Today most procurement teams are struggling to keep up with the increasing market volatility and sustain over their competitors. However, most of them are still stuck with older, legacy ERP systems which hold them back from the rest.
Be it a legacy ERP software that comes with a built-in procurement module or a standalone, disparate procurement tool, their rigidity makes it difficult to initiate a complete digital transformation of procurement. While ‘If it ain’t broke, don’t fix it’ is a great saying, it can neither bring in business agility nor provide much-need efficiency in procurement operations.
On the other hand, e-procurement software that rides on flexibility can help procurement managers meet all their policy requirements, and help them grow and scale as they grow. If you’re one of those skeptical procurement professionals who are skeptical about how an e-procurement solution can produce tangible benefits to the bottom line, you are at the right place.
What is eProcurement?
E-procurement is a business-to-business (B2B) mechanism in which business transactions such as the acquisition and selling of products and services are carried out over the Internet. The ‘e’ in e-procurement is electronic. If you're new to procurement and are not sure where to start with procurement. Here's a free ebook to help you with procurement automation.
Here are the 8 key benefits of the eProcurement system
1. Mitigate procurement risks
With the need to do more with fewer increases, procurement leaders are trying to figure out ways to control costs and mitigate risks while trying to cope with an outdated procurement system. To tackle this challenge, teams need to move away from outdated, manual processes that lack the power and control to drive efficiency and savings. The pandemic has been a real challenge for a lot of us. It put the businesses at risk and a lot of companies had no clue on how to tackle the situation and now they are not in the market.
Automated procure-to-pay software like Kissflow’s Procurement Cloud can reduce these risks, processing time, and overall cost, freeing up the procurement team to focus more on human-centric tasks. Irrespective of an organization’s size, it enables businesses to buy smarter, streamlines their purchase-to-pay cycle, and mitigates supply chain risks.
With seamless collaboration, an e-procurement platform enables swift and reliable exchange of updates and documents, resulting in reduced operational risk of duplicate payments and off-catalog purchases. What’s more, its dynamic rule engine can proactively enforce policies to ensure that buyers abide by budgets, processes, and product restrictions.
2. Break down data silos
Procurement processes usually revolve around an array of stakeholders like requisitioners, vendors, finance team, procurement leaders, inventory managers, and more. Disparate systems and data silos impact the quality of procurement processes causing a lack of clarity and disconnect resulting in maverick spend, long procurement cycles, and missed opportunities.
However, when all transactions, communication, and critical collaboration happens in an e-procurement solution, all purchasing-related data stays in a single interface. A unified procure-to-pay system like Kissflow Procurement Cloud can not only simplify purchasing data management but also streamline all procurement processes from sourcing to invoice processing and payment.
“Nearly 66% of organizations are planning to centralize their procurement functions”
3. Bring underperforming suppliers up to speed (or) tackle poor supplier performance
Most often procurement managers don’t have the time to track supplier performance manually. Infrequent feedback and manual evaluation of supplier performance demand a considerable amount of data maintenance leaving a huge burden on the purchasing department. Failing to identify the poor performance of suppliers can end up leaving a negative effect on the business. Here's a free ebook to create a successful strategic sourcing process to help you manage suppliers better. Download it now!
Pro Tips: Kissflow helps procurement teams to monitor and mitigate supplier risks.
With an automated vendor master that collects, stores, and displays up-to-date, consistent information about vendors, products they offer, and their performance, procurement leaders can finally break up with spreadsheets and paper. Businesses can analyze enriched supplier data to retrieve deeper insights, identify purchase risks, spot opportunities, and negotiate better deals.
“A recent Gallup supplier engagement study indicates that proactive supplier engagement can reap substantial economic benefits.”
4. Avoid invoice delays and duplicate payments
One of the more complex validations is matching an invoice and the related documents in the procure-to-pay lifecycle. The pricing and terms on an invoice should match those mentioned in the purchase order and the goods receipt note.
