Unoptimized supply chains. Suboptimal contract management. Opaque or incomplete spend data. While many of the most commonly encountered procurement challenges are universal, finding a procurement solution that addresses these challenges in the best possible way for your business is not.
Myriad types of procurement software exist to assist businesses in tackling the procurement process with greater efficiency and productivity. But to find the eProcurement system that provides the best value for your investment, it’s crucial to understand your options and the benefits each provides.
Understanding the Many Types of Procurement Software
In decades past, the role of the procurement department in most businesses revolved around cost savings. But with the rise of a globally-connected marketplace overflowing with data holding the potential to yield value-rich insights, procurement professionals find their role evolving into one focused more on strategic sourcing, effective spend management, and risk management. Traditional procurement systems are not optimized to handle these roles, leaving the door open for the development of eProcurement solutions to meet changing needs.
And the need is expected to continue growing; in a 2019 study, Market Research Future estimated that procurement software will have a global market size of $9.6 billion by 2023, nearly doubling 2017 values. This growth is anything but surprising when one considers how automation and artificial intelligence (AI), along with process optimization and improved data management, provide provide a powerful incentive for procurement teams looking to maximize their procurement management return-on-investment (ROI).
Not all procurement software is created equal, of course. Some applications focus on improving a single process, such as the procure-to-pay cycle, or handling a single complex system, such as supplier management. Other, more robust eProcurement systems take a comprehensive approach, connecting not just the different aspects of the procurement process, but integrating procurement with existing software resources such as enterprise resource planning (ERP) and accounting software to create a single, cross-connected software environment supporting the strategic goals of entire organizations.
Some of the most common types of procurement software include:
Spend Analytics: Every transaction, communication, and interaction conducted in the course of doing business generates data. Performing spend analysis reveals patterns in your purchasing behavior that can help you streamline your internal processes and optimize cost savings. Many spend analysis applications allow you to “slice and dice” your research by supplier, category, project, etc.
Purchase Order Software: By automating the purchase order process, this software improves spend management by providing a complete record of every purchase, tracking and storing all spend data for easy access, and eliminating wasted time and money due to human error, rogue spend, and fraud. Users can create purchase orders from templates, auto-populated with purchase requisition information and (if the purchase order software has contract management and supplier management, or integrates with them) vendor terms and pricing, in addition to any boilerplate required by the company’s own internal, industry, and legal standards. Purchase order approval workflows are automated, with contingencies and reminders built-in to keep roadblocks and lost value to a minimum.
Supplier Relationship Management: Finding, selecting, and working with the best possible suppliers for your business can yield significant benefits in the form of reduced risk, higher profits, and better competitive advantage. The goal of software in this category is to make it easy to identify, connect with, and recruit vendors who can help you build a diverse, healthy, and well-optimized supply chain. Supplier discovery software is used to search for vendors based on specific criteria (capacity, location, compliance history, special certifications, etc.). Supplier relationship management (also called supplier information management) software is used to record accurate and current supplier information, track supplier performance history, risk profile, and to ensure you’re developing key suppliers effectively and rehabilitating underperformers—or trimming them from your supply chain. It also connects to other procurement or ERP software to populate supplier data into forms, databases, etc. automatically.
Electronic Sourcing (eSourcing): With this software, you can allow potential and current suppliers to respond to electronically to your requests for proposal (RFPs), requests for quotes (RFQs), requests for information (RFIs), etc. You can also encourage (healthy) competition between suppliers by allowing them to see their rank and bid values relative to their competitors.
Contract Management: By providing templates, pre-built content libraries, and support for custom user-generated content, contract management software makes it easy for users to assemble contracts on demand with minimal time and effort. Users can route contracts electronically for approval, track additions or revisions, alert the procurement team and legal department when current contracts are approaching the end of the contract lifecycle, and provide a centralized (often cloud-based) document repository and data management solution.
eProcurement Software: This type of procurement software creates a shopping experience for users similar to what they might find while purchasing personal items on the Web. eProcurement allows procurement professionals to create pre-approved, pre-populated catalogs of goods and services from approved vendors. Users can choose the items and services that fit their needs, and “check out,” whereafter a purchase requisition is created and routed either for approval (depending on spend limits, item categories, project and department budgets, etc.) or directly to procurement to generate a purchase order.
eProcurement packages help streamline the procure-to-pay (p2p) process (particularly when part of a customized procurement combination utilizing other applications), allowing users to quickly and efficiently order the correct goods and services from the correct suppliers while preserving spend transparency (simplifying spend management), providing real-time spend data review, access, and management, and reducing risk by eliminating maverick spend and fraud.
