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.