Procurement 101

Feasibility Of Managing Procurement Outside Of A Cloud-Based Software

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5 minute read

Written by

Alan McPhaul

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

Properly managing your purchasing and procurement process is essential for any business. Having the proper tool in place to help lead you makes your day-to-day procurement initiatives easier. Cloud-based procurement Management software can enable you to efficiently run your end-to-end purchasing and procurement as seamlessly as possible.

Cloud-based procurement management platform is an instrument used in the purchasing process that helps you automate and efficiently manage your procurement practices. Typically, these software automatically takes data from different sources, combines them, and allows a user to manage procurement from a single interface. A good procurement management software will create synergies within your organization's procurement team so that priorities can be set. This enhances visibility into the process of purchasing goods and services from start to finish and helps to streamline your procurement process.

With the world changing and everything becoming faster, companies face the problem of managing more purchases as customer demand increases and become more volatile. Due to this fact, managing your procurement activities efficiently and optimizing procurement performance has become more critical than ever. With a proper procurement management system in place, you can effectively navigate changing markets by using a system to efficiently manage your purchases and automate your procurement tasks.

But can you successfully manage your purchasing without a cloud-based procurement solution? In this complete guide to procurement management, 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.

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WHY USE A CLOUD-BASED PROCUREMENT MANAGEMENT SOFTWARE TO MANAGE PROCUREMENT

In the right hands, the right procurement software 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 and push your business forward. From integrating with accounting software in order to reconcile purchases to integrations with access management solutions in order to allow for faster user authorizations, 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 at every step of the procurement process, from the point of approval to when an item is received. This is the importance of procurement solutions. They give your team the necessary visibility into the procurement management process, so you're always 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 so you can efficiently delegate tasks and prevent miscommunications.

Cloud-based procurement software solutions are specifically designed to take your business to the next level by optimizing your procurement management practices. 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 to handle business or project procurement, your thoughts should be focused on the following three items

FOCUS ON REDUCING DATA ENTRY IN THE PROCUREMENT MANAGEMENT PROCESS

Without the convenience of 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 for goods or services purchased.

The problem with inputting data manually is that you open yourself up to human error. A procurement management solution will do a great job managing your data. But if you aren't using software, you want to decrease the number of manual entries for your entire procurement process. 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 things like unknown information or numbers that changed over a certain threshold.

SEPARATING OUT PRODUCT DETAILS IN YOUR ALTERNATIVE MANAGEMENT SYSTEM

A staple of procurement software is that each core product attribute lives 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 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 know what raw materials go into an assembled product so you can keep track of what is needed at a component level in order to maintain quality standards.

3) Other attributes you want to visually see on outputs – You can easily use logic to always have an 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 procurement software and manage costs seamlessly. Procurement software excels at keeping data clean and organized without you having to manage information at every step. If you aren't using 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 FOR YOUR PROCUREMENT PROCESS

A Procurement solution outlines the procurement steps to follow and excels at providing information in an easily digestible manner that drives efficiencies and results for procurement managers and other procurement professionals. 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

Cloud-based procurement management plays a huge role in letting you know what product or service 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 purchase requisition 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 operation. 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 the differences in receipts versus invoiced?

Cloud-based procurement management allows you to these questions and other similar ones seamlessly. This is another shining moment for this type of software. You will need to format your alternative solution in meaningful ways to your business in order to grant you the level of flexibility to be able to visualize your data and track your key performance indicators 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 act 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 in all types of project management is data tracking. This is important within a cloud-based procurement software as it is constantly giving you data points for comparison to drive profitability and results in your procurement management plan. You will not know if something is off or requires attention with your procurement spending and procurement policies unless you are tracking important data points.

Procurement management is a way to track these two important items:

1) Request for Quotes – You should be keeping track of item pricing, especially as it is changing over time within the supply chain. This enables 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 for every procurement cycle, you can manage records at many different points in their process to better manage procurement costs, track budget, and financials as well as manage the dreaded discrepancies that may be caused by inefficient procurement practices.

The procurement management process includes vendor management or supply chain management too. You can use supplier scorecards to measure your partners' capabilities when they bid for contracts or track 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 suppliers accountable and manage supplier relationships better. Measuring their performance and compliance with procurement contracts also ensures you are not being held back by unreliable partners.

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

AUTOMATE COMMUNICATION AND COLLABORATION

Cloud-based procurement automation software is great for 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 and improve the efficiency of your procurement management to a reasonable extent.

COMMUNICATION

Between automating supplier follow-up to reducing the time of PO approval through the constant flow of information, cloud-based software can not be underestimated. It is possible to recreate these features outside of a software, but it will be really hard to achieve the same level of efficiency as your procurement software. For instance, 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 these key steps together which is the way cloud-based software works.

Cloud-based procurement solutions often have built-in messaging systems that allow for direct communication within the system to streamline workflows and duties within the procurement department. This is an important part of procurement management. You can mimic this by using shared documents to communicate with staff and other stakeholders involved in the procurement of goods and services. You can also use notes on word documents to respond to different points and share procurement management plan details.

The ease of use and friendly user interface of an effective procurement platform is hard to replicate, but it is possible. You may have to get the help of a programmer or simply find a great software solution instead of building one yourself. Or you may have to use different messaging programs and other solutions when a good digital procurement management software would be a one-stop solution.

COLLABORATION

By tailoring user permissions and setting customized approval workflows within your purchasing department, a cloud-based procurement platform provides structure to internal collaboration. You can recreate a procurement workflow outside of a good procurement tool, but it is hard. You can use list-making tools to assign tasks to different people or use messaging apps and threads to call out what needs to be done by who.

A cloud-based purchasing software allows you to delegate work and share procurement documents seamlessly. By using this in conjunction with limiting permission, you enable your team to focus on things that they are responsible for. Who needs to do what must always be clear in the procurement process, and using an effective procurement management ensures there is no confusion on this. 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 regular procurement management software would do. A strong procurement cloud inherently assigns 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. Your alternative solution for managing the procurement process must do the same.

CONCLUSION

A cloud-based procurement tool offers a convenient solution to managing your procurement plan and optimizing inner and cross-departmental functions for successful procurement management. If you currently do not have an existing procurement management solution, 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, without procurement software, 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 platform, you can put together a makeshift alternative tool to improve procurement. 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 platform can be the permanent solution for your business.

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