Procurement 101

Feasibility Of Managing Procurement Outside Of A Cloud-Based Procurement Software

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5 minute read

Written by

Alan McPhaul

Properly managing your purchasing and procurement is essential for any business selling products. Having the proper tool in place to help lead you make your day-to-day work easier. Cloud-based procurement software can enable you to efficiently run your end-to-end purchasing and procurement.

Cloud-based procurement software is an instrument used in the purchasing process that helps you automate and efficiently run this aspect of your business. Typically, these software’s automatically take data from different sources, combines them, and allow a user to focus on a single interface to manage procurement. A good procurement software will create synergies within your organization so that priorities can be set and enhance visibility into your purchasing from start to finish.

The world is changing and becoming faster. Companies face the problem of managing more purchases as customer demand increases and become more volatile. Due to this fact, managing your purchasing functions efficiently is becoming more critical than ever. With proper procurement software in place, you can effectively navigate changing markets by using a system to efficiently manage your purchases.

But can you successfully manage your purchasing without cloud-based procurement software? In this post, we will explore how alternative methods can possibly work with your company while emphasizing 3 key areas to focus on when thinking about this alternative.  

WHY A CLOUD-BASED PROCUREMENT SOFTWARE

The right procurement software within the right hands does offer businesses convenience. You can have a huge advantage in the following areas:

1)      As your business is likely within a very competitive landscape, you need a leg up on the competition. Most procurement software offers layers of time-saving capabilities to free your time on pushing your business forward. From integrating with accounting software to reconciling purchases to integrations with access management solutions to allow for faster user authorizing, this convenience can not be understated.

2)      Procurement software has a ton of capabilities that drive data intelligence. They allow for the opportunity of economies of scale where you can save time and money by increasing your purchasing power. They also track item information, from point of approval to when an item is received. This gives your team the necessary visibility into orders to ensure you are aware of your company’s spend.

3)      Procurement software, especially cloud-based, increase synergies in your business. Procurement systems are known to connect your operational spending to your financial bookkeeping. This software allows for real-time data to flow to partners seamlessly through your organization to efficiently delegate tasks and prevent miscommunications.

Cloud-based procurement software solutions are specifically designed to take your business to the next level. Creating these advantages outside of cloud-based procurement software is doable but comes with a lot of manual work and workarounds. If you are using an alternative to a cloud-based procurement software, your thoughts should be focused on the following three items:

Focus on reducing as much data entry as possible

Without the convenience of a procurement software integration to outside systems to gather data, you will have to input all the information needed to make accurate decisions. The core information needed to get to your core outputs are:

  • Products – A list of products and components of assembled products needs to be maintained.
  • Inventory data – A record of what you have, where you have it, how much you have and where, what is in production, quantity in production and time production will be completed). You need to also store receipt quantities, times, and costs of items at the time of final receipt.
  • Payment information – Information related to payment history and outstanding invoices.

The problem with inputting data is that you open yourself up to human error. Every time you are manually doing a task, you increase the likelihood of a mistake. Procurement software does a great job managing your data, but if you aren’t using software, you want to decrease the number of manual entries. You can do the following to alleviate mistakes and their impact due to increased touchpoints:

  • Copy and paste large data sets – You should export information in bulk, copy it, and paste it.
  • Utilize formulas to automatically pull in repeated information.
  • Utilize formulas to sanity-check your work – You can check to see if things make sense by using logic to detect think like unknown information or numbers that changed over a certain threshold.

SEPARATING OUT PRODUCT DETAILS

A staple of procurement software’s is that core product attributes live in its own area. As per the second point above, if there is the same information you want to see in multiple places, you should only be entering that information in one place and then using formulas to pull that information in other locations like a software does.

You want to have a place that contains all the core information that you want to see or that is key to your logic that might change. You want to have your logic built in a way that references this detail page and changes based on the input change.

On your product details page, some things you might want to break out are:

1)      SKU and manufacturer combination – If you ever change suppliers, you can change it in this one place, and it updates everywhere. This can also house any costing related to the same sku from different suppliers

2)      Bill of materials – If you are dealing with products that need assembly, you want to have what raw materials go into an assembled product so you can keep track of what is needed at a component level.

3)      Other attributes you want to visually see on outputs – You can easily use logic to always have a SKU’s price, color, metal type, size, style, etc automatically populate in other areas.

By focusing on touchpoints, you can become almost as efficient as a procurement software. Procurement software excels at keeping data clean and organized without you having to manage information at every step. If you aren’t using a software as a solution, you must focus on this point to save on time and errors by making sure your data is structured in a way that you don’t have to continually manage inputs.

Focus on outputs and data tracking

Procurement softwares excel at providing information in an easily digestible manner that drives efficiencies and results. You can customize alternative solutions to allow for this same usability. By formatting information in the correct way and keeping track of your performance over time, you can have similar functionality as a software.

