With more than 764,000 manufacturing job openings as of December 2022, it is clear that there is a massive demand for different kinds of finished products. However, as most manufacturing units are small, they cannot scale and deliver products to a burgeoning market — 87.7% of manufacturing companies in the US have fewer than 50 employees.
Many smaller organizations still use manual methods to procure and purchase raw materials. Employees are often overstretched and caught between procurement of raw materials and implementing manufacturing best practices. This leads to delays and missed opportunities, especially when having a competitive edge is vital. In addition, purchasing poor-quality raw materials can have a devastating effect on finished products.
Purchasing and procurement automation
An easy solution is to use a Manufacturing Purchasing Software Module. Enterprise resource planning (ERP) products geared towards manufacturing units, such as Priority's dedicated ERP manufacturing software, come with procurement and purchasing software modules that automate the entire process.
This article looks at purchasing software and how it helps manufacturing units function better. We will evaluate the critical features of manufacturing purchasing software.
The role of purchasing in manufacturing
Before getting into the reasons for acquiring a purchasing software program, let us understand the role of purchasing in manufacturing.
Manufacturing is a complex process that involves converting raw materials into finished products. Procuring raw materials is the first step toward manufacturing, and it is a complex process. Consequently, most manufacturing companies have procurement managers who oversee the purchase of high-quality but affordable raw materials.
Procurement managers have to
- Evaluate various vendors and suppliers to buy the best quality raw materials at the lowest price.
- Ensure that the supply of raw materials is in sync with demand management. More stock lying in the inventory leads to wastage and loss of revenue, whereas understocking leads to missed opportunities and potential harm to brand image.
- Ensure that the raw material quantity is adequate and that it is of high quality.
Purchase management ensures no overspending on raw materials that do not add value to the final product. Any purchase-related decision should be tied to the raw materials' contributing value to the finished product.
While cost-saving is an essential aspect of procurement management, there are other things to consider, such as:
- Purchased materials must be tracked in real-time, moved around warehouses, and safely stored until transported to the manufacturing units.
- Purchasing managers should be able to retrieve data related to raw materials in case there are quality-related issues with finished products.
- They also need to maintain a record of invoices and delivery slips, which can be cumbersome.
Manually doing this is complex and prone to human errors.
The benefits of purchasing software in an ERP
1. Manage purchase orders seamlessly.
Purchase managers must create tracking numbers, coordinate with suppliers, maintain purchase history, and ensure everything aligns with inventory management. ERP's purchase management software communicates essential information with your inventory management module and ensures you can always oversee current stock and predict demand. You can easily create purchase orders (PO) based on real-time demand-related data.
2. Enhance relationships with your suppliers.
Procurement managers need to maintain good relationships with suppliers. This ensures timely delivery of raw materials, discounts based on trust and goodwill, and the ability to trace faulty products back to their origin. You can easily create a database of multiple suppliers and classify them based on the parts and materials they offer. You can also categorize them based on other identification data such as tax, price, location, etc. This ensures you can make timely pricing inquiries and predict delivery times. In addition, you can be transparent with your long-term suppliers and optimize supplier relationship management.
3. Maintain product quality.
The quality of raw materials directly affects the final product and its performance in the post-production QA stage, leading to entire batches being discarded, resulting in a loss of revenue and man-hours. By choosing to work with a purchase management module, you can guarantee that you always stay on top of your quality game. Predictive analytics within the purchase software module guarantees that only the best quality raw materials are purchased among the suppliers and are ready to sell.
4. Keep track of finances and other metrics.
You can automate multiple delivery schedules to ensure subcontracting and complex indents do not affect your PO. You can generate your PO in domestic and foreign currency and ensure all your tax-related information is archived correctly for regulatory inspection. In addition to products, you can also raise and process service contracts, service indents, and service orders. You can create detailed purchase requisitions to avoid missing out on critical materials or services.
5. Ensure everything is transparent.
The purchase software module allows you to match multiple receipts, shipping documents, and invoices to secure refunds if you have been delivered poor-quality raw materials. The purchase software module can also be integrated with your warehouse management software to help you track and trace raw materials storage and movement in real-time, from the time of purchase to the transfer to the manufacturing unit.
Key features to look for in manufacturing purchasing software:
- The ability to perform and manage all procurement-related activities on a single system
- Integration of purchase-related data with an inventory management module and warehouse management system (WMS)
- Ability to reorder automatically when the stock decreases or when demand rises.
- Forecast future procurement based on order trends
- Reduce manual entries and automate most processes
- Mobile application for both iOS and Android devices to allow on-the-go procurement operations management
- Track purchases, deliveries, and stored goods using RFID tags or barcodes
- Ability to set and filter different attributes to retrieve supplier and vendor data.
- Communication gateway with suppliers and vendors
- Make payments, track invoices, and handle disputes by ensuring you have access to historical purchase data.
Implementation considerations:
If you plan to deploy a manufacturing-oriented ERP, it goes without saying that you should also have a purchase management module. Priority's ERP manufacturing software is a world-class solution ensuring you get a holistic view of your production facility.
You can run leaner operations and gain access to complex analytics so that you know when to make purchases. As purchase management software is integrated with various other modules within our ERP, you can go back and forth from different modules to ensure that you are always in control of what you buy, how much you spend, and how your finished products turn out.
Our Material Requirements Planning (MRP) is a powerful feature that helps you plan and schedule inventory-related processes. This includes determining material requirements based on sales orders and planning purchasing and delivery activities. In addition, our Serial, Lot Tracking, and Traceability feature ensures that you can track all your raw materials down to the vendor or supplier. In short, Priority's Manufacturing ERP Software is a complete solution for manufacturers with built-in purchase management features.
Contact us today to learn how our Manufacturing ERP Software can help you manage procurement seamlessly.
The Author
