What is the procurement process?
Procurement management, the act of managing and optimizing spend, is a critical business role. Brick and mortar stores prioritize procurement just as much as online stores. As companies purchase products, streamlining supply chain costs to ensure positive cash flow is a top priority.
Procurement Department Responsibilities
- Evaluate and choose vendors
- Oversee movement of goods or services
- Establish processes and accept payments
Purchasing Department Responsibilities
- Oversee the purchasing step specifically
- Take direction from procurement department
Procurement is more than just credit cards and banking accounts. The effects of procurement ripple across an organization; picking a vendor to buy from depends on many factors. These include a company’s values, customer sentiment, resource constraints, and business objectives.
The procurement process today
Procurement has not transformed much over the years. A company’s inventory management and supply chain strategy must evolve with developing ecommerce trends in order to have a competitive advantage. Here’s what the procurement process looks like today:
- Step 1: Needs analysis to identify what needs to be purchased
- Step 2: Vet vendors and choose a supplier. Procurement needs to weigh factors like reliability, speed of delivery, cost, and reputation
- Step 3: Send purchase requisition to the purchasing department, with details like quantity, price, and vendor information
- Step 4: Generate and send a purchase order to the supplier
- Step 5: Vendor invoices procurement
- Step 6: Invoice is paid through payment processor (e.g. Stripe)
- Step 7: Buyer documents all forms and supplier ships order
What is vendor managed inventory (VMI) procurement?
Companies that use vendor managed inventory (VMI) send their requirements to the vendor. The vendor then takes responsibility for the inventory at the buyer’s location. Companies use VMI to reduce inventory costs and have more control over their profits.
Vendors also benefit from VMI because they can better forecast the costs involved to fulfill the orders. Some of the best wholesale websites use this to the benefit of both the supplier and the buyer. VMI is predictable and cost-efficient, especially when dealing in bulk. The supplier can anticipate supply shortages and the buyer can develop a wholesale catalog that won’t go out of date.
The main components of procurement
Typically, individuals from all affected departments are represented in the procurement process, including Human Resources, Legal, Finance, Purchasing, and Operations. It's best practice to build processes around them to ensure as frictionless a cycle as possible. If the steps are not followed, there can be major implications from a legal and financial standpoint.
It’s just as important to document these steps as it is to follow them. Typically this is manual, however many supply chain management and procurement management systems can automate it.
Pitfalls in today’s procurement processes
Procurement, especially with VMI, has served the needs of businesses for years, but there are many opportunities for improvement that can save businesses money. Because many stakeholders can be involved in a given procurement cycle, the process can become very lengthy as bottlenecks form.
Traditionally very decentralized, procurement has not worked well for companies that need to buy bundles of products. Procurement managers have to get quotes from a set of vendors for each product they need to buy. This can involve repeating the process many times. The solution to these procurement pitfalls come in the form of electronic procurement and supply chain management tools.
What is supply chain management and why is it important?
Supply chain management solutions help companies streamline the production, sale, and delivery of their goods or services. Efficiently managing a supply chain can optimize costs and improve margins, with benefits in other areas as well.
These solutions typically include inventory management and electronic procurement services. Innovative, forward-thinking tools may also offer customer service, payment processing, and supply chain logistics management as additional services. Companies that offer these holistic services have dubbed their offerings as “industrial commerce” (or I-commerce) solutions.
What should a business look for in a procurement management system?
As more supply chain management tools enter the market, businesses are asking if it’s worth the effort to automate procurement. The benefits include better customer experience, faster procurement cycles, less resources required, cost savings, and supply chain transparency.
The key to achieving these benefits is knowing what to look for in a supply chain management system or system that integrates the various business solutions you need. A high quality solution will have the following:
Spend management - Also known as spend control. It is important to have the ability to quickly and easily manage how much money is being spent.
Centralized cloud storage - Having this data centralized in the cloud enables real-time approvals and rejections and streamlines the procurement process.
Risk mitigation - User management, access control, and data hygiene all need to be managed to minimize risk.
Ability to integrate - The system should be able to readily and easily integrate with other critical business systems.
Analytics and reporting - Make better, more informed investment decisions. View and glean insights around purchased items and their impact on the business.
Flexibility - Every business’ needs are different, so the solution should be able to fit specific requirements. At the very least, the system should support all payment options.
Procurement for B2B Ecommerce
As B2B companies digitize their offerings to compete in a global e-commerce setting, having a simple procurement process becomes more important. Inxeption has created industrial marketplaces that serve as centralized procurement portals for enterprise organizations.
Businesses can create marketplaces populated with pre-vetted vendors so customers or business departments can purchase all their necessary products from a single online location. They no longer have to go through multiple lengthy procurement cycles. Trusted vendors can offer special discounts or promotions and process transactions in the Inxeption Cart. Inxeption supports purchase orders, credit cards, in-cart financing, quoting, contracting, and more.
Inxeption’s I-commerce platform also has built-in product information management. With Inxeption, companies can optimize their supply chain, procurement, and logistics processes to streamline costs and grow.
What is Stripe and is it the best payment processor for my business’ needs?
Stripe is a payment processor that processes billions of dollars worth of e-commerce transactions every year. As a leading payment processor, Stripe is often the go-to for companies that do business online. Stripe’s secure toolkit gives businesses the flexibility they need to establish payment settings that work for them.
Inxeption is a secure and scalable platform that brings business the ease of consumer e-commerce. From one digital dashboard you can drive sales, manage your supply chain, and optimize costs. For enterprise organizations to small businesses, you can do more and sell more with Inxeption.