Electronic Invoicing (eInvoicing): Also known as ePayment software, eInvoicing connects your suppliers to your procurement and accounting systems to allow for paper-free invoicing that’s more accurate and efficient. Some packages offer special built-in discounts for early payment, as well as integration with contract management, eProcurement, and accounting software to help ensure:
- Users only order items from the vendor that comply with contractually-approved terms, conditions, and pricing.
- All transaction data is complete, transparent, and accurate.
- Invoice information is readily verified against related documents such as the original purchase order and, in the case of physical goods, the shipping documents.
- Buyers can automatically order goods and services at optimal pricing based on vendor promotions, spending levels specified in their contracts, etc.
Custom Procurement Software Packages: When users build or purchase a solution that offers complete P2P functionality out of the box (or download), they’ve chosen a custom procure-to-pay solution. If they add eSourcing capabilities to that package, it becomes a source-to-pay solution.
Comprehensive Procurement Suites: Some companies (such as PLANERGY) offer customizable and complete procurement software suites that include many or even all of the other types of procurement software, as well as features such as inventory management, asset management, and project management integration.
It’s entirely possible that the best value for your procurement dollar lies in finding a provider who can customize their available options to build a complete procurement software solution that has everything you need, without the extras that can compromise efficiency or needlessly complicate your processes.
Choosing the Best eProcurement Software for Your Needs
Procurement, like so many things in life, is not one-size-fits-all. Whether you own a small business or are part of a large procurement team, the best procurement software solution for your company is the one that leverages the power of tools like data analysis, artificial intelligence, and process automation to streamline your workflows and maximize profitability, performance, and competitive advantage.
Not every business, for example, needs a powerful eSourcing solution; in fact, for companies with very basic supply chains and limited resources, adding an eSourcing layer can actually slow down workflows and increase risk if users become frustrated and fail to engage with the software. In addition, some software packages that are ostensibly designed with a focus on one area of procurement may contain functionality that covers other areas. No sense in “doubling up” if you can slay two procurement birds with one software stone.
For example, a procure-to-pay suite often includes built-in purchase order management, as well as spend analysis tools and cloud-based collaboration tools that allow team members to monitor workflows in real time from anywhere while connecting with stakeholders in other departments for collaboration, reporting, forecasting, and strategic development.
Finding the right procurement software has two simple requirements:
1) A complete understanding of your current needs. What is/are your most pressing procurement challenge(s)?
- What is the size of your spend?
- How complex is your supply chain? Is it a significant source of risk due to poor spend transparency, rogue spending, and missed opportunities and deadlines?
- Are you looking for a basic standalone purchase order management solution, or do you need something more powerful, such as advanced vendor management and deep data analysis to develop more effective risk management approach supported by strategic procurement?
- Do you already have existing software that provides some of the functionality you need? Can it be integrated with other software, or upgraded with new features, to meet your needs and enhance your business processes?
- Are you ready to automate? If you’re still analog, is your corporate culture ready for a complete transition to eProcurement? How important is customer service, training, and support for the new procurement software in ensuring complete buy-in from the C-suite, management, and staff?
- What sort of procurement solution fits both your ambitions and your budget?
2) A thorough grasp of your future needs. Today’s cutting edge can quickly become the blunt brim of tomorrow’s old hat.
- Based on your company’s plans, culture, and budget, does it make more sense to invest in a comprehensive suite of procurement tools, or take a piecemeal approach?
- If the latter, is the solution you’ve chosen upgrade-friendly?
- If your current solutions are on-premises or a mix of on-premises and in the cloud, is there potential for a move to a completely cloud-based solution?
- Do you anticipate the need for additional functionality down the road? E.g., adding supply chain management tools?
- Is there a solution you’re considering that would enable the process improvements provided by automation and AI to be implemented not just in procurement and accounting, but across your organization?
- Does the solution you’ve chosen provide ongoing support and training to ensure smooth upgrades?
It can be tempting to go whole-hog and hope the bells and whistles will have a setting that works for your company, but a little needs analysis goes a long way. It’s entirely possible that the best value for your procurement dollar lies in finding a provider who can customize their available options to build a complete procurement software solution that has everything you need, without the extras that can compromise efficiency or needlessly complicate your processes.
Which eProcurement Solution is Right for Your Business?
Whether you invest in a complete procurement suite or start small with a basic P2P solution, choosing procurement software doesn’t have to be difficult or frustrating. Ultimately, the right type of procurement software for your company is the one that meets your needs, frees you from inefficiency and frustration, and allows your team to focus on building value, innovation, and profitability.