Hardware-centric, procurement-heavy startups and mid-size companies can see a huge difference to their bottom line when implementing purchasing software to streamline their procurement process. It helps your procurement team handle mundane tasks with ease so they can focus on more strategic tasks, which makes your purchasing process even more cost-effective. Rather than focusing on the minutiae of everyday tasks, your team can employ supply chain management and strategic sourcing to lower your hard costs further and alleviate concerns for your supply chain.
In this complete guide, we will cover every little detail of supply chain management, procurement management, order management software, and purchasing software for your firm.
Supply Chain Management
Supply chain management is always on your mind. What happens if there are disruptions? What happens if the supply chain comes to a screeching halt? What do you do when a major supplier or preferred vendor suddenly quits or raises prices forcing you to raise prices?
Procurement software can help you achieve more efficient supply chain management in several ways.
Major Issues Facing Operations and Supply Chain Management
The supply chain has two ends for your company. It comes into your facility through a series of multiple vendors and suppliers, and then your customers purchase the outgoing products that you make.
- Meeting or Exceeding Customer Requirements: Your supply chain team provides a vital service to customers and to your procurement-intensive company. As they reduce time spent on requests for procurement, projects, manufacturing, and outside customers due to procurement software, they can begin to address customer requirements.
For example, your procurement team receives up-to-the-minute information in a fast and accurate manner. This allows teams to oversee the timely fulfillment of orders, sourcing, planning for the future, and logistics.
To correctly manage customer requirements, you need to control costs and prices versus the quality of deliverables. That means communicating with customers when any issues arise or delays happen.
Using the right e procurement software gives you instant access to the information you need to track orders, invoices, and payments.
- Supplier Management: What happens when your suppliers raise prices? What if they can’t deliver? What does your company do when the quality of raw materials isn’t up to standards?
Good, long-lasting relationships with your suppliers are key to supply chain management. You may need to reach out to suppliers when handling delays, purchase order fulfillment, and any issues when receiving the order. And you also need to keep multiple vendors in line with your standards.
No matter how hard you work on supplier management, there will always be at least one vendor that has issues. The sooner you have answers, the better. Procurement software offers a solution for this issue, allowing you to be proactive.
- Getting the Right Data: Contemporary supply chain management practices need data to make decisions. Without the right data, you can’t make relevant decisions because you don’t have the big picture with all of your data points.
Your procurement team needs to see:
- Cycle time: How fast are purchase orders approved? How fast are invoices paid?
- Vendor consolidation: You can identify cost-saving opportunities by reducing the numbers of suppliers to manage and talking to them about discounts and bulk purchases.
- Timeliness of data: You need to know which purchase orders are outstanding, both for your finance team and logistics department.
- Budgeting: You must ensure spending occurs within monthly budgets.
Procurement software is the perfect tool for you to have to get access to all of the data and analytics you need.
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Purchasing Costs and How Businesses Can Reduce Them
Purchasing costs occur during your procurement process. Purchasing costs show you a KPI that helps determine the cost-effectiveness and efficiency of your procurement team.
Common purchasing costs include:
- Base purchasing costs: Base purchasing costs or the price paid for goods or services from your suppliers or vendors: Lowering your base purchasing costs comes from scaling a process to lower these hard costs by negotiating prices during the contract management stage of vendor management.
- Purchasing costs: Purchasing costs or the purchases generated by your procurement team conducting their ordinary daily tasks. These are more than just the hard costs of the purchases, but also the labor costs associated with purchasing, such as data entry, making or accepting purchase order requests, and collaborating with other departments. Reducing labor costs can come from the right procurement software solution to take over mundane tasks associated with the procurement process.
- Transportation costs: Transportation costs come from the costs of acquiring goods. Effectively managing and negotiating with logistics companies help lower these costs.
- Contract and negotiation costs: Contract and negotiation costs or costs that happen when you negotiate with suppliers. These negotiations can last for months. You might need to hire a legal team. You need to balance the costs versus the benefits when negotiating with vendors to reduce your costs here.
- Taxes and customs cost: Taxes and customs cost or those that occur when you obtain supplies from foreign suppliers because there may be import duties associated with the items you order. Negotiating prices will provide a relevant way to lower these types of costs. Are discounts on very large orders enough to balance out any fees?
Look at a big-picture way to minimize these costs on your procurement team. Think about making targeted improvements in the department. Professionals can research ways to do their jobs better by making the procurement process more efficient.
Procurement software is the easiest and most relevant way to accomplish this. Your company gains a competitive advantage while employing strategic sourcing and a procurement process that works with finance and accounting teams. The strategic value you gain will more than pay for the procurement software itself because your team can do what it’s paid to do.
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Strategic Sourcing vs Sourcing
Do you know what the differences are between strategic sourcing and sourcing? Understanding the differences can help you become a more effective procurement-intensive company when you need to order supplies from vendors.
- What is Sourcing? Sourcing involves researching, vetting, choosing, and managing the suppliers you need for your procurement process. Sometimes, this is a daily process when your procurement team sees prices go up or purchase orders that don’t come in within a specified timeframe. Sourcing means you also create a strategic view of suppliers by defining quality and quantity of the goods you need and then choosing suppliers that meet those standards.
- What is Strategic Sourcing?
Strategic sourcing occurs in your procurement team when your supply chain management process formalizes the way your staff gathers information. You then need to organize this information and consolidate your purchasing power to find the best possible outcomes.
For example, you have a budget of $50,000 a month for purchasing nickel-plated bolts for the carburetors your company manufactures. In your strategy, you outline that suppliers typically give anywhere from a 10 to 15 percent discount on purchase orders with a $50,000 purchase. Therefore, your procurement team should look for savings to either purchase more bolts or save money on the purchase.
- How is Strategic Sourcing Different from Sourcing? Strategic sourcing differs from traditional purchasing in that strategic sourcing emphasizes the total cost of ownership rather than the absolute costs of individual purchase orders.
Think of strategic sourcing as if you’re buying a vehicle. You can easily buy a $2,000 car. But it needs a lot of fixing up and labor to bring it up to working condition. After you invest $5,000 on parts and another $10,000 on labor, the car is finally up to working condition after several months.
But if you spend $17,000 on a certified pre-owned vehicle that runs almost like new, your maintenance costs are much lower for years to come until you’re ready to trade-in the vehicle a decade later for a newer vehicle.
The same is true for sourcing. You get what you pay for. You can purchase nickel-plated bolts for $10,000, but if 10 percent of them are malformed and they don’t meet your standards, how is that cost-effective? You might consider spending $5,000 more to get better-quality parts over the long term because your customers appreciate higher quality of your finished product.
- Benefits of Strategic Sourcing
You recognize several key benefits of strategic sourcing.
Improved cost savings. This is the entire point of strategic sourcing. When you partner with suppliers that give you the greatest discounts with the best quality, that’s the sweet spot you strive to achieve.
Risk management. Procurement software gives you analytics tools you need to make relevant decisions pertaining to supplier risk. Are prices going up? Did a supplier change their discount structure? Have certain suppliers demanded contract negotiations several times in the past year? Mitigating risk ahead of time can minimize these issues with contract management.
Continually improving. Your procurement team’s sourcing strategy must continually improve. If you’re not improving, you’re stagnating.
Optimizing your supply chain. This occurs when you optimize vendor relationships, prices, discounts, and quality of supplies. When you find a team of trusted suppliers that meet your goals, you build stronger relationships with them that lead to more cost savings later because you don’t have to renegotiate terms with new vendors.
