has helped in finding consolidation opportunities.

• Data security and its growing emphasis - Keeping data secure is extremely important for an organization, and therefore, it is imperative that they keep their data secured at several steps throughout their supply chain. Plus, they need to make sure that they have people who are accountable for any security breaches that they incur.

• Unique requirements from new generation - Organizations have high expectations for what procurement needs and the type of technology that they want to use for it. Therefore, organizations have to make sure that they stay up to date with their technology in order to manage the millennials that are involved throughout the entire supply chain.

Procurement Software Benefits

Some of the main benefits of using procurement software are:

• Analyzing intelligence data for a business is important in being able to plan and forecast for an organization, accordingly.

• A single platform to share and collaborate with suppliers

• Get alerts while tracking events - Useful in risk management preparation

• Sharing and collaborating within the organization

• An organization can standardize their procurement process

Potential Issues

There are a number of challenges that organizations need to be aware of in procurement because it can dramatically impact how the organization uses their software:

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  Inflexible suppliers - It is important that organizations deal with vendors that will accommodate their requests, and the majority of vendors will heed requests in order to gain an organization's business. There are questions that an organization can ask a rigid supplier to help negotiate with them, like, will they provide discounts if ordering in bulk and do they pay for the shipping costs. Organizations can use the answers to these questions as bargaining tools, even when the vendor is inflexible, by nature.

• Exceeding budget - Coordination gaps and poor communication in an organization can be the cause of over-spending. It is possible to exceed a budget because of needs, rather than over-spending. In order to fix this issue, users should receive regular budgetary updates about the organization's latest financial status. This will help to make sure that spending is within an organization's allotted limits and stays in their control.

• Wrong Orders - Organizations should contact their supplier immediately if they find they have ordered the wrong quantity or item. However, how can an organization prevent ordering wrong from the start? Proper checks and balances are important to help prevent this in the supply chain. Orders should have to be improved by multiple managers to make catching accidental orders easier, resulting in less wrong orders.