Procurement Software

What is Procurement Software and how to choose one for your business

As it’s in the name “Pro” “Cure”, the software that cures all troubles of inventory, purchase orders, purchase requisitions, goods received/returned and invoicing like a pro! Procurement software stores relevant information of suppliers to facilitate efficient buy/sale strategy.

But not all procurement software cures every problem of yours. However, in this article, you will know the importance and what parameters to look while choosing procurement software.

Here’s how the actual ‘Googled’ definition of procurement software goes:

“Procurement software is all in one solution that helps to automate the purchasing work of organizations. One can employ it to raise and approve purchase orders, pick and order the product or service, receive and match the invoice including order, and pay the bill online” 

Statista’s data shows how tremendously the procurement software market application will be growing in the upcoming years.

Above graph from statisa shows the size of the procurement application market worldwide from the year 2015 to 2022. From the data of 2017, procurement software market was valued at about 5.1 billion USD. Hence, it’s for sure that businesses across the globe are utilizing the procurement software to ease up the cumbersome process.

procurement software market application

Adeel Shabir who’s Content Marketing Executive at GigWorker shares his insight on the topic. There are many functions of procurement software or applications:

  • Purchase requisition
  • Create purchase order
  • Invoice approval
  • Vendor management.
  • Contract management

Importance of procurement software is as follows:

  • Time consumption of handling every entry is reduced by 39% when you have defined a set of vendors and material management.
  • You can have a clear eye over your team, their management and their skills are fully revealed.
  • It reduces the cost by 52% of working effectively.
  • You have a clear relationship with the suppliers. Business face all kind of issues, but the top priority is the relationship with your suppliers.

Now let’s see what are the parameters to look while choosing procurement software.

 

Dynamically choose supplier

Choosing the right supplier involves much more than comparing a series of price lists. Therefore, the procurement software must be smart enough to determine the lowest rates offered by different suppliers including a broad range of factors such as service, quality, reliability, value for money and time. How you weigh up the importance of these different factors will be based on your business’ need, strategy and priorities.

Example: Let say you sell a product (gold ornaments) whose price keeps on changing frequently. Now you have 3 suppliers that supply the product you sell. Each of them also updates their price according to on-going market rates. And it’s a tedious task for anyone to manually select the most affordable supplier each time the product price gets changed.

Hence, you can smoothen the stage of manually choosing the supplier using suggestions and save an ample amount of time by automating the supplier selection process through procurement software.

 

Integration with Accounting software

Your procurement software must-have integrations with all well-known accounting software. A good procurement software automatically sends data of all your invoices to the accounting software. Eventually, the data about all your purchases should flow seamlessly without any manual intervention.

The integration of both systems’ functionality can lead to the more advanced and streamlined supply chain management”.

 

Dropshipping support

Amateur entrepreneurs who are willing to start their own business can easily start it by integrating procurement software with dropshippers.

Let say you as a seller must be able to purchase and track product from the supplier. For example, you received an order from a customer. Now being a dropshipper, you’ll need to raise a purchase order for your supplier. As mentioned above procurement software will automatically choose the most affordable supplier (if you are dealing with multiple suppliers). Afterward, the supplier chosen will send the product to the customer and he will send you the invoice of the order.

Now assume your customer returned the product. But due to miscommunication, the product didn’t reach to the supplier. During such circumstances, you have to bear a huge loss – as you need to refund the product amount to the customer and also pay the product amount & supplying or fulfillment fee to the supplier.

Therefore by using procurement software, you can easily keep track of all dropshipping process and even automate the operations from receiving an order to its fulfillment and even returns.

 

Keeping safety stock

Safety stock is unsellable inventory that sellers keep when demand goes beyond expectation. You may find yourself in situations where you are running low on your stock level due to high demand. At that point having safety stock in your inventory can be a business-saving gem.

But do you know many sellers end up wasting their shelf/warehouse space and money on safety stock – even if they are not being used for a longer time? Safety stock management is an essential element which many sellers avoids or overlook. Batching and categorization of safety stock items using procurement software let you determine which items are near expiry or for long. Therefore those items could be sold prior to other similar items in safety stock.

Hence procurement software needs to have an option of managing safety stock, other than the actual inventory. So that you don’t miss out good numbers of orders for not having enough inventory to fulfill those orders.