E-procurement software gives you the tools you need to foster great strategic sourcing for your team because you have all of the information at your fingertips.
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Do You Need a Procurement Solution For Your Business?
How many issues do you deal with on a monthly basis when a part of your procurement process fails? A purchase order and subsequent invoice fulfillment put a project over budget. Having the right information on hand would have prevented the problem.
Someone approved a purchase order who shouldn’t have done so because of a previous issue with a vendor that wasn’t flagged properly.
Someone missed three-way matching with a purchase order, invoice, and accounts payable document. It took three days to rectify the situation, wasting staff time that could have been better spent on strategic sourcing.
Automation for your procurement solution can solve these types of issues.
Do you still use a traditional system and processes that don’t focus on automation of mundane purchasing processes?
Then it’s time for a procurement solution for your business.
A traditional procurement process may look like this:
- Someone determines a need. That person fills out a purchase order by finding the right supplier for the goods needed. The purchase requisition request is completed. Then it goes to a supervisor for approval. If the preferred vendor has been used before, this process is easier.
- Once the supervisor gives approval, the procurement team member completes a purchase order before sending it to the supplier. Hopefully it’s sent quickly, at least through an email.
- If this is a new purchase, the supervisor might need to get quotes from several vendors before making a final decision. When the quotes come back, the purchaser decides which one to go with and, perhaps, makes that supplier a preferred vendor.
- Then the order arrives. People check it for accuracy, receive the invoice, confirm the delivery, and then send the invoice to accounting.
- The invoice is paid. The purchase order, invoice, and accounting slip undergoes a three-way match to make sure everything is the same.
When this is a manual process, documents can be misplaced, lost, or accidentally destroyed. You’ll need to rectify the situation as soon as possible.
If you have dozens of manual processes that you can do with automation, then e-procurement software is a procurement solution for you.
You should look for these features in an e-procurement solution:
- Real-time analytics. Strategic sourcing is only as good as the analytics your purchasing software provides.
- User-friendly menus. Purchasing software must be easy to use for your entire procurement team.
- Speed. You should be able to go from a requisition request to purchase order approval in mere minutes rather than hours with the right purchasing software.
- Automated approval workflows that cut down on the time it takes to approve a purchase through message automation sent to the right people.
- Budgeting data to help make decisions months in advance.
- Cloud-based systems with a purchasing app. Gaining mobile access through a purchasing app is a secure solution when the procurement system administrator controls who has access and at what levels on the team.
If any of these benefits sound good to you, then you need a verdant purchasing software system for your procurement team.
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eSourcing vs. eProcurement: What are the differences?
eSourcing happens when your procurment staff processes sourcing electronically through consolidating and managing quotes and bids from various suppliers in a single, central information platform. This allows purchasing teams to find the information they need quickly and efficiently.
More specifically, eSourcing includes tools to facilitate communication between you and your vendors, including during the contract management phase.
You need supplies to run your company. Did you know you’ll spend anywhere from 50 to 70 percent of a budget procuring the right supplies for your firm?
eSourcing allows your procurment specialists to locate those supplies with the right vendors and then setting up the right terms and conditions for future purchases. This helps you minimize risks from vendors who might suddenly change their way of doing business.
eProcurement entails the actual purchasing of the goods from suppliers. eProcurement software executes plans as set forth in contracts created by eSourcing, such as prices, discounts, rebates, and delivery schedules. In eProcurement, this process runs on automation through electronic and digital processes, and no negotiation is involved. It ensures the optimal flow of goods from vendors to your team.
eSourcing and eProcurement are two parts of the same fruit. One occurs within the framework of the other, and your company needs both for efficient, streamlined, and cost-effective requisitions, purchase ordering and relationship management.
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What is spend management? Real-life examples of how it can save you time and money.
Spend management helps your procurment staff maximize value from your company spend while giving you automation and tools to decrease costs, improve supplier and vendor relationships, and mitigate risks by having the proper analytics and information in hand.
The right spend management software analyzes your spend, how much you spend, and how to invest your purchasing wisely. This is vitally important for saving money as your company grows.
Does this scenario sound familiar?
It’s the end of the month, and you need financial reports and data on your spending, revenue, purchasing, and profitability.
The accounting software you have is different from your procurment system. You have to upload the report from the purchasing software into your accounting program.
Half an hour later after you make the end-of-month report, an invoice comes in that you didn’t account for. Now you have to run the reports all over again because the invoice is a big one and it would definitely skew the numbers.
How much time did you spend trying to track down the invoice? What if your accounts receivable staffer or finance team completely ignored the new invoice and didn’t bother with it? How many other invoices did your procurment staff miss? How is this going to alter your spend analytics? How much time, training, labor costs, and meetings are you going to burn through to make sure your procurement process is robust? Accounting software usually can’t handle these specialized situations.
Does your team still use spreadsheets?
Microsoft Excel and Google Sheets are both very good tools to use. MySQL uses spreadsheets to create dashboards in just about every type of computer software that uses dashboards, including procurement management software.
Excel was great when you only had to place six orders a month, all from the same supplier.
Then your business took off. The monthly spreadsheet now looks like a quintuple rainbow of color codes interrupted by hundreds of dollar signs that’s messier than a Bob Ross painting palette. In just 18 months, what was six purchase orders from one vendor is now 140 purchases from 20 vendors every month.
How do you track your spending now? One mistake in the wrong cell in a spreadsheet can send your spend analysis into hard times with inaccurate numbers. Tracking down the errant entry from your procurment team can take hours, days, or even weeks.
Purchasing software eliminates these mistakes and cuts down on the time it takes to make reports. It also makes your spend reports more accurate.
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Is spend management software the new procure to pay software?
Spend management software offers an all-in-one solution for your company’s procurement system. One centralized platform allows your procurment department to make purchases
Spend management software automates workflows across departments and roles while having someone oversee the final purchases. It starts with procurment and goes all the way to paying for an invoice as the final step.
This is how one workflow would happen in a procure-to-pay environment with the right spend management software.
- Someone makes a purchase order or requisition request and fills out the necessary form online.
- The requisition request is emailed to the person authorized to make the purchase.
- The supervisor authorizes the request, and the purchase order is sent to a supplier.
- The vendor then sees the purchase order and confirms that it can be filled.
- Upon delivery of the materials listed in the purchase order, the system receives an invoice from the supplier.
- The final step is that the spend management software pays the invoice upon performing a three-way match for the purchase order, bill, and invoice.
Companies with a lot of regular procurment activities as part of the ordinary functioning of the business benefit most from spend management software as a way to manage a procure-to-pay system.
You’ll need an affordable spend management software suite if you’re a:
- Manufacturer that needs raw materials for finished products.
- Equipment supplier that requires parts.
- Janitorial supply firm that regularly purchases chemicals, equipment, cleaning supplies, and PPE to send to janitorial departments.
- A company that makes a lot of purchases from several suppliers on a regular basis.
These types of businesses benefit greatly from spend management software as a way to manage spending, expenses, and payments from start to finish.
This software also works well for departments who have various expenses and purchasing requests.
For example, a lead engineer needs more stem bolts to fulfill a large order your company just received. It’s outside of the normal order you send to Acme for stem bolts every month. It’s a rush order, which costs extra. Your finance team understands this because they can match the purchase order request with the profits made on the larger order to justify the request based on the revenue they expect.
