There are so many software choices out there to help you automate your procurement process.
This is both a blessing and a hindrance for procurement-heavy manufacturing and hardware-centric firms.
On the one hand, having a wide range of choices for procurement software means you have affordable options you can invest in right now.
On the other hand, you have to make the right choice for your procurement software provider because there is a lot riding on this type of system.
Two of your choices include e-procurement software and ERP modules.
Both of these routes offer advantages and disadvantages.
As part of your company’s digital transformation, procurement software should be part of that conversation.
We’ll compare ERP modules and e-procurement software so you can select the one that’s right for you. (Spoiler alert: It’s the e-procurement software.)
What is e-procurement software?
E-procurement software allows SMBs and enterprises to manage spending on goods from suppliers through automated processes, all completely online with cloud-based access.
It is specialized software designed solely for a company’s procurement efforts. As such, e-procurement software has robust reporting and analytics tools to help managers make decisions.
It is secure, cloud-based, and gives administrators complete control over who has access, what roles people have within the platform, and what parameters are set.
Automation ranges from purchase order generation and inputting vendor information to three-way matching and invoice payments.
Managers and administrators, from department heads and lead engineers to the owner and the finance team, view big-picture data of the company’s procurement while getting to see who authorizes purchases and from what suppliers.
For example, your lead engineer for one-third of the production lines gets an alert at the end of a shift that the night supervisor for Line 2 needs an additional 10,000 hex nuts to complete the motor assemblies for next week. The company had a huge order come in last night.
The night supervisor put in a purchase request through the procurement software using his tablet computer right after he got the alert for the order. All the way on the other side of the plant, the lead engineer got the email alert in her office and approved the request within 10 minutes of seeing the alert when she first arrived for her shift.
The engineer was able to approve the rush request, which added 5 percent to the costs of the order, because it’s for a huge customer.
E-procurement software not only expedited the alerts to get the order out quicker, but it also noted that it was due to a bigger order for future reference.
What are ERP modules?
Enterprise resource planning (ERP) modules refer to a kind of software suite that manages all manners of daily operations and business activities such as accounting, project management, risk management, compliance, supply chains, and procurement.
A complete ERP module comes with performance management, or analytics tools that give various departments the information they need to report, plan, budget, and even predict a company’s financial results.
ERPs provide a one-stop shop for data across many seemingly mundane business processes to alleviate people’s workload so they can focus on higher-level duties.
An ERP’s goal is to eliminate data duplication among disparate systems and provide data integrity through a single, reliable, and authoritative source.
For example, an ERP manages procurement processes for a large motor manufacturer. It also taps into accounting and finance to show how the expenses and costs of the procurement department are holding up. The ERP module could alert higher-level executives to any red flags on misspends or higher costs coming from the procurement module so they can make planning decisions on whether to switch suppliers or raise prices.
Most procurement-heavy firms have a procurement department that handles such lofty and finance-heavy functions. Your team is responsible for purchasing raw materials, equipment, supplies for the equipment, office supplies and facility maintenance, among others.
Procurement departments also handle specialized tasks and processes for supplier selection, setting payment terms, negotiating contracts, and purchasing goods. establishing payment terms, contract negotiations, and the actual purchasing of goods.
Just like purchasing is only a single function of procurement, so is procurement to an ERP.
Main Differences Between E-Procurement Software & ERP Modules
There are three main differences between e-procurement software and ERP modules.
Purpose of Each
E-procurement software specializes in automating procurement processes. It is robust and provides the specialized details that procurement departments require to make the right decisions about budgets, suppliers, and planning. E-procurement software has greater purchasing and procurement expertise compared to ERP modules.
Procurement software is a subset of ERP modules. As the name implies, procurement can be a single module of many embedded in an ERP. As such, it might not get as granular as a procurement department may need. While the data analytics are robust, is an ERP module as good as procurement management software? Perhaps.
The advantage of ERP modules is that they are comprehensive across all company departments.
Time to Deployment
If procurement-heavy companies want specialized e-procurement software instead of ERP systems, procurement software is easier to deploy and install. While both ERPs and procurement software are cloud-based, one only exists within a single department. The other must be installed everywhere.
Because procurement software deploys faster and on fewer machines (within 24 hours in some cases), it is less expensive than ERP modules. You see a quicker return on your investment.
Completely automating your purchase-to-pay process lets the procurement department create value within a short time by gaining strategic insights, improving transparency, enhancing visibility of the company’s expenses, and controlling the company’s spend.
Usage Statistics for Procurement Software
Procurement software is an essential part of any company that relies heavily on making purchases.
In 2020, the global procurement software market stood at $5.63 billion. By 2026, that figure is expected to grow 9.4% year over year to reach $9.65 billion in total revenue.
An astounding 90% of large companies take advantage of an automated procurement tool. Of those, 60% got their procurement software modules from a specialized procurement provider.
A paltry 20% of large companies said they were going to use their procurement system as part of a larger ERP system.
Clearly, procurement-heavy companies enjoy the depth at which their procurement software gives them insights.
What does procurement software do for my company?
A robust procurement system has several notable tools and benefits that win over an ERP module.
A dedicated e-procurement solution obviates the need to operate within various ERP modules. It still lets those disparate systems communicate with each other.
Cost Savings on the Procurement Process
The whole point of your procurement system is to save your company costs. Automating your purchasing system cuts down on time for approvals, expedites the purchase order process, and allows procurement teams to focus on other tasks rather than mundane, low-level ones that advanced software can handle easily enough.
For example, let’s say 20 staffers save 15 minutes a week because of procurement system automation. Over the course of a year, that adds up to 240 hours of time saved. What could that staff do with an extra 240 hours on their hands?
With a specialized e-procurement software, your staff gets to dive deeper into purchase order spending for your suppliers and raw materials. You can channel purchase orders and purchase requisitions to the right people, allowing you to reduce operational costs.
Meanwhile, your staff spends more time on creating strategic purchasing strategies and developing strategic supplier partnerships and strategic sourcing initiatives.
Developing Long-Term Relationships With Suppliers
Now, your procurement team has more time to optimize your supply chain because you have automated mundane business tasks and processes. You can find discounts, deals, and bargains from suppliers by using a managed catalog of goods that an ERP module may not be able to find for you.
This also lets you identify supply chain risks by looking at the value and cost-effectiveness of your procurement process. When you discuss your supply chain with your vendors, you mitigate risks by keeping them in the loop with what you need and when.
More Intelligent Spending
With an automated procurement system, your company can transform your team’s spending practices and goals by tracking costs and spending when looking at real-time data. This encourages everyone on staff to spend more wisely, and you get to save on everyday operating expenses.
When you conduct a spend analysis in a dedicated procurement system, you’ll find it much easier to look at the entire spending picture of your company.
Procurement System Automation Right for You
No matter how your purchasing process works now, an e-procurement software solution can improve your procurement within 24 hours.
Yes, that’s how long it can take ControlHub to deploy our purchasing software suite.
It’s time to get rid of old processes and reach for a new era of digital transformation for your procurement department.
Get a leg up on the competition. Contact us to request a quote. We’ll talk to you about how we can help you.