Did you know that companies spend 50-70% of their income on procurement? This means that a large part of their budget is spent on buying goods and services. This highlights the importance of a good procurement system for businesses to save money, make operations easier and stay ahead of the competitors.
However, one of the most common challenges companies face is the complexity of procurement management, which involves purchasing materials, negotiating contracts and managing relationships with suppliers. Without an efficient procurement system, companies can struggle with manual processes, data gaps and inefficient communication, leading to delays, errors and increased costs.
Recognising the importance of efficient procurement management, companies in the Philippines are increasingly turning to software solutions to solve their procurement challenges. Moreover, according to a survey from Alibaba Cloud, around 94% of businesses in the Philippines are looking at cloud-based IT solutions. By embracing digital transformation and adopting modern procurement technologies, businesses in the Philippines can unlock new opportunities for innovation, efficiency, and success in the global market.
This article aims to provide a comprehensive insight into the critical role that procurement systems play in the success and competitiveness of companies operating in today’s fast paced market environment.
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What Is a Procurement System?
A procurement system is a system used by businesses to obtain goods, services, or works from external sources efficiently and cost-effectively. The system covers various stages, including identifying needs, sourcing suppliers, and negotiating contracts. Furthermore, investing in this software can improve the efficiency of the procurement process with its features such as, supplier management, PR approval management, and spend analysis features.
In procurement management, there are sometimes challenges including a lack of transparency in the procurement process, which makes it difficult to track the status of orders and complicates audits, difficulties in assessing and selecting the right suppliers, slow and cumbersome approval processes, technical issues such as system failures or unsynchronized updates, and price fluctuations and changes in market conditions.
Procurement systems address this with solutions in easy data tracking and selection of the right vendors, performing PR approvals, total price calculations, enabling efficient analysis, and improving processes. This leads to cost savings and increased productivity as employees spend less time searching for information.
How Procurement System Work
Procurement systems work by utilizing various technologies to automate and simplify the procurement process, thus allowing businesses to manage the traceability of their purchases and payments more efficiently and effectively. Here is an overview of how procurement software works:
Budgeting and planning
Once the needs have been identified, there is a need for budgeting and planning. This involves determining the budget available for procurement, predicting demand and deciding on a strategic approach to procurement.
Vendor selection
Companies evaluate potential suppliers or vendors based on cost, quality, reputation and past performance. This may include sending out requests for proposals (RFPs) or requests for quotations (RFQs) to get bids from suppliers.
Negotiation and contracting
Negotiations are held with the selected suppliers to finalize the terms and conditions, pricing, delivery schedules and other relevant details. If both sides agree, contracts are signed to formalize the agreement.
Purchase order processing
Once contracts are in place, purchase orders are created to formally request goods or services from the selected suppliers. This document outlines the quantity, specifications and delivery terms.
Performance monitoring
Monitoring supplier performance is essential to ensure compliance with contract terms, quality standards, delivery schedules and overall customer satisfaction. Feedback and performance metrics can be used for this purpose.
Supplier Management
Creating and maintaining positive relationships with suppliers is critical to long-term success. Effective communication, collaboration and problem solving contribute to strong supplier relationships.
Features to Look For in a Procurement Software
Procurement software should have a wide range of features and functions to meet the diverse needs of businesses. Here are some important features that businesses usually need:
- Purchase Request Management:
This feature allows users to create and manage purchase requests within the system. It streamlines the process of requesting items or services needed by various departments or teams within the organization.
- Purchase Request to RFQ:
It can convert a purchase request into a request for quotation (RFQ) so that companies can quickly request quotes from suppliers, compare quotes, and make informed purchasing decisions.
- Purchase Order Management:
With this functionality, users can create, track, and manage purchase orders efficiently. It enables the organization to maintain control over procurement activities, from the initial request to the final approval and fulfillment of orders.
- Work Order Receiving:
This feature facilitates the receiving process for work orders or goods received from suppliers. It helps ensure that the organization receives the correct items in the right quantities and maintains accurate records of all incoming goods.
- Supplier Invoices:
The system allows users to manage supplier invoices seamlessly. It enables the organization to process and track invoices received from suppliers, ensuring timely payment and accurate financial records.
- Blanket Order Management:
This feature enables the creation of long-term repetitive purchase orders automatically, such as orders placed periodically for regularly needed goods or services.
- Vendor Price List Submission & Management:
This feature allows vendors to submit their price lists electronically, managed and updated within the system. In addition, this feature simplifies the process of maintaining current pricing information, ensuring users have access to the latest vendor pricing data for informed decision making.
- PR Approval Management:
This feature allows companies to create a structured workflow for purchase requisition approval, and can also prevent unauthorized purchases, improve budget control, and increase accountability in the procurement process.