The above example is a fantastic situation where procurement process automation provides a solution.
In the sales department, the sales director onboards three new people due to the success of recent contracts, including the rush order for Acme and the stem bolts. She requires three more licenses as a software purchase for the CRM, and those are $100 per person for a year. The sales director puts in a requisition request for $300 from a supplier for the software purchase.
Spend management software handles this process, too, because it’s technically procurement but in a different way.
Even though these are two different departments, they both fall under spend management software and procure-to-pay because they regularly spend money on things they need to keep the company functioning properly.
Procure-to-pay is an essential expense-tracking process that lets managers and finance teams track spending across all departments.
→ Related topic: Is spend management software the new procure-to-pay software?
The Role of E-procurement software in Supply Chain Management
E-procurement software helps procurement-heavy startups and mid-size companies manage spending on goods and raw materials from suppliers thanks to automated processes.
Automation in e-procurement software includes purchase order generation and inputting vendor information to three-way matching and invoice payments made by the accounting department.
Managers and administrators see larger views of the company’s procurement process while understanding who authorizes purchases and from what suppliers.
For example, a plant manager receives an alert on his mobile device at the beginning of a third shift that the day supervisor for Line 3 needs more 3-inch bolts to complete motor assemblies for next week. One batch from a supplier was not up to standards, but they didn’t find out until the batch was halfway done.
The day supervisor made a requisition request through the procurement system using her tablet computer when she was still working on the line. All the way on the other side of the plant, her supervisor, the plant manager, got the email alert and approved the requisition request (made through a purchase order system) within five minutes. He was able to approve the rush request, which added 10 percent to the costs of the order, because it’s for a huge customer and the products need to be done on time.
E-procurement software expedited the alerts to get the order done faster. The data analytics side of the system flagged the problem noted by the shift supervisor about the bad batch of 3-inch bolts they received from a supplier. The plant manager will look at that problem later.
E-procurement software allows your procurement specialists to play a vital role in your ability to optimize supply chain management.
This is especially vital for just-in-time manufacturing and agile frameworks. Supply chain management must work perfectly for these types of companies to deliver finished products to their customers on the right schedules.
As such, they must learn to vary their suppliers in case one can’t deliver. For instance, store goods need to know the output of lines every week so they can arrange storage spaces properly.
Another aspect of your procurement process occurs when managers need to streamline purchase order approval. Delays in approvals can stymie production.
Supply chain management directly affects the goods flowing in your production lines. Without it, your company might face delays.
Where does e-procurement software come into play with supply chain management?
E-procurement software is the industry norm for procurement-heavy companies because advanced software is now more affordable.
Your company can’t afford not to have some kind of procurement software.
→ Key Takeaways of Supply Chain Management
- You can’t make decisions about supply chain management when you don’t have the right data in hand.
- Procurement management software gives you the tools you need to streamline and automate purchase orders, spending decisions, budgeting and supply chain management.
- Advanced software and analytics is more affordable than ever thanks to implementation industry-wide.
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Procurement vs Purchasing
Procurement and purchasing may sound similar, but ask a procurement specialist and you’ll get an earful about making these two terms synonymous.
The main differences lie in the approach to how people handle both systems.
Procurement talks about how a company acquires the best deal on goods from approved vendors. Purchasing entails the actual physical functions of buying the goods from suppliers.
Procurement discusses several processes that happen before, during, and after purchasing. Purchasing is the physical act of buying goods when the order goes out, products come in, and payments are made.
Procurement is an internal process. It goes through several steps, leading up to and including purchasing. Purchasing involves other companies, like suppliers.
Procurement emphasizes on an item’s value over the long-term versus the immediate cost. Purchasing relies more on how much something physically costs.
Procurement is a set of tasks and procedures to follow. Purchasing involves buying of something, usually at wholesale.
Procurement recognizes the need for strategic sourcing and supply chain management to get the best possible prices from vendors. Purchasing focuses on ordering, receiving, and paying for items.
Procurement systems spot needs within an organization, and it’s proactive. Purchasing is purely reactive for when a need arises when buying something.
Procurement fosters long-term relationships with suppliers and vendors. Purchasing is purely transactional.
Think of procurement as a strategy and purchasing as an action.
One is high level and one is lower level.
When it comes to procurement vs purchasing, both can be labor-intensive and can cause inefficiencies.
Both can be improved with the right procurement software or purchasing software.
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Procurement management is the process of overseeing all the acquisition of products, materials, and goods related to your business model. For manufacturers and suppliers, procurement is necessary for both sides of the supply chain in order to make money.
Diving into Procurement
Procurement is more than just simple purchasing of your raw materials. The procurement process can drive company growth when it’s implemented properly, from the right combination of staff expertise and using the right procurement tools for supply chain management.
What is Procurement?
Procurement is a strategic process designed to keep the supply chain moving forward. The main activity is that your firm obtains goods to support daily operations.
Tasks in the procurement process include:
- Strategic sourcing to manage many vendors simultaneously
- Negotiating terms with suppliers
- Purchasing items using digital purchase orders
- Receiving goods regularly
- Inspecting goods received from your vendors
- Maintaining records of the procurement process along all of its steps
What is Procurement Management?
Procurement management happens when your procurement department or purchasing experts oversee sourcing for your finished product. This involves acquiring products and materials you need to maintain your business operations.
Procurement management has a direct impact on your revenue and profits because it’s a strategy that lets your purchasing experts negotiate better deals with preferred vendors.
Strategic Sourcing vs Procurement:
Strategic sourcing is a subset of procurement. It’s where your experts determine what suppliers are best for your company to use while getting the best deals on quality raw materials and products.
Strategic sourcing is a key element of procurement, but it isn’t everything.
7-Step Process to Effectively Implement Strategic Sourcing in your Organization
Understanding the advantages of your strategic sourcing lets you design a process to implement it.
- Identify & Categorize Spend Profiles: To start your strategic sourcing process, identify all spend areas across your business. Categorize them based on how critical they are, which helps you prioritize your spending and sourcing activities in these categories.
- Build a Sourcing Strategy: Now you build a sourcing strategy based on each area or category. Identify the requirements of your business teams that require spending in these areas, and then have them define goals and timelines related to achieving those objectives. This involves developing a great communication framework and workflow to make sure all stakeholders know what’s happening. It also makes for increased accountability when everyone knows when tasks must happen.
- Analyze Your Supplier Market: Execute an in-depth analysis of current suppliers by understanding and evaluating supplier profiles. This means diving deep into the markets of your vendors (not your market) to understand their performance. You must understand the risks and opportunities of your chosen supplier market in order to manage the supply chain more effectively.
- Request Relevant Supplier Information: Now it’s time to request RFIs, RFPs, or RFQs from vendors. Your team must communicate your exact requirements to suppliers and vendors. They need to know their performance expectations so they understand what your business needs.
- Selecting Suppliers & Executing Contracts: Choose vendors from your culled and curated list. They offer the highest level of cost savings while maintaining your quality standards. Send out contracts to suppliers to have the relationship formalized.
- Measure & Track Supplier Performance: Your strategic sourcing doesn’t stop when you choose suppliers.
You need to periodically measure how suppliers perform based on the requirements and objectives you set for them and your company. Track supplier performance and identify areas to improve. This helps your procurement department manage supplier risks, allowing you to design a strategic procurement process to mitigate supply chain disruptions.