 

Returning the product

With good sales, you are also often plagued by the curse of customer returns. You can’t stop or avoid consumers to return your product. Tons of reasons are there when a buyer returns a product, and when the supplier is the reason for return – then you can not every time contact the supplier and question him/her.

Some procurement software also lets you to:

  • Set customer-specific return processing
  • Send return updates via SMS or email
  • Show real-time tracking with shipping partners
  • Issue and manage replacements
  • Automated refund processing and many more.

Hence by having a procurement software that has the feature of return management can help you minimize the bigger problems with your supplier and smoothen the process of the product return.

 

Difference between Procurement software and Inventory management system

Tom who is Operations Director at “Software Path” says, procurement software is becoming more popular as the shift away from large supply chain suites to point solutions gathers pace. They are seeing more companies looking for “best-of-breed” procurement and inventory management systems now that integration between systems is becoming simpler.

The primary difference between procurement and inventory management software in the supply chain stages they address. Procurement software delivers controls on the supply chain upstream of purchasing (and occasionally supports those downstream) whereas inventory management systems primarily transform processes downstream of purchasing.

There is some overlap between the systems including supplier management, but software buyers are increasingly looking for specialist systems for each that can then be integrated.

Boris Shiklo CTO at ScienceSoft, an international IT services company, has shared his ideas about procurement software.

“Both terms are often used interchangeably and may have overlapping features, especially when we speak about businesses where inventory management is a critical element of the business, for example, manufacturing companies, restaurants, etc.

However, inventory management is more about the rationalization of product storage, selective product placement, demand/supply balancing, resource planning, etc. As for procurement software, it focuses on purchasing activities – order creation and approval, bid management, invoicing, payment.

The integration of both systems’ functionality can lead to the more advanced and streamlined supply chain management”.

 

— When does a firm or an individual thinks of procurement software?

  • For mid- and large-sized companies, the main drivers to opt for e-procurement are intensive, long and costly buying activities.
  • Heavy, slow and error-prone paper-based procurement processes.
  • Increased number of vendors; involvement of Tier 2 and Tier 3 suppliers
  • Dispersed production processes
  • Frequent tendering activities
  • Complex legal compliances and more.

 

— What are the benefits of procurement software (other than just automating the process of a purchase order)?

Procurement software enables transparency of the procurement-related processes for all concerned departments from logistics and marketing to the financial department and senior management.

Such software allows for quick insights about suppliers, advanced supplier comparison and pre-assessment, improve reporting and decision-making and helps to improve the efficiency of the buying process through involvement of non-procurement employees into the procurements activities.

 

—  Which features to look out for while choosing Procurement software?

Here are some salient features to look for depending on the company’s’ industry, business model and established procurement processes.

  • The useful features include the ability to track the order status (approved, pending, declined, completed; vendors selected or recommended; RFI, RFP, RFQ sent, LPO generated/sent, etc.)
  • Get automated notifications on the product upgrade, order status changes, delayed supplies, upcoming payments and expiring vendor certificates.
  • Role-based access to software functionality (i.e. Manager and Accountant both have different usage of software)
  • Sending electronic POs as well as invoice downloading and printing
  • Smart vendor filtering and offering comparison.
  • Bid management, integration with payment systems and in-built communication channels also can be useful.
  • If the company plans to involve the non-procurement employees in the purchasing activities, the ‘guided buying’ will be a plus due to reducing efforts of employees and preventing violations of the company’s policies.

 

Wrapping up

Nowadays with hundreds of procurement software in the market- you can’t choose instantly which one suit best for your business. Hence to ease up the process of choosing or selecting the best procurement software you may find this article helpful. And also know when and what are the benefits that you as a seller would get by having a procurement software for your product-based business.

I hope you got all your queries answered if not then let me know if I have missed out any important point regarding the procurement software via comment.

Abhishek Biswas

Abhishek Biswas

A Listener, who speaks less and writes more. Will choose Pizza over anything. Doing non-technical pieces of stuff, with a degree in a technical field. Has stage fear thus prefers "Stealth-mode" conversation, also the Content Curator at Orderhive. . . . <<--- In the picture, I'm looking at my happy belly ;)

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