Additionally, the line-item quantities, product descriptions and per-unit pricing on the invoice must match those of the purchase order and the actual goods received. Although three-way matching can be performed manually, the cost, accuracy, and time required for the validations can be significantly reduced through automation.
A key component of an e-procurement solution is an automated three-way matching process (invoices to contracts, POs, GRNs, and service entry sheets) to enforce compliance and prevent maverick spend.
“An accenture research on AP automation suggests that procurement teams reduce invoice processing times by 72% with an automated and accurate three-way match.”
5. Eliminate dark purchasing
Dark purchasing reigns when organizations use outdated or disparate tools to manage procurement. When procurement is handled manually, stakeholders have no idea of who is requesting what and why. This leads to expenses incurring outside of established practices like redundant or unnecessary purchases, submissions to unapproved vendors, and more.
Organizations can enjoy a wide range of benefits by addressing inherent procurement risks and embarking on a journey to transparency. With an ideal procure-to-pay solution, stakeholders can allow them to see what’s going on at every level of their supplier tier enabling them to anticipate and prevent disruptions before they occur.
Proper data aggregation and transparent spend management can identify and eliminate maverick spend, off-contract purchases, cancel unused services, and consolidate spend with high-performing suppliers. Organizations that have implemented an e-procurement platform see a 60% reduction in maverick spend compared to businesses that have not. Using e-procurement software will help you eliminate maverick spend by bringing your spend under management. We have put together a free guide to help you understand how this works. Download it for free to learn more!
6. Empower your suppliers with self-service
Managing supplier data manually has become a thing of the past. When vendors have to go to the procurement department for every small clarification, it is a waste of time for both vendors and the procurement department.
An automated procurement experience using a vendor portal, however, proves how much you value them because it makes their lives easy by offering them more visibility into the status of payments while giving buyers greater control over the communication itself.
Vendor portals can empower suppliers to see and track purchase orders, update shipping data, manage product catalogs, raise invoices, and manage payments all in one place. With consistent and accurate payment processing, the vendor-supplier relationship can get a lot stronger. Buyers can use this opportunity to extract early payment discounts and incentives.
7. Remove approval bottlenecks
A procurement system that depends on too many manual interventions and spreadsheets and emails is subject to human errors and associated risks. In a people-based system, people tend to do things their own way even if it means bypassing policies to cut down purchase cycles.
An effective e-procurement tool, on the other hand, will address such purchase risks with enforced accountability and role-based accessibility, protecting sensitive information and restricting confidential information to relevant stakeholders while keeping the procurement cycle moving forward.
Additionally, an e-procurement solution will reduce the workload of the procurement and finance team by automating administrative tasks such as field-level arithmetic calculations, approval routing, and deadline adherence.
Pro Tips: Automate your approval workflows and speed up purchasing cycle.
8. Strategize with insight, not instinct
Siloed tools like emails, spreadsheets, and chat threads dismantle data and don’t offer complete visibility into the purchasing process. As a result, procurement managers and other decision-makers aren’t privy to information like status, deviations, confirmations, stock levels, and other things that offer purchase insights.
E-procurement tools allow purchases to collect and organize data about past purchases and vendor performance with ready-to-use visual reports. These reports allow businesses to better automate and manage their purchases, contracts, and vendors.
By gathering key metrics like PO cycle time, supplier lead time, spend under management (SUM), item defect rate, and more, businesses can identify supplier performance, analyze spend patterns, and gain actionable insights to improve the efficiency of procurement processes.
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An e-procurement tool paves the way for digital transformation in B2B transaction efficiency. As discussed above, the existing software benefits are positioned well to enable widespread e-procurement adoption.
Businesses around the world have an opportunity to achieve similar results by leveraging the learnings, standards, policies and guidelines developed by those frameworks and customizing them for their unique business needs.
Given the scope of procurement functions, an ideal e-procurement tool will need to meet a diverse set of business needs and be complementary to and link easily with existing processes and solutions. It will not displace or disrupt existing systems or processes but offer stakeholders opportunities to innovate and extract more value out of their procurement processes.