- Implement Supplier Relationship Management (SRM): Lastly, the strategic sourcing process implements supplier relationship management (SRM). This turns your supplier management process into a loop of back-and-forth communication rather than a one-sided relationship.
SRM enhances collaboration between you and your suppliers by turning your relationship into one that shows you’re both strategic value partners.
The Benefits of Procurement Management Software
The benefits of moving to the best procurement management software are numerous.
- Shorter Purchasing Lifecycles: Your procurement team may see shorter lifecycle times for purchase orders, invoice processing, and payment processing. This is because purchase orders are automated, and approvals are sent to the right people right away. Suppliers send electronic invoices upon receipt of goods, and you can approve those invoices for spending. Purchase orders may be flagged for not using procurement guidelines properly.
- Better Spend Transparency: Better spend transparency, accountability, control, and security because administrators can see specific transactions and a larger picture with data analysis.
- Improved Supplier Relationships: Improved supplier relationships through supply chain management, access to supplier performance metrics over weeks, months, quarters, and years, as well as better leverage for vendor negotiations based on the metrics and analytics. You don’t have to wait for end-of-the-month reports to make important decisions.
- Standardization of Procurement Processes: All of your spend data is in one place, managed by your procurement processes. Admins have access to complete data via the user-friendly interface. Templates make it easy to create purchase orders, reports, contracts, and other documents.
- Scalability of the Best Procurement Management Software: Your company may only need a smaller platform when you first purchase procurement management software.
As you grow, you will need more robust solutions as your procurement needs take off.
Platforms must be cloud-based so they can work on any mobile device on the premises with wireless infrastructure you already have in place. This gives you real-time access to the information you need. If you receive an approval request from the other side of the plant, you can read the purchase order and approve it in minutes if necessary.
More robust solutions also integrate with accounting and financial software to give you the ability to make purchases from within the procurement management software.
- Enhance Purchasing Power: Consider integrating supplier catalogs within your procurement management software to give you access to a full range of raw materials, parts, and supplies for your production lines. This way, you can see the full range of products and product categories to let you find the best value for what you need.
- Optimizing Your Supply Chain: Here is where data analytics excels for procurement management software.
You can analyze your supply chain to find inefficiencies, bad orders, shoddy products, or more expensive orders over the course of a specified time. You can examine vendor performance over a month, quarter, or year to detect seasonal fluctuations, supply problems, price increases, late orders, or orders that were short.
You can renegotiate contracts and prices based on these metrics, or decide to go with other suppliers if the situation is bad enough for certain vendors.
- Enhanced Inventory Management: Do you have enough screws to get you through the next week? The best procurement management software can tap into how many crates of screws you have in your inventory and then you can order more automatically. Your staff doesn’t even have to fill out a purchase order for this because these materials are vital to your regular way of doing business.
So long as the inventory levels meet your criteria, ordering can happen automatically, which makes inventory management more streamlined.
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The Importance of Procurement Process Automation
Procurement process automation uses technology and advanced computer programs, such as procurement management software, to manage your entire procure-to-pay cycle from start to finish, including filling out purchase orders to make requests all the way to paying your suppliers.
You already have a procurement process in place. Procurement process automation simplifies these things by making them more streamlined and taking out human errors.
The best procurement software automates mundane procurement tasks so your teams can focus on things that deliver more results and value to your company.
Rather than worrying about purchase orders getting lost, misapprovals in the procurement workflow, or mismatched invoices that lead to paperwork headaches, your procurement team can (affordably, by comparison) switch to a fully digital system that handles a lot of formerly labor-heavy tasks that save you time, effort, energy, and money.
Procurement process automation is vital to your company because it:
- Reduces human errors
- Sets specific parameters
- Cuts down order lifecycle times
- Standardizes procurement processes
- Improves supply chain management
- Analyzes data
- Keeps data all in one place
- Allows staff to focus on strategic work
Procurement process automation reduces human errors. That’s because the procurement department pre-sets parameters, access, suppliers, forms, and processes.
No one can enter information or duplicate a purchase order that is outside of specified parameters. If that happens, either the system disallows or escalates the purchase order request to the right person.
Procurement process automation systems and software add levels of control to your purchasing, purchase orders, suppliers, and invoicing.
For example, someone fills out a purchase order for 10 tons of aluminum because your company needs it to make radiator parts. Only authorized personnel have access to the purchase order system. Let’s say it’s a shift supervisor who notes his line will run out of aluminum in 30 days. The automated procurement system would alert the lead engineer if the company needed to order the raw materials under normal circumstances. But one customer needed a rush order. Aluminum supplies started to dwindle. Only people who understand what’s going on will be able to access the purchase order system.
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How Procurement Software Drives Business Growth
Your chosen small business procurement software (equally useful for startups and mid-size companies) allows you to optimize resource planning and business processes while enhancing decision-making as you look to grow.
For example, you started with small business procurement software that merely helped you place orders from suppliers while tracking spending and creating digital purchase orders. That was three years ago when you received your first seed funding. Then COVID hit, and you couldn’t invest in newer software even though your procurement team begged for a better procurement solution.
Even with concerns about inflation, an automated procurement platform offers more advanced tools than the basic accounting software you bought three years ago. You’ve outgrown your old procurement process and you can’t afford to miss an opportunity to grow.
A robust procurement platform centralizes all purchasing information in one place. It integrates with accounting, budgeting, and financial software so you can make the right decisions about company growth due to better spend analysis data.
You are trained to look at numbers and make strategic decisions. Having access to key purchasing data offers one way to make your procurement process more efficient.
For example, your procurement numbers look off for one particular supplier. You’ve been spending more money progressively over the past two months, and your purchases from that vendor are up 10 percent.
Because you have extra time on your hands due to a more efficient procurement process, you can investigate better suppliers with fewer pricing problems. It turns out, you found a supplier that saves you 10 percent on purchases compared to the previous vendor’s original prices, and they deliver faster.
You can find other efficiencies and room for growth with procurement software for your small business.
You can gain other insights from spend analytics such as:
- How to manage strategic sourcing when supply chains become more expensive.
- Understand when you need to replace equipment or purchase better raw materials based on purchasing patterns.
- Should you raise prices? Have you paid more for logistics and raw materials lately? A cost analysis lets you determine how to mitigate rising prices from your vendors.
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The Different Types of Procurement Software
You have several choices when it comes to procurement software, all with varying levels of complexity.
- Purchase Order Software: Purchase order software manages one specific aspect of your procurement process. This type of procurement software automates the generation of purchase orders to make it easier to manage the approval workflow, spending, supply chain logistics, supplier management, and budgeting.
Authorized users can automatically create digital purchase orders with vital information already filled in various fields. Then it automatically goes to someone higher up the approval workflow chain before it gets sent to a supplier, all electronically.
- Supplier Relationship Management Software: Not all suppliers are created equal. Even though you have your favorites, over time some suppliers may not be the best fit for you. Supplier relationship management software specializes in identifying vendors that can diversify your supply chain when (not if, when) you run into issues at some point in the future. Not only can this type of procurement software compare suppliers and their overall costs, but it can give you tips on strategic sourcing by finding vendors based on specific criteria, such as capacity, location, and logistics.
- Spend Analytics Software: Every part of your business operations, from your procurement process to sales, generates data. Spend analysis using this type of program highlights patterns in your purchasing process that give you insights to streamline processes, save money, find better suppliers, and improve your production lines. You can create reports on almost any type of financial data you have on spending with this procurement software.
