One of the biggest challenges in procurement is clerical errors. This is unsurprising when you consider how much copying and re-copying there is in a manual procurement process. And, until the last couple of decades, the manual process was all businesses could use for their procurement. We went from cash in hand to using a purchase order and corporate credit cards.
Unfortunately, all of these methods are not only error-prone but can easily fail to catch improper spending and unauthorized purchases. That’s not even counting the potential for a company to mis-bill a customer or for the customer to send a check in the wrong amount.
Luckily, a modern procurement system can help prevent many of these errors. Not only can customers order things using automatically-generated purchase orders, but they can even do so without completely leaving their procurement system. This second option is referred to as the punchout process.
How does the punchout process work?
Think about punchouts as a type of system within a system. That is, suppliers create a punchout catalog which is accessed through the customer’s procurement software.
Let’s say that you need to buy a box of copy paper, some printer ink, and a new mouse pad for the office. Like many other companies, you prefer Staples or Office Depot. To purchase these items, your employee will first log into your procurement system. From there, they will select either Staples or Office Depot, depending on the company policy and knowledge of who carries the office’s favorite paper brand.
Once a certain vendor has been selected inside the procurement platform, your employee will see the Staples online catalog. It will look just like their website because there is an interface open between the two computer systems. Then, your employee will search for each item individually and place each chosen item in the shopping cart.
After everything is in the basket, they’ll make a check-out request. In this case, the desired products are input back into the procurement software rather than purchased through the shopping cart. Then, the automated system will get approval from management if necessary and issue the purchase order. After that, the procure-to-pay process continues as normal. Of course, if one supplier didn’t have everything that was needed, the employee will repeat the process with a different vendor’s punchout catalog until all supply chain needs are met.
What is punchout compared to other systems?
For most of us, the most familiar punchout alternatives are the supplier catalog and the e-commerce website. With an old-fashioned catalog, you can quickly find out what a particular supplier can provide. With e-commerce websites, you can see what each company has in stock, almost in real-time.
Let’s look at these differences in more detail.
Punchout vs. supplier catalog
before the punchout catalog was invented, there were old-fashioned supplier catalogs. These are similar to any other type of catalog that you might get, selling anything from clothing to electronics and even expensive equipment. While we still have these today, it’s important to understand the differences between a supplier catalog and a punchout catalog.
Arguably, one of the biggest differences is that a punchout catalog is updated quickly, often in real-time. This is just like an e-commerce website because you can see if something is in stock or not. Sometimes, you can even see how many units the vendor has in stock. And when you purchase the items, your purchase is automatically deducted from the inventory available to sell.
Another major difference is that more traditional catalog formats are not easily updated. Therefore, if a supplier introduces a whole new product line or if they discontinue something, the entire catalog has to be updated. Because most supplier catalogs issued for a modern procurement system are little more than a spreadsheet file, is this usually involves sending the new file to customers. But if one customer doesn’t get the new file, it can disrupt their supply chain and potentially lose a customer for the supplier.
In other words, the more modern punchout model helps customers by providing them with more up-to-date information. This also means that if you are out of something, they know whether that quartering is viable or if they should order somewhere else the next time. Of course, that can be cut both ways because sometimes they will buy from your company as an alternative to their out-of-stock preference.
Punchout vs. e-commerce sites
of course, like almost everything these days, catalogs have become digitized. Particularly in the B2C space, this digitization primarily takes the form of e-commerce websites. At the same time, B2B enterprises increasingly use e-commerce to accept orders from their customers.
If that’s the case, why are punchout catalogs so important? There are two main advantages to punchouts when compared to a traditional e-commerce website.
Punchouts tend to be more convenient.
The ability to choose products, route your selections directly into the purchasing system, and issue a purchase order without leaving your procurement software makes the purchasing process a lot more streamlined. At the same time, you reduce the risks of making serious errors, such as buying 100 boxes of paper when you intended to purchase 10.
Similarly, switching back and forth between one window and another makes a procurement employee’s life more difficult. At the same time, it’s easier for employees to respond appropriately when the first supplier they check has a critical item out of stock. Having everything in one place makes life much easier.
Punchouts maximize your automatic purchase orders
Another advantage of punchouts compared to traditional e-commerce is that you can always use a purchase order. While some major B2B websites that also sell to consumers accept this form of payment when you buy directly from their website, not all of them do. Furthermore, with the websites that will accept purchase orders from the traditional checkout system, you still have to fill out the document and send it to your supplier.
On the other hand, with punchouts you never completely leave your procurement system. The nesting doll effect means that the two systems communicate in real-time. In other words, you can get the maximum convenience, efficiency, and accuracy out of a modern procurement system by using punchouts with automated purchase orders.
Punchout catalogs are essential
If you want to attract and retain business customers with modern E-procurement systems, you need punchout systems. Large buyers prefer to use this ordering method, because of the amount of time it saves. And the more complicated their supply chain is, the more likely they are to insist on punchouts.
Of course, you should also learn the value of punchouts from a buyer’s perspective. Companies that use a lot of hardware and specialized components have to work harder to secure their supply chains. One of the easiest ways to maximize the effectiveness of a modern procurement solution like ControlHub is to use this system. Then, the procure to pay and order tracking features can work harder for you.
Want to know how ControlHub can help revolutionize your purchasing? Call us today for a free consultation.
