What is Procurement in ERP?

Procurement is essentially the buying process of businesses, as it relates to the purchasing of supplies or services. Sounds simple enough. But when a procurement process is integrated into an ERP system, it becomes a powerful tool to effectively manage and control the entire purchasing workflow, from start to finish, including managing budgets, tracking spending, and more.

An ERP, with a built-in procurement module, also helps business to oversee their purchase orders, by breaking down orders, so that they can include specific lines that refer to specific items, and can even allow for multiple delivery dates. An ERP helps purchasing managers and departments quickly and easily create purchase orders, often with a simple click, gain access to a fully-integrated supplier database, aggregate purchase orders to increase negotiating power, with all the data, information and tools they need to ensure they’re the best available, cost-efficient vendors for each and every job.

 

How using an ERP can lead to more efficient purchasing

Keeping one step ahead of your company’s purchasing process and requests, managing often fluctuating inventory levels, and negotiating with third-party vendors and suppliers, is an arduous and time-consuming task. The procurement process involves a lot of high-level planning, management and control to get all the intricate details, parts and associated data ‘in line’ to ensure smooth operations, and faster time to market, ensuring valuable time, resource, and cost savings along the way.  

An automated and streamlined procurement process is vitally important for virtually ‘all’ industries, namely manufacturing, such as the automotive supply chain, food and beverage distribution, retail and consumer goods, oil & gas, telecom, and more. For large-scale enterprises and even for small and mid-size companies, when a procurement module is integrated into an ERP system, it’s a win-win for all stakeholders in the supply chain. An ERP ensures that a company has the right level of stock on hand, be it raw materials for manufacturing or finished products, and enables logistics and distribution companies to deliver on time, and on budget.

But that’s not all. Without a strong and viable procurement process in place, manufacturing, logistics and distribution slows down or in some scenarios, grind to a halt. Here are 5 more reasons why procurement can be and ‘should’ be integrated into an ERP system.

 

 

The power of the PO

 

Purchase orders (POs), are at the heart of every procurement process, where purchasing is integrated into every ERP system. In an ERP, every aspect of a purchase is clearly visible, and broken down into purchase order lines, where each line reflects a specific item or service, with the ability to specify single or multiple delivery dates and other valuable order and customer information, rendering the entire PO issuing process, faster, easier, and more efficient.

Payment via credit card

 

In some scenarios, procurement can be finalized without issuing a PO. Here, credit card payment is a viable means of establishing credit between a vendor and a customer for a single purchase. An ERP seamlessly manages credit card transactions via the system, including processing payment clearing through integration with various payment processors, for faster, more convenient and more efficient payment collection.

Efficient contract management

 

An ERP procurement module is often viewed as a business’s financial center. Contract management functionality integrated into an ERP simplifies standard business processes, such as developing contract templates. Because an ERP system is a single database of information and workflows, with accounts payable and receivable integrated into contract management, missed delivery dates or other milestones become obsolete.

Robust and reliable database

 

An ERP system has powerful, steamlessly integrated databases to record third-party suppliers from whom the purchase of raw materials, finished products and services are procured. An ERP’s database includes all of supplier’s necessary information, such as name and addresses, goods or services said supplier can provide, company and tax information, and a related database with relevant supplier contacts.

Optimized supplier relationship management

 

Managing and nurturing relationships with suppliers is potentially the most important task of any purchasing manager and their team. An ERP helps build strong supplier relationships by enhancing and streamlining communications. Good supplier relationships require a level of transparency. An integrated ERP system skillfully balances sales demands, buying processes, and inventory controls, in line with the capabilities and capacities of each supplier, resulting in an increased understanding and trust between vendor and supplier, to optimize management and control of the procurement process.

An ERP system helps make complex procurement processes easier, faster, and more efficient.

 

It aggregates supplier and customer data to ensure a smooth and seamless purchasing process, and timely delivery to the customer’s door. An ERP also serves each and every stakeholder in the supply chain, with always available, always accessible real-time purchase order information and end-customer information, to help accelerate sales, and boost the overall customer experience.

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