- Contract Management Software: Before you have purchase orders, you have to have contracts with suppliers and vendors. Contract management software allows your teams to create contracts quickly by inputting custom information based on your standards. Auto-fill items from quotes to populate contracts, then alert your procurement team that there is another supplier your company can use. Once your staff fills out a new contract, it can go to a manager or supervisor for approval.
- Electronic Sourcing Software: Also called e-Sourcing software, this kind of procurement software for small businesses, startups, and mid-size companies enhances your purchasing process by letting you send requests for proposals, quotes, and information to suppliers, and they respond in kind (all digitally). This platform lets you assess the best suppliers based on the bids they have returned to you. Over the years, you can see how each of them stacked up as you selected ones that were right for you.
- e-Procurement Software: This kind of procurement management software lets you choose from a pre-approved and customized catalog of products for sale from suppliers. You get to see exactly how much you’ll spend, what inventory the suppliers have on hand, and whether they will fit your needs. You can even take advantage of vendor discounts and promotions, especially when buying in bulk.
- Electronic Invoicing Software: Otherwise called eInvoicing or ePayment software, this procurement process software gets rid of some extra steps for your purchasing. Rather than sending you an invoice by email, you can connect approved suppliers to your procurement and accounting system to allow vendors to receive payments for goods delivered.
- All-in-One Procurement Platforms: An all-encompassing procurement solution comes from comprehensive procurement suites that handle everything in your purchasing process from start to finish. These software suites combine many types of procurement software into one. The most robust procurement platforms handle everything we’ve mentioned in this guide and then some.
→ Click here if you want to learn more about The Different Types of Procurement Software
How to Choose the Best Procurement Software: 17-Step Checklist
Choosing the best procurement software is a big decision. Look at our 14-step checklist to see how to accomplish this.
- Procurement Software Supports the Entire Procure-to-Pay Cycle: Before you purchase procurement software, make sure it can perform several functions.
- Identify what your procurement team needs to purchase, such as when inventory is running low or it’s time to regularly restock to keep your production lines going.
- Create electronic purchase orders with certain information to fill in or already filled in.
- Supplier management, including an analysis of price changes, quality issues, discounts, or delivery snafus.
- Automatic three-way matching so your suppliers can be paid efficiently.
- Invoice approval to pass on to the accounting or finance team.
- Purchasing and receiving to allow your team to automatically pay for items once you receive them.
- Payment integrations with your bank account or credit cards.
- Record-keeping by way of a digital audit trail to track who fills out purchase orders, who approves the purchases, and when items arrive.
- Metrics and spend analytics to help you with future casting and cash flow planning.
- Procurement Software Integrates With Your Accounting System: Your chosen procurement platform supplements your accounting system by integrating with common programs like QuickBooks and NetSuite.
Ask your e-procurement software supplier these questions first before you demo the software:
- Can your platform integrate with my existing ERP system or accounting cloud-based software, such as NetSuite or QuickBooks?
- Do you provide AP integration with my accounting software?
- How does your procurement software integrate with other tools we use?
There’s no sense in paying for procurement software that doesn’t work with other computer programs without having to go to another vendor just to purchase low-code integrations.
- Procurement Software should integrate with your most important providers. Typically, the top 5 providers for hardware-centric companies are big industry names such as Digi-Key, MacMaster, Mouser for hardware parts and Amazon for office supplies. If these providers seem all-too familiar, don’t hesitate to take a look at ControlHub’s Purchasing Software which has an integration with all of them, allowing users to import their shopping carts directly to their procurement system in order to simplify purchasing.
- Procurement Software Must Have Cloud-Based Accessibility: Your procurement software must be cloud-based so your team can access it from anywhere, including on mobile devices. Procurement teams need this functionality, particularly if they are working remotely. Procurement software must have the right security protocols in place to prevent a breach.
- E-procurement software must allow your staff to:
- Request, approve, and receive purchases on the fly and wherever they are, such as on the factory floor or at the loading dock.
- Use automated notifications to speed up the purchase order approval workflow
- Take photos of receipts, packing slips, damaged packages, incorrect items, or misdelivered items using a mobile device.
- View and assess budgets, and set approval thresholds to keep departments within their spending limits.
Administrators should be able to easily control who has access to certain functions of your procurement platform based on roles and permissions.
- Procurement Software Is Easy to Use: Test the procurement solution before you buy it to see if everyone on your team can use it easily. After the test run, there shouldn’t be any qualms about moving to the new procurement software because everyone gave their stamp of approval.
Most certainly get a free trial or demo copy to use for a month. Set it up to work through your procurement process from start to finish, including the purchasing process. Do all of the steps make sense? Do they fit with what your company already does? Is everything in plain language? Does the navigation make sense?
If the procurement platform isn’t easy to use, then you shouldn’t purchase it.
- The Best Procurement Software Can Improve Operational Efficiencies
Your procurement software allows managers, supervisors, upper-level staffers and owners to push for operational efficiencies across all departments. Ask the following questions to assess if your vendor has the right procurement management software for efficiency:
- Does your procurement software speed up purchase cycle times?
- How will our teams use this procurement platform?
- How much time will this software save our teams?
- How much could this platform help us manage our spend?
Again, how your chosen software supplier answers these questions can go a long way to making a purchase decision.
- Procurement Software Has Fast, Customized Approval Workflows: Perhaps one of the best time-savers prevalent in procurement software comes from paperless approvals and ditching the spreadsheets.
Top procurement software lets you customize approval workflows by dollar thresholds, users, permissions, departments, and locations. It speeds up the approval process, and therefore the receipt of goods, for your SMB.
- Procurement Software Creates Digital Audit Trails: Small business procurement software (equally useful for startups and mid-size companies), unlike ordinary accounting software, captures and records the change history for your firm’s purchasing documents. You can see a digital audit trail from the original purchase order to the approval, and then to receipt of the order, receipt of the goods, and paying for the invoice from your supplier.
- Asses your chosen procurement software by seeing if it can:
- Track purchase order approvals and approvers for every purchase made.
- Keep a full history of all edits, viewable by you at any time on your mobile device.
- Show you exactly who requested, approved, purchased, and received any item in the procurement process.
- Everything should be easy to see with just a few clicks: Procurement Software Offers Real-Time Budget Tracking.
With manual procurement systems, even when you use Excel spreadsheets, it is impossible to see a real-time view of how your procurement process and purchasing activities impact your budgets, cash flow, and bottom line.
Your e-procurement software must be able to let you understand the following aspects in real-time:
- Portion of your budget already spent
- Approved spending that hasn’t been spent yet (excess budget)
- Amount left in the budget
- Spend Analysis and Reporting: You must be able to control business spending based on your cash flow, and that’s important during economic lean times, when prices suddenly change, costs rise, or equipment breaks unexpectedly.
Your business procurement software must show :
- Who spends money
- Departments the spend the most on purchase orders
- What is being purchased throughout the company
- Supplier management analytics
- Automatic Three-Way Matching in Your Procurement Process: Purchasing discrepancies, spending over budget, duplicate purchase orders, and mistakes in the approval process can cost your company money it doesn’t have.
Any procurement software for businesses needs to prevent these discrepancies from happening before it even gets to the three-way matching phase.
If your basic procurement solution can’t do this, keep looking.
- Spend Management With Procurement Software for Small Businesses, startups, and mid-size companies: A great procurement platform helps you control and track spending by employees who use credit cards (company or personal).
