How to Build a Procurement Management System
At times of economic uncertainties, fluctuating markets, and fragile supply chains, it’s essential for companies to stay stable and keep their procurement processes under control. However, due to the growing workflow and new business opportunities arising it can be quite challenging to achieve. That’s why many businesses opt for procurement management digitization, creating their own procurement management systems.
Procurement management digitization allows companies to automate many procurement processes and optimize the workflow. As a result, companies can focus more on their business development while clinching lucrative deals with various suppliers in the market.
In this article, we’ll look into how procurement management systems can improve procurement management in your company and how to build your own procurement management solution.
What Is Procurement Management?
Procurement management, also known as supplier management, is one of the fundamental processes for businesses that have to purchase goods or services from various vendors. It helps companies to estimate various factors like pricing, terms and conditions, service and product quality, delivery time, vendor location, goods quantity, and others and choose the best vendors to cooperate with. This way, companies can save their budget while receiving the best goods and services on time.
Procurement management is a complex process. It usually involves various procurement functions from purchase planning to its completion, procurement supplier relationship management, contract management, analytics, and many others. Though there are many ready-to-go options many companies choose to build custom procurement management systems (PMS) that address their company needs.
These systems allow companies to:
- handle every step of goods or service purchasing and track them in the system;
- evaluate the suppliers’ performance and get the most value from the services they provide;
- define how companies could improve their cooperation with their suppliers.
Core Functionality of a Procurement Management System
By using supply management systems, companies can effectively manage their supplies and quickly adapt to changing economic conditions, any turbulence in supply chains, or risk-involving circumstances. For this, these systems include a wide range of functionalities. Let’s have a look at the most necessary ones that should be included in any procurement management solution.
Supplier management is the key function in any procurement management system. It helps businesses to search, onboard, manage, and analyze the suppliers they work with. This module can include:
- the data on suppliers in a form of a database with transactional and order history, purchase catalog, qualifications, policy compliance, payment details, etc.;
- supplier onboarding and management like the status of orders and payments tracking, delivery schedules, and others;
- notifications on supplier management e.g. risk factors, supplier capabilities, etc.;
- supplier performance analytics throughout the supplier lifecycle management.
Procure-to-Pay Cycle Tools
Supply management systems offer all the tools required to fulfill procure-to-pay transactions from placing an order to purchasing. Companies can streamline and automate the procurement processes and make sure that they comply with the policy and pricing.
Another important feature in PMS is invoice automation. When done manually the process is quite time-consuming and error-prone. In contrast, the system automates the invoice approval process, ensuring that all the invoices match the data of purchase orders, receipt notes, and exclude any incorrect information.
The contract management feature helps businesses to accelerate contract handling, shifting it from manual to automated processing. PMS offers its users guides on contract creation, including standardized templates, clause libraries, and collaboration tools. As a result, companies can create contracts much faster under established standards.
Above all, the contract management feature can send notifications on expiring contracts for companies to handle them timely and avoid any risks.
Budget tracking and its management allow companies to better allocate their expenses among suppliers. Dynamic approval workflows encourage companies to be more flexible and more effectively manage their budgets as well as better resolve any approval issues.
The budget management module in PMS should provide:
- customized budget monitoring;
- purchase compliance checks for each item and purchase step;
- view reports of current expenditures, and others.
Reporting and Analytics
Procurement management systems should keep their users updated on the latest events and provide high-quality data analysis. This way businesses can gain the most actionable insights on how to conduct their further procurement policy.
The system should provide purchasing data in various formats like manageable charts, tables, diagrams, and others. Also, it should automatically generate customizable and visual reports which facilitate decision making and improve predictability.
Integration With Other Software
The possibility of integrating a PMS with other digital solutions such as accounting software, project management apps, finance and banking apps, and others offers much space to operate. It allows apps to exchange the data, fill in the missing information, reduce the possibility of human error, and update the data in the synced apps in one click.
Benefits of Building a Procurement Management System
Many companies invest in PMS to automate and optimize their procurement processes. Let’s have a closer look at how businesses benefit from using supply management solutions in their daily workflow.
- Cost savings
With PMS the cost-saving activities start at the very beginning of the procurement process and continue throughout its entire lifecycle. The system allows companies to assess potential suppliers and find relevant goods and services with the best value for money. Moreover, companies can negotiate prices with their suppliers and identify how to make their supply chains even more cost-effective, using analytics and reporting features.
- Improved supply transparency
Any procurement management solution unites various business departments as well as suppliers into a coherent and well-organized system. This allows all the participants to stay updated on the latest changes and obtain all the necessary information required for a successful procurement process. Moreover, these systems can integrate with other third-party digital solutions, updating and syncing related data with them.
- Careful supplier management
Finding stable and skilled suppliers who provide high-quality services or products can be a real challenge. Supply management systems help companies to tune up the selection process and choose the critical factors essential for a particular business.
After a company adds its suppliers into the PMS, it starts monitoring the customer-supplier relationships, helping companies to manage them. For example, it can evaluate supplier performance, notify procurement managers on the latest data, or when a supplier’s qualifications are about to expire, and many other activities.
- Procurement processes automation
Procurement management systems eliminate the need to process procurement steps manually. As a result, a company significantly accelerates the procurement process, minimizes the number of possible errors in documentation, avoids uncontrolled expenses, and others. This way, a procurement team can focus more on other strategic activities like price negotiating, investigating new sources of supply, and others.
- Streamlined contract lifecycle
Creating a procurement contract is an essential step in the procurement process. Supply management systems provide their users with quick templates, collaboration, and compilation tools that can ensure that the contracts have a standardized language and include complete information. Contract reviewers can simply make any contract changes during negotiations and conclude transactions much faster.
SCAND Experience in PMS
When a company develops its own procurement management system, it ensures that it obtains the solution that meets 100% of its business needs. SCAND has experience in building effective PMS that reduce the time and efforts required to manage procurement processes. Let’s have a look at the case when the SCAND team had to develop such a system for our customer.
The SCAND team had to develop a PMS with:
- customer/supplier tracking functionality;
- sale and logistics management;
- expenses management;
- supply chain coordination;
- useful tooling for the procurement process;
- contract management;
- reporting and task creation;
- mobile data access;
- a reporting feature that would display the details of business process operations.
As a result, our customer obtained a powerful and multifunctional PSM solution that could support each step of the procurement process and provide informative insights through deep data analytics and its detailed presentation.
Conclusion on Procurement Management Systems
As businesses grow and become more complex they require more and more workflow digitization and automation. When it comes to procurement management, supplier management solutions become a real lifeline for the companies that order goods and services form their supplier partners.
These systems allow companies to unify the procurement data among various departments, create quick purchase orders, monitor the procurement process at each step, and choose the best suppliers among a great variety of supplier offers. Therefore, the companies that want to retain their competitive edge in their niche should consider building their own supply management system.