Procurement Management

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What is procurement management?
Procurement management is also referred to as the source-to-settle process. It encompasses the evaluation, selection, and creation of formal contractual agreements as well as managing the company’s ongoing supplier relationships.

Procurement is a complex discipline spanning many interrelated activities. The procurement management process includes the transactional purchasing of goods and services, and integrates with accounts payable to complete the source-to-settle cycle by providing supporting documents to help with the processing of supplier invoices for payment.

We define procurement management as a process responsible for overseeing and administering all the methods involved in acquiring materials, products, goods, and services needed for efficient operations.

It involves multiple stakeholders and departments such as commercial, legal, technical, and managerial parties. As a business, your procurement team must carefully balance the needs of all departments. Proper procurement management can reduce lapses in communication and ensure organizational success.

It also helps to manage external vendor relationships and ensures compliance with contract terms and regulations. Additionally, procurement management allows businesses to meet project goals, negotiate contracts effectively and manage supply chain logistics.

The terms “sourcing,” “purchasing,” and “procurement” are at times used interchangeably (depending on the industry) to define the process of procuring supplies. However, sourcing is more strategic, while purchasing and procurement refer to the actual operational function.

Across all industries, organizations depend on procurement management to manage costs. This has a direct impact on an organization’s bottom line as well as strategic business operations.

Read More:- What is Procurement Management

Reasons to digitize procurement management
It will be no surprise to you to hear that relying on outdated, manual, paper-based processes to handle your procurement management activities is unlikely to offer your organization optimum speed, accuracy, or efficiency. In fact, it is probably costing you more along the way. It is therefore well worth considering how digitizing your procure-to-pay process can offer you tangible benefits.

For example, you can benefit from automated workflows across all of your procurement activities. This means smarter performing processes with purchase requisitions, purchase orders, and invoices, making them easily trackable because they are automatically sent to the appropriate reviewers and authorized quickly and accurately.

What’s more, you can easily ensure your processes are legal and compliant and also benefit from a shared workspace to efficiently collaborate with your suppliers. The covid-pandemic has further accelerated the need for procurement automation and going digital definitely improves the efficiency of the process.

Here are six important reasons why businesses need to digitize their procurement management process:

Improved spend under management
Eliminate maverick spends
Reduced processing cost and time
Remove approval bottlenecks
Enhanced spend visibility
Improved compliance

Functions of procurement management that need to be digitized
Though there are a number of functions in procurement, here are the top 5 functions that need to be automated to save time, manual effort, and cost.

1. Purchase Requisition
A purchase requisition system offers requesters a guided requisitioning experience. Right from listing preferences or frequent purchases to suggesting the best vendor, it embeds purchasing policy in the process and guides the requester in the right way.

As policies are enforced in real-time and any missing or misleading information in the purchase requisitions are spotted instantly, there is no room for errors or inaccuracy in purchase requests. A procurement management software that offers electronic data capture, routing, and approvals will help organizations keep the requisitioning experience consistent every time.

2. Purchase Order
With a procurement management system, there is no need for manual paper-based purchase orders or data re-entry. Purchase requisitions are automatically converted to as many purchase orders as required (depending on the number of line items).

Since purchase order software offers complete transparency into the process, stakeholders can easily find out where a PO is located in the purchase order approval chain at a specific point in time. A procurement management system will ensure that purchase orders list out every important detail a stakeholder needs to take an effective decision and process the PO swiftly.