Before you invest in a procurement solution, examine it to see if it can handle expense reports outside of your normal procurement process. Look for credit card reconciliation tools as well as the ability to easily upload scans or photos of paper receipts and credit card statements.
- Supplier Management Capabilities in Procurement Software: Make sure your procurement platform can:
- Manage all suppliers in one place.
- Track supplier performance, such as goods delivered on time, defective products, or wrong quantities delivered.
- Measure suppliers against KPIs such as speed, accuracy, price, and quality of goods.
- Streamline supplier emails, phone calls, and communication
- Create custom supplier catalogs to help employees order correct items from approved vendors at the lowest prices.
Vendor management allows you to assess whether you should find a new supplier to replace a wayward one.
- Customer Support for Your Procurement Process: When you need assistance with your procurement software, can you readily get in touch with your account manager, tech support, or anyone on the help line?
- Look for online reviews and references for the procurement software provider.
- Customer support 24/7 or at least 24/5. This is important for production lines that run three shifts.
- A dedicated onboarding team, account manager, person who can train your staff, and a customized onboarding process to help your staff get up and running as soon as possible.
- An online knowledge base or help center updated regularly as the software evolves.
- Fast Onboarding & Implementation of Your Procurement Software: Downtime is never good, whether it’s due to equipment failure or the installation of your new procurement software.
You should have very little downtime with a new procurement platform. Find a software supplier that can make the switch with few hassles so your team can start using the platform quickly.
→ Click here if you want to learn How to Choose the Best Procurement Software with a 17-Step Checklist
E-Procurement Software: Built For Purpose Software vs ERP Modules
E-procurement software is a built-for-purpose option while ERP handles many facets of your company automation. 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.
→ Key Takeaways: Your company has many choices when it comes to procurement software. Even though prices have come down, it’s still a big investment when looking for the best procurement management software for your small business, startup or mid-size company.
Go through a specific checklist to find out which procurement management software is best for you.
Intro on Purchasing Management
Purchasing management creates rules to make faster purchase order approvals and order placement. The goal is to get goods faster ahead of production. Purchase management streamlines purchasing and inventory management.
- Order Management software: Order management software automates many parts of your company’s purchasing process. After you send a purchase order, the supplier fulfills the order through its automated system. OMS platforms speed up receipt of goods, often by magnitudes of two or three. Your company also monitors inventory levels, returns, and bad suppliers while finding ways to make ordering more efficient.
- Purchasing Software: Purchasing software manages the entire procurement process from placing an order to paying it, and then it allows for inventory management and supply chain management to find efficiencies across the entire procurement process.
Order Management software
Order management software is a platform that oversees all orders within a company. OMS functions support sales, CRMs, accounting and purchasing. It automates several functions, such as purchase order creation, approval, and payments. That way, procurement teams can focus on strategic tasks instead of mundane ones.
→ Click here if you want to learn more about the differences between Built for E-Procurement Purpose Software vs ERP Modules
Impact of an Electronic PO system in Purchase Order management
Your chosen purchase order management software and a robust electronic PO system saves your company money on several levels.
Streamlines PO Approval
Your existing purchase requisition and approval process gives you complete control at every level.
Once the staffer completes the order through a very simple process, the PO approval person receives an alert to review the purchase order.
Your purchase order management software ensures that people who shouldn’t have authorization to make purchase orders or approve them can’t have that task. With administrator-level access, managers and procurement teams can set parameters on who can and can’t get in the system.
Enhances the Purchase Order Process
Procurement managers have complete control over the purchase order process based on the business structure. Automatic routing of PO approval requests provides an audit trail to show who took certain actions along the purchasing process in case there are other questions, comments, and concerns later.
Each purchase requisition request in your purchase order management software outlines how your company pays for the order and when, creating expectations for your finance team to send payment to the supplier.
Purchase order software automates the process of requisition requests, which eliminates errors in the submissions of the purchases. It can also avoid double entries, too many items being purchased, and duplicates coming from multiple departments.
Your sales staff needs real-time data to give possible delivery estimates for a new prospect. Your sales manager can easily find the data he needs by accessing your purchase order management software to look at outstanding purchase orders, inventory, purchase requisitions, budgets, and finances to determine how fast an order can be done and if there is a possibility of finishing a rush order.
This also lets you avoid back orders and missing deadlines as promised by your sales staff. It sets realistic expectations for order completion.
Look for Discounts
Some suppliers will give you bulk discounts when you order certain quantities at one time or within a certain time frame.
If you have two separate purchase orders for the same supplies, the approval person can combine the orders to get a discount from a supplier.
Shortens the Time You Receive Your Supplies
When you streamline the purchase order process, you receive your supplies faster. In some cases you might be able to shorten the time of delivery by two or three days, particularly if you can perform quick research as to who can deliver the raw materials you need the fastest.
Your purchase order software automatically sends every digital purchase order to your supplier in real-time. Their fulfillment software acknowledges receiving the order and can even send you an estimate as to when you will receive the goods.
Your procurement and finance teams love to see those financial numbers climb to the positive side of the cashflow ledger.
The purchase order management software automatically aligns the PO number with the invoice, giving you an automatic check to match what’s happening. There is no guesswork. It’s all right there.
→ Click here if you want to dive deeper into the Impact of an Electronic PO System in Purchase Order Management
How Automation Can Turn Purchase Order Management from a Headache to a Breeze
Purchase order management software makes a lot of your procurement processes so much easier.
Easy Tracking With Purchase Order Management Software
You can track a purchase requisition request from start to finish with purchase order management software. It is NOT accounting software, which has limits on its reporting.
Who made the request? Did the person make a note explaining why the purchase requisition is necessary? Can someone flag the supplier as being faulty because of defects or higher prices? Who approved the purchase order request?
From the initial purchase requisition form to approval through to acceptance by the supplier to paying the supplier invoice after an automated three-way match process, purchase order software makes this easy.
Get Meaningful Insights With Purchase Order Software
How many times have you kicked yourself when you say, “I wish we would have known that a month ago?”
While no single computer system can predict the future, it’s nice to have data insights you can turn to when trying to plan for procurement for the next quarter.
Purchase order management software collects and analyzes data all in one place to give your purchasing department a competitive edge.
Rather than focusing on mundane, day-to-day tasks of your purchasing department, your experts can get in a strategic mindset of “How can we prevent inventory management problems six months from now?
Streamline Purchase Orders & Purchase Requisitions
You can monitor purchase order workflows in real-time. Are there blockages holding up fulfillment of orders? You can get alerts for that to minimize disruptions to your plant’s operations. Adding new suppliers or supplier catalogs? That’s easy.
This saves time later in the process when people fill out purchase orders and purchase requisitions because the vendor information fills in automatically. Rather than spending two minutes filling out address and contact information with a traditional paper form, your staff can fill out all of that information in about five seconds.
After this, you can track the progress of purchase requisitions to compile all information relating to them over a certain time period, with specific vendors, or to see a current snapshot of budgets and purchases yet to be made if there are future investments you’re thinking about making.
PO Creation & Automation
Authorized staffers can select from purchase order templates, pre-populated with the right information, or you can let them make custom orders using valid vendors.
Similarly, line supervisors can have standardized purchase orders that fill in the company name while an employee fills in the rest using drop-down menus.
Purchase Order Tracking
Following the successful PO creation and approval of a purchase requisition, your PO management system allows users to create one automatically for next time as a template in case a similar situation comes up. At this point, you can achieve even greater labor savings the more times you use the template.
