How an ERP optimizes Procurement Processes for Manufacturing

Procurement Manager in Warehouse

While the current cloud adoption rate stands between 7% and 8% of total infrastructure consumption globally, this figure will likely shoot up over the years. Cloud-based enterprise resource planning solutions (ERP), in particular, will probably see their adoption rate increase in the coming years, especially among manufacturing units.

Although it is known for helping automate everyday business processes such as accounting, sales, production and planning, Human Resource management, and marketing, an ERP plays a crucial role in manufacturing. ERP products targeted at manufacturing companies ensure that more focus is given to automating production lines, procurement of raw materials, and warehouse operations.

ERP, WMS, and procurement management work in tandem to help manufacturers.

Manufacturing ERP solutions usually consist of robust WMS and purchase management capabilities. For example, Priority’s Manufacturing ERP Software deftly integrates WMS and purchase management to ensure manufacturers can easily trace and track raw materials from their origin to their warehouse location.

In addition, Priority’s Manufacturing ERP Software helps purchase managers procure raw materials and services in sync with insight generated by its inventory management system. Consequently, procurement is an almost automated process.

This article looks at how ERP manages procurement, especially in manufacturing.

What is Procurement in ERP?

An ERP helps purchase managers automate and regulate the process of procuring goods. It helps regulate the process of raising requisition requests and purchase orders and manage invoices and receipts.

An ERP helps minimize fraud and ensures transparency between purchase managers, suppliers, and vendors. Most importantly, it helps track purchased goods, collect shopping documents, track where purchased goods are stored in warehouses, and ensure that historical details can be retrieved even after production.

Key Benefits of Using ERP for Procurement for Manufacturing Businesses

ERP helps purchase managers to note down quote and order details and track purchase orders until they are fulfilled. ERP automates most steps starting from identifying the need for procurement, purchase requisitions, requisition reviews, and approvals to the process of soliciting. This step involves generating a purchase order and sending out requests for quotations (RFQs). An ERP also handles post-solicitation procedures such as signing the purchase order contract, managing and tracking the order, and keeping records for future use.

Here are the key benefits of using ERP to manage your purchases:

Real-time monitoring and visibility of purchases

One of the biggest challenges that purchase managers encounter is the lack of transparency when dealing with suppliers and vendors. Procurement management features ensure that purchase managers can track and trace from where their raw materials originate. This is especially important to back claims about product affirmations to end users.

As many suppliers and vendors subcontract procuring raw materials to manufacturers, purchase management tools help enhance transparency. While subcontracting is common, a lack of transparency can interfere with tracking and tracing when things go wrong. For example, Priority’s Serial and Lot Tracking helps you manage material and product traceability through every stage in the supply chain.

Some of the relevant advantages are:

  • Complete control over procurement in the supply chain. You can ensure that you can minimize faulty finished products or failed quality tests.
  • Access to historical purchase data is essential to manage backorders easily.
  • Track both previous shipments and payments of goods so that you can quickly raise issues if there are any disputes or problems with quality in real-time.

Streamlined purchase order (PO) management

Manufacturing companies often need help to keep up with order fulfillment. There are times when they are understocked, while other times, they are overstocked. While the former leads to loss of business opportunities, the latter leads to resource wastage and loss of revenue. Hence, purchasing the right amount of raw materials based on demand is crucial.

Automated processes help control procurement costs and accelerate purchase order approvals.

  • Priority’s Material Requirements Planning (MRP) helps you determine your raw material requirement based on sales orders, frequency of needs, and various other metrics.
  • Data from multiple sources help predict precisely how much raw material needs to be purchased and when.
  • Accurately plan, schedule, and control your inventory management system.

MRP is integrated into Priority ERP to help you streamline your purchase orders seamlessly.

Better supplier management

Most manufacturing companies purchase from a pool of suppliers curated based on different attributes. This could be the nature of the raw materials or services they sell, their location, or the quality of the products. Other characteristics include discounts, trust, and speed of delivery.

Depending on the context and need, purchase managers can raise requisition requests to different suppliers and approve purchase orders to be given to suppliers with the best quote. An ERP helps ensure that all this is automated and transparent, which helps build trust between purchase managers and suppliers. Invariably, this helps manage suppliers better, leading to better outcomes.

Other benefits include:

● Enable suppliers to share their catalogs directly with your purchase management tool so that you can approve purchases on the go.
● Rate your vendors and leave feedback to expect better service in the future.
● Automate purchases from favored vendors when there is a high demand for raw materials.

Cost savings through automation and improved negotiations.

An ERP is a powerful tool that gives valuable insights about demand and supply, discounts offered by suppliers’ competitors, and various other metrics that are relevant during purchase. ERP automates the process of making requisitions and indents and chooses suppliers that provide the best quote in addition to other variables and attributes such as quality, timeliness of delivery, etc. This helps ensure cost reduction both in the short and long term.

In addition,

  • Data from the ERP allows purchase managers to negotiate with suppliers and vendors skillfully and ensure that they get the best bargain possible.
  • Landed cost calculations help you understand the total expenses incurred during the purchase. This includes taxes, currency conversions, shipping charges, insurance, and similar fees.

The right ERP helps you manage your manufacturing purchases efficiently.

Manufacturing is a complex process involving several business processes best handled by an ERP dedicated to manufacturing units. Such an ERP helps manufacturers to assess material requirements, manage product data, and automate multiple production processes used in discrete, repetitive, and mixed-mode manufacturing.

For example, Priority’s cloud-based Manufacturing ERP Software does all of the above in addition to executing manufacturing, implementing quality control and assurance, and inventory control. Most importantly, our ERP for manufacturers has a tightly integrated purchase management feature encompassing various modules. As such, you can easily manage your vendors and suppliers and ensure that you can always trace back every material you purchased down to its originating supplier warehouse.

Consequently, you can monitor your inventory levels in real-time and streamline your purchase order management while ensuring that you build lasting relationships with your loyal suppliers. Most importantly, you will save a lot of expenses thanks to automating manual tasks and reducing human errors and fraud.

Contact us today to learn how Priority’s ERP Software can help you manage your purchases.

The Author
Olly Lukatski

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