OUTPUTS

The goal of a cloud-based procurement software tool is to let you what has been purchased, if it has been paid for and if it has been received into your systems. In a software, these key pieces of information are easily visible. If you are working with another alternative, you want to try to replicate this. These outputs should also consider the nuances of your business. Some questions you may ask to help structure your data are:

1)      Do you need to see information by location?

2)      Do you need to see information by supplier?

3)      Do you need to see how much a production run will cost?

4)      Do you need to see how much are the differences in receipts versus invoiced?

Cloud-based procurement systems do well in answering these questions and similar ones. This is another shining moment for these softwares. You will need to format your alternative solution in meaningful ways to your business. You will need it to grant you the level of flexibility to be able to visualize your data as a true cloud-based procurement software would.

Also, you want to be able to structure your information in a way that can be easily imported or given to another party to action on. Cloud-based procurement systems typically allow you to export purchase orders and invoice to send to manufacturers which enhances the users experience. If you build your own solution in the proper format, you can try to format the data to enable you to take information and use it in a way you see fit.

DATA TRACKING

The true key to progress is data tracking. This is important within a cloud-based procurement software as it is constantly giving you data points for comparison to driving profitability and results. You will not know if something is off or requires attention unless you are tracking important data points.

Two important items that should be tracked are:

1)      Request for Quotes – You should be keeping track of item pricing especially as it is changing over time. This enables for superior negotiation in getting the best pricing as you can easily see ideal terms allowing for the best working relationships.

2)      Accounting – By tracking inventory receipts, invoices, and expenses you can manage records at many different points in their process to better track budget and financials as well as the dreaded discrepancies.  

You can use supplier scorecards to measure your partners’ performance over time. Some of these may include fill rates, late delivery times, competitive pricing, and communication. By tracking these measurables over time, you can hold your partners accountable. By measuring their performance, you can push your business in the right direction by making sure you are not being held back by unreliable partners.

Tracking results allows for accountability. Whether you need to change the way you are purchasing or work with your internal partners to ensure timely payment of goods, without measuring the results, you will not know the point of failure. Accurate data lends itself to accurately managing your business which cloud-based procurement systems do a great job helping with. In an alternative tool, you want to replicate this important feature.  

Focus on communication and collaboration

Cloud-based procurement softwares are great at encouraging collaboration and enabling seamless communication. These things will be hard to recreate outside of a software but with creative methods, you can almost mirror these functionalities.

COMMUNICATION

Between automating vendor follow-up to reducing the time of PO approval, through the constant flow of information, a cloud-based software can not be underestimated. You can recreate these features outside of a software but it will be really hard. You can use your personal email address to set reminders, and you can use google docs or other shared services to allow team members to see the same information. The trouble will be synching all of them together which is the way a cloud-based software works.

Cloud-based purchasing softwares have built in messaging systems that allow for direct communication within the system to streamline workflows and duties. You can mimic this by using shared documents to communicate with staff and other stakeholders. You can also use notes on word documents to respond to different points.

The ease of use and friendly user interface of a cloud-based software is hard to replicate but it is possible. You may have to get the help of a programmer in which you might just be better off finding a great software solution instead of building one yourself. Or you may have to use different messaging programs and other solutions when a good cloud-based procurement software would be a one-stop solution.

COLLABORATION

By tailoring user permissions and setting customized approval workflows, cloud-based procurement softwares provide structure to collaboration. You can recreate this outside of softwares but it is hard. You can use list making softwares to assign tasks to different people or use messaging apps and threads to call out what needs to be done by who.

Cloud-based purchasing softwares allow you to delegate work. By using this in conjunction with limiting permission, you enable your team to focus on things that they are responsible for. There is no confusion on who needs to do what. The ability to group users and tasks can be done outside of a software but it will likely involve getting another software to do this or protecting spreadsheets from unwanted users.

You really want the alternative tool to make clear call-outs on what needs to be actioned on and by who as a cloud-based procurement software would do. Cloud-based procurement systems inherently assign tasks to users to allow for actions to be taken. This results in improvements in your productivity and ultimately your top line as you have defined roles and clear definitions of what needs to be done. You really want your alternative solution to do the same.

CONCLUSION

A cloud-based procurement software offers a convenient solution to managing your purchasing and optimizing inner and cross-departmental functions. If you currently do not have a cloud-based procurement, you should think about your current solution and if it makes sense. For organizations that are not ready for a cloud-based procurement software, using an alternative can be a viable option. However, you may be spending a lot of time and effort managing a tool that won’t be able to grow with you and causes more headaches than help.

By mimicking the sum of the parts of a cloud-based procurement software, you can put together a makeshift alternative tool. This solution can save you money upfront but in the long run it will not be able to scale with your business. You should think about the time and resources you dedicate to a substitute and really consider if a true cloud-based procurement software can be the permanent solution for your business.

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