Managing Supplier Invoices
Purchase order tracking still needs three-way matching to verify that everything is in order. Use the PO number to match it with the supplier’s invoice and what accounts receivable shows. Thanks to automated procurement processes, this happens automatically within your PO management software when you set up those parameters.
A paperless system stores everything for you to see and analyze later.
Supplier Management & Contract Negotiations
PO management software seamlessly integrates all information about suppliers, including purchase history, discounts, spending limits, delivery times, and price changes. You’ll also have leverage to negotiate new contracts based on the data you receive thanks to real-time and ongoing data tracking.
→ Click here if you want to dive deeper into the benefits of Purchase Order Management Automation
Digital Purchase Order Generator
Your company can streamline several processes thanks to a digital purchase order generator.
It lets your team generate purchase orders faster while reducing errors and double-checking.
For example, Smithco Smithing Supplies needs to buy 1 ton of iron to fulfill an order for making its world-class anvils. Smitty Smith needs to get the right information to the right supplier, so he uses a digital purchase order generator to help him out.
It’s better than filling out a form by hand because it reduces errors, and it’s faster. Smithco will get its iron faster because it uses digital purchase orders rather than traditional paper ones or even ones made in Excel.
Digital purchase orders are a crucial segment of an overall procurement software. It works with the program to generate standardized forms that already have vital information. Rather than spending time looking up vendor details, they are already there in the digital purchase order software.
Someone at your company simply goes to your chosen digital purchase order system through the password-protected portal, looks at the icon that says “Create New PO”, and then a standard form appears.
From there, you fill in several points of data without having to research them or know what’s what. The digital purchase order generator does the legwork for you by starting with a standard purchase order form.
It already has your business information prefilled in, like the name and address of the company, who to send the invoice to, the email of the person to contact in case there are questions.
After that, your staff can fill in pertinent information into the digital purchase order system using a series of menu choices for ease of use.
→ Click here if you want to learn How Automation Can Turn Purchase Order Management from a Headache to a Breeze
Best Purchase Order Software and what to look for
Purchase order software generates a PO for you. It streamlines one aspect of your procurement process.
- Automatically generate a PO number to match later.
- Automate the approval process higher up the chain.
- Fill in standard purchase order information when your staff first puts in a purchase order request.
- Send the purchase order to your supplier to fulfill the order.
- Hasten the purchase order process.
- Reduce your lead cycle times compared to paper or even spreadsheet-based systems.
The best purchase order software will not only create purchase orders, but it will also store standard information you need to complete the job more efficiently.
The best purchase order software is a powerful part of your procurement process.
- It reduces errors because of automated approvals and better collaboration.
- Vendors are right there for people to see, and there are no mysteries as to what vendors are preferred.
- Purchase orders all have standardized information.
- They make three-way matching easy with invoices and accounting slips.
- Creates an audit trail of purchases.
- Gathers data on various aspects of purchasing.
However, there are limits. You can only generate POs with this software. But to have a more robust solution that takes care of the whole purchasing process, you would choose a complete purchasing software package like ControlHub instead.
Purchasing software gives you more data, more automation, and more tools to streamline processes throughout your procurement team.
ControlHub gives only certain staff access to purchase orders, approvals, and invoices. Procurement managers or administrators can assign access to certain staff. It also flags whether or not a preferred vendor is still a valid choice.
All of this, and you get key data points to let you decide how to proceed forward.
→ Key Takeaways
Purchase order software is a great choice, but procurement management software offers better and expanded capabilities when you’re a procurement-heavy operation.
Because of widespread adoption of this type of software, you have many choices.
ControlHub puts all of your procurement tasks in one place, leaving no stone unturned when it comes to data analytics.
→ Click here if you want to learn how to recognize the Best Purchase Order Software and what to look for
The purchasing process is more than just purchase orders. There’s purchasing software out there, such as ControlHub, designed to handle the whole purchasing process in a really intuitive and efficient way, saving a lot of time and headaches to the engineering, accounting, finance, and procurement teams at fast-growing companies
Direct Purchasing vs Indirect Purchasing
Direct purchasing involves purchasing goods, supplies, and products you need to fulfill your company’s mission. Direct purchasing gets those essential products to your facility before going to your customers.
Examples of direct purchasing include:
- Buying flour to manufacture rolls
- Ordering cement and blocks to construct a building
- Purchasing cloth, needles, and thread to make clothing
Direct purchasing usually involves manufacturers who buy raw materials to produce goods from those materials before selling them up the supply chain.
Indirect purchasing occurs when you acquire non-essential products and supplies that support your business. They are not relevant to your actual finished products, but your company cannot function without them.
Examples of indirect purchasing includes:
- Software subscriptions, such as procurement management software
- Office supplies like paper, staples, and pens
- Food for the break room
- Computers and mobile devices
- Janitorial supplies for bathrooms
The key difference between direct purchasing and indirect purchasing lies in the function they perform.
Direct purchasing focuses on core supplies you need to make products for customers. Without direct purchasing, you would go out of business.
Indirect purchasing deals with the supply of spontaneous goods, like when you run out of paper towels in the bathroom.
Both direct and indirect purchasing can benefit from purchasing software to manage supplies, suppliers, and supply chains.
→ Click here if you want to dive deeper into the Difference between Direct vs Indirect Procurement
Purchasing Automation: What It Is and Why It Works
An automated purchasing system, also known as procurement automation, uses advanced software to make procurement processes easier while maximizing efficiency of your staff and reducing time taken to handle mundane tasks. It speeds up the purchasing process and procurement cycle, and frees up your procurement staff to handle higher-level tasks like strategic work and managing vendor relationships.
Widespread adoption of procurement automation has occurred thanks to lower prices for software, suppliers who also use automated tools, and infrastructure for mobile devices already in place in factories.
In general, procurement automation systems handle mundane tasks so your staff doesn’t have to.
Automated procurement systems can:
- Streamline reordering when you know your production lines need new raw materials regularly.
- Eliminates most human error factors, such as mistranscribing numbers, addresses, and other vital information.
- Link to and analyze accurate, real-time supply chain information to help with vendor management.
- See the purchasing process through to the end with invoice matching.
There are many benefits that procurement automation software gives your startup or mid-size company.
Reduced Order Lifecycle Times
Small businesses, startups, and mid-size companies that use automated procurement systems have the opportunity to manage a two-day purchase order cycle based on the top-performing firms. Compare this to a seven-day cycle using the old way of paper purchase orders.
Efficiency of Automated Procurement Systems
Increased efficiency inherent within procurement automation software frees up your staff to do higher-level tasks rather than repetitive, low-level tasks so you can invest in strategic planning for the coming months and years.
Improved Control & Visibility
Digital transformations are tricky. They need widespread adoption and buy-in from everyone in the company. Investing in procurement automation software should be a win-win for everyone.
The system gives administrators full control and access to the information while limiting access to certain roles. Only people authorized to approve purchase orders should be able to do so. If that changes in the future, the overall administrator can easily restrict access.
How Purchasing Software Drives Business growth?
Your time and money are valuable. You barely have the energy to deal with 10 minutes of problem solving, let alone spending two hours trying to track down purchase orders that have gone missing while a big order has to go out.