- Automate Stock Reordering:
With the integrated software, it allows your business to automatically generate new purchase orders when stock reaches a certain level, ensuring that goods are available without shortages or overstocking.
- Online Portal for Suppliers:
This feature provides suppliers with access to interact with the procurement system online, facilitating easier and quicker processes for negotiation, delivery, and monitoring of order statuses.
- Landed Cost Calculation:
This feature calculates the total cost of purchasing goods, including shipping, insurance, and customs duties, providing an accurate overview of the total final costs involved in procuring those goods.
A procurement management system should offer a comprehensive set of features and functions that can meet diverse business needs at various levels, from basic procurement tasks to advanced management and analytical capabilities.
Signs that Your Business Need Procurement System
As the business grew and expanded, it became increasingly clear that you needed a robust procurement software solution to effectively manage our procurement processes. Several challenges have emerged in our procurement operations, highlighting the urgent need for a comprehensive solution.
The following are signs that your company needs a comprehensive procurement management system:
You have strong cost reduction goals
If your business is committed to achieving cost reduction goals, implementing a procurement system is essential. By streamlining processes, eliminating inefficiencies, and maximizing purchasing power, a procurement system enables you to meet or exceed your cost-saving objectives.
Expenses are rising
Rising expenses are a common challenge for growing businesses. A procurement system helps identify cost-saving opportunities, negotiate better terms with suppliers, and track spending to optimize budget allocation and reduce overall costs.
The procurement team can deliver ROI
A proficient procurement team has the potential to deliver a significant return on investment (ROI) by optimizing procurement processes, negotiating favorable contracts, and ensuring compliance with purchasing policies. A procurement system enhances their capabilities and enables them to achieve even greater ROI.
Your company is in growth mode
As your business experiences growth, the volume and complexity of procurement activities increase accordingly. A procurement system can help streamline processes, manage resources more efficiently, and support scalability to accommodate growth effectively.
Increasing employees and locations
Expanding your workforce and establishing new locations often leads to a higher demand for goods and services. A procurement system provides centralized control and visibility, ensuring consistent procurement practices across all locations and departments.
Inaccurate data
Inaccurate or incomplete data compromises the integrity of procurement processes and hinders strategic decision-making. A procurement system ensures data accuracy through centralized data management, validation checks, and integration with other business systems.
Time-consuming approval process
Manual approval processes can be time-consuming and prone to bottlenecks, causing delays in procurement and impacting operational efficiency. A procurement system automates approval workflows, expedites the approval process, and provides notifications for pending approvals to improve responsiveness.
Conducting business without formal contracts
Operating without formal contracts exposes businesses to legal and financial risks, including disputes, pricing inconsistencies, and quality issues. A procurement system facilitates contract management by centralizing contract storage, tracking contract terms and renewals, and ensuring compliance with contractual obligations.
HashMicro Procurement System as a Comprehensive Solution for Your Business
HashMicro Procurement System is an ERP solution designed to optimize and automate the procurement process for companies of all sizes. The software offers a range of excellent features to facilitate PO, RFQ & PR management, PR approval management, online supplier portal, supplier rating, blanket order management, and landed cost calculation. Not only that, you can also integrate with many modules such as inventory management system, accounting system, and CRM sales.
HashMicro is a leading company known for its system standards and commitment to delivering high-quality solutions. HashMicro has been trusted by various companies in South East Asia for its software solutions especially in its Procurement Management System. This is a proof of its reliability and effectiveness in fulfilling various business needs.
The software covers end-to-end business processes and provides comprehensive functionality for full traceability, invoicing, procurement spend management, easy backorder management and timely payment control.
In addition, HashMicro’s procurement management software is designed with integration capabilities that enable seamless integration with other modules, including inventory management systems, purchasing systems, HRM and CRM sales.
With its comprehensive features and high adaptability, HashMicro helps companies increase productivity and competitiveness in dynamic markets through effective and accurate enterprise procurement management.
Conclusion
Procurement Management Systems operate to drive business efficiency by ensuring that every procurement process facilitates proper decision. In today’s dynamic environment, the importance of implementing procurement software cannot be overstated.
Good procurement software should include a comprehensive set of features, including a purchasing system, supplier or vendor management and financial reporting. These features simplify the procurement process, improve accuracy and enable organizations to succeed in a competitive market.
HashMicro is one of the Procurement Software providers that offers complete customisable features according to your business needs. It enables your company to streamline their procurement processes, gain actionable insights, and drive growth with confidence.
Explore how HashMicro’s software solutions can transform your procurement management processes and try a free demo today!
