Procurement management is a crucial part of any manufacturing business, but also one of the most complicated. With so many moving parts, documentation, and employees, it can be easy to fall into a pattern of missed deadlines, stockouts, and delays.
In the rapidly transforming world of Industry 4.0, you need a procurement management system to ensure you have the supplies you need to make your customers happy. In this article, we’ll discuss what a procurement management system is, how it works with your ERP system, and give an example of what procurement management software looks like in the real world.
What Is a Procurement Management System?
A procurement management system is a software solution designed to automate and optimize the processes used to acquire goods and services for a business. Procurement management systems play a vital role in enterprise resource planning (ERP) systems, with a specific focus on all aspects of procurement. This focus includes purchase requisitions, supplier management, purchase orders, contract management, and invoice processing.
The ultimate goal of a procurement management system is to streamline the procurement process, improve efficiency, reduce costs, and improve communication with suppliers and vendors.
Benefits of a Procurement Management System
The benefits of a procurement management system, especially for manufacturers, are many. In fact, depending on how you use the software, they can be endless.
For starters, procurement management systems save businesses money. Procurement management software can help you find opportunities to save costs. By streamlining processes like cost comparison, you can spend more time negotiating better prices with suppliers.
These systems also help improve supplier management. You can create a database of approved suppliers, track their performance, and monitor compliance with procurement policies and contracts. If a supplier fails to deliver, you can mark them as an unapproved supplier to prevent procurement staff from using them in the future. On the flip side, suppliers who have worked well with your team in the past can be tagged as first-priority suppliers. This helps create better relationships with suppliers and ensure reliable procurement partnerships.
Never miss a beat by optimizing your purchasing workflows. Procurement management systems allow your team to automate purchasing workflows, from purchase requisitions to order approvals and invoicing. Not only does the automation reduce the risk of human error, it also speeds up the procurement cycle, so you can ensure on-time delivery.
On top of that, by procurement management systems can be seamlessly integrated with your broader ERP system. This enables your team to communicate and collaborate across departments. For example, if your design and engineering teams are working to develop a product, they can access the procurement team to get an idea of the availability and cost of materials. This will help ensure products are feasible to manufacture.
Procurement management software can also be integrated with your inventory management module in your ERP system. Your team will be able to quickly optimize inventory levels, reduce stockouts, minimize carrying costs, and improve inventory turnover rates.
6 Procurement Management Software Best Practices
Procurement management requires you to be creative and analytical, strategic, and personable. Your team needs to be detail-oriented while looking at the big picture. That’s why procurement management software is so helpful.
Here are some ways you can put your procurement management software to use to maximize your company’s overall performance.
1. User Adoption and Training
User adoption, training, and ongoing support are crucial to your team’s use of procurement management software. Change management means getting employees on board with new software. If they aren’t using it, they’ll revert back to the old processes that required you to opt for a more holistic software in the first place.
Be sure to provide comprehensive training to users on how to effectively use the procurement software. Also be sure to have a robust support system in place for troubleshooting, addressing users’ issues, and monitoring for proper use.
2. Centralize Procurement
Ideally, your procurement software integrates with your holistic ERP system. Your goal is to centralize processes into a single database, including sourcing, purchasing, and supplier management. The process of centralizing data streamlines processes and ensure all employees are on the same page, working with the same data.
3. Automate Workflows
Work with your ERP consultant to set up efficient workflows from the start. Having a standardized plan in place will help employees support each other and stick to their workflows.
Using procurement software, you can set up an alert to be sent to a manager to approve a purchase order or invoice and it won’t be sent to a supplier until the manager clicks “Approve”. Be sure to include approval processes for activities like purchase orders and invoice processing so that no errors slip through the cracks.
4. Supply Chain Collaboration
Not all software offers the ability to collaborate with suppliers, but fortunately, Infor CloudSuite does. This is critical to building trust among your partners, as well as avoiding accidental ordering from unreliable vendors. Infor offers Vendor Portals so you can share catalogs, negotiate contracts, and monitor supplier performance directly in the system.
5. Analyze Data
Our ERP system of choice, Infor CloudSuite Industrial, comes packed with data analytics capabilities. This includes report templates, advanced planning and scheduling (APS) tools, and the ability to drill down into historical data weekly, monthly, quarterly, and annually.
When it comes to procurement and purchasing, these tools give you insights into spending patterns, supplier performance, and help you identify cost-saving opportunities. It eliminates guesswork by giving your team the tools to make informed decisions and optimize procurement management strategies.
6. Integrate with ERP
While procurement is its own department, it shouldn’t operate independently of warehouse management, inventory control, finance, or engineering. All teams should be operating like a well-oiled machine, and this can only happen with cross-collaboration.
Be sure to choose a software that can integrate with your greater ERP system, or choose an ERP implementation strategy that comes with a procurement management module, like Infor.
Don’t worry. With user permissions, you can restrict sensitive data to need-to-know team members only.
Example of a Procurement Management System in ERP
At Godlan, we are Infor Gold Channel Partners of Infor CloudSuite Industrial, an ERP system designed with manufacturers in mind. Infor CloudSuite offers an easy-to-use purchasing and procurement system as part of the Materials & Inventory Management module that integrates with the rest of your ERP system.
The goal of the Procurement module is to help your team quickly and easily determine requirements, place purchasing orders, vet vendors, manage pricing, and ensure compliance of company protocol. It also integrates with CloudSuite’s Inventory Management module to help you control inventory and therefore your company’s cash flow. In the dashboard, you can easily coordinate material purchases and receive online decision support.
You can manage all types of purchases, including inventoried items, supply items, outside service operations, service parts, and engineered components produced by a vendor.
The software allows your team to quickly compare vendor prices and lead times while eliminating guesswork, paperwork, and other time-sucking manual processes.
Infor even allows vendors to work directly with your system using Vendor Portals. This makes communication a breeze and improves trust among your partners.
Not Sure If You Need an Upgraded Procurement Management System?
Our experts at Godlan have over 35 years of experience helping companies grow by implementing ERP system. If you have questions about procurement management software, contact Godlan today.