Take a look at some typical reasons why small businesses and startups need to invest in purchasing software sooner rather than later to drive business growth
Your engineering team can standardize and streamline purchasing processes. Your day shift engineer on Line 1 needs another piece of equipment because one of the extruders isn’t giving that line the results they need. He puts in a purchase order request right there on the line through his tablet computer. You, as the engineering director, receive an email alert for the purchase requisition. You look over the budget numbers within the procurement software suite, and approve the purchase order. Your line should receive the new equipment in three weeks.
Better Spend Management
Purchasing software gives your engineering teams better spend visibility.
For example, you notice the equipment is breaking down more often on one line versus another, even though the same machines are making the same products. You task that line’s engineer to solve the problem. He narrows it down to a roller that functions just barely within normal parameters, but not within the same parameters as the other lines. You put in a purchase order for a part to fix it, and the line gets back to normal after that.
Would you know about this anomaly if you didn’t have an all-in-one place to compare spending? Spend analysis is a powerful tool to find inefficiencies in equipment, people, suppliers, and purchasing.
Enhanced Data Accuracy
All of your purchasing data is in one place with purchasing software. You don’t have to hunt down a wayward purchase order to match with an invoice, nor do you have to worry if someone double-entered a purchase order into a spreadsheet that three people have access to. Procurement management software has it all right there for you.
Lower Your Costs & Build Value
Spending less time on your procurement process gives you more time to focus on improving your business model, whether you need to shorten your time to market, find better raw materials and suppliers, or improve your equipment. When you worry less about purchasing, you can add value to your products. Over time, adding value allows you to adjust pricing to match your output.
9 Purchasing solutions for modern businesses
You have plenty of options for purchasing solutions as a modern business. We list nine important ones in our industry.
- ProcureDesk: ProcureDesk offers cloud-based purchasing software. It focuses primarily on e-commerce companies and their supply chains as opposed to manufacturers or hardware-centric firms. It also has good purchase order software for that aspect of procurement.
- Procurify: Procurify has been around for 10 years. It supports purchase requisitions to allow employees to create purchase orders easily. It also works with customizable workflows to route approvals through certain staffers. Approvals happen on the go through mobile apps.
- Kissflow: Keep it simple. That’s Kissflow’s motto. It automates several processes within a company rather than focusing on just purchasing software. It also focuses on requisition and purchase orders.
- Spendwise: Spendwise manages digital purchase orders, inventory, invoices, bills, and suppliers. It offers 25 standardized reports you can run at any time.
- Tipalti Approve: Tipalti is primarily a payables automation solution with a solid background in payments, including global payments from one country to another.
- QuickBooks Online: Perhaps the most recognizable name in accounting software, QuickBooks Online handles just about anything financial you can think of. However, it doesn’t quite measure up to purchasing software’s analytics capabilities.
- Veeqo: Veeqo is a purchasing software focused on the e-commerce space, allowing retailers to deliver streamlined experiences for their customers.
- Xero: Xero is a cloud-based accounting software platform for SMBs. Like QuickBooks, it’s a great alternative if you’re not a procurement-based company.
- Sage Intacct: Sage Intacct offers strong purchasing software chops even though it touts itself as an accounting software.
Best Purchasing Software for startups and mid-size companies in 2022
ControlHub, hands down, is the best purchasing software for small businesses, startups and mid-size companies in 2022.
Procurement is a complicated subject, but ControlHub wants to make it easier and you and your staff. Our software integrates with QuickBooks online and NetSuite. We offer cloud-based solutions that cater to the way your company’s procurement processes work.
Our list contains a variety of procurement solutions for all kinds of SMBs that rely heavily on procurement as part of the supply chain. Procurement is a basic concept, but every company runs it slightly differently. The tool you choose should be customized to the way your teams operate.
ControlHub can help you with:
- Spend limits to make sure people don’t go over budget
- Approval workflows so only people who are authorized to approve can do so
- Spending analytics to help you predict future purchases and budgeting
- Automated PO generation to save time
- Supplier integration to see catalogs of every supplier’s goods and materials
- Accounting integration for easy payments when invoices come in
- And so much more!
→ Key Takeaways
You have many options for purchasing software and plenty of reasons to buy it today. Costs have come down, customization is driving growth, and you can find patterns in data that are otherwise inaccessible to your procurement staff.
While many choices exist, ControlHub is the best option for your firm for several reasons.
→ Click here if you want to checkout our Best purchasing Software list
Leading Purchasing Software Integrations for hardware-centric, procurement-heavy startups and mid-size companies.
McMaster-Carr is part of the top 3 sources for industrial parts and pieces. From fasteners and pipes, to power tools and playground equipment. If it's used in a factory, chances are McMaster-Carr has it in stock.
A Punchout catalog is a method of integrating an eCommerce site with a company's existing procurement system. This allows employees to shop for products on the eCommerce site and have the purchase automatically added to their company's procurement system.
There are many benefits of integrating Punchout with your company's existing procurement system. By doing so, you can save your company time and money, improve the accuracy of your procurement process, and provide your customers with better service.
How to integrate your company’s Procurement Process with McMaster-Carr?
By using ControlHub, the most intuitive purchasing software for hardware companies, these companies can automatically access Mc-Master PunchOut to streamline their purchasing processes.
With McMaster PunchOut, hardware companies can:
- Access a wide range of hardware products from McMaster-Carr
- Get real-time pricing and availability
- Place orders directly from their ControlHub account
→ Click here to see how the McMaster and ControlHub integration work
Digi-Key is one of the world's largest distributors of electronic components, offering more than 1 million in stock products from over 2,300 suppliers. They are a leading source for board-level components and offer a broad-line of in-stock semiconductors, passives, interconnects, electromechanical, power, batteries, and sensors.
How to integrate your company’s Procurement Process with Digi-Key?
By using ControlHub, the most intuitive purchasing software for hardware companies, these companies can automatically access DigiKey PunchOut Catalog to streamline their purchasing processes.
With DigiKey PunchOut, hardware companies can:
- Access a wide range of hardware products from Digi-Key
- Get real-time pricing and availability
- Place orders directly from their ControlHub account
→ Click here to see how the Digi-Key and ControlHub integration work
Mouser Electronics is a world leader in the design and manufacture of electronic components and semiconductors. They offer a huge selection of products that are used in a wide range of industries, from automotive to aerospace to consumer electronics.
How to integrate your company’s Procurement Process with Mouser?
By using ControlHub, the most intuitive purchasing software for hardware companies, these companies can automatically access Mouser PunchOut Catalog to streamline their purchasing processes.
With Mouser PunchOut, hardware companies can:
- Access a wide range of hardware products from Mouser
- Get real-time pricing and availability
- Place orders directly from their ControlHub account
→ Click here to see how the Mouser and ControlHub integration work
Fast-moving startups that recognize the value of process automation will quickly fall in love with the Amazon Punchout and ControlHub integration.
How to integrate your company’s Procurement Process with Amazon?
By using ControlHub, the most intuitive purchasing software for hardware companies, these companies can automatically access Amazon PunchOut Catalog to streamline their purchasing processes.
With Amazon PunchOut, hardware companies can:
- Access a wide range of hardware products from Amazon
- Get real-time pricing and availability
- Place orders directly from their ControlHub account
→ Click here to see how the Amazon and ControlHub integration work
Purchasing software is vital for Hardware-centric, procurement-heavy startups and mid-size companies. It saves time, energy and effort for your engineering, accounting, finance, and procurement teams.
Contact us to discuss what features you need and what we can do for you. We have a wide range of features that we customize for your company’s purchasing software.