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Most organizations worldwide operate a disordered procurement management system that makes the procurement process difficult and tedious to manage. A simple change or reorganization of how procurement management is done can go a long way in making the entire procurement process of an organization straightforward.

  1. Procurement Management
  2. Procurement Management Digitization
  3. Critical Functions of a Procurement Management
  4. Procurement Management Increases Efficiency
  5. Conclusion

Procurement Management

In simple terms, procurement management involves the use of effective planning strategies to manage and optimize expenditures within an organization. An essential part of procurement management consists of purchasing goods or services directly from a preferred service provider or supplier in a timely fashion and within the agreed budget.

The procurement management’s primary function is to provide a framework that allows an organization the ability to source, request, order, purchase, inspect, and reconcile required goods and services. However, to manage procurement accordingly, some or all of the management processes must be digitized.

Procurement Management Digitization

The use of manual procurement processes leads to inefficiencies, such as lack of accuracy and diminished operation speed. Ultimately, these inefficiencies lead to loss of money. As such, organizations need to improve their procurement processes through digitization. Digitized procurement management procedures translate to smarter ways of sourcing, requesting, purchasing, and invoicing, as each process becomes automatic and trackable.

Additionally, digitization of this process makes it easier to ensure compliance with legal requirements, and it also encourages effective collaboration with service providers.

Critical Functions of a Procurement Management

Although procurement management involves several processes, a handful of functions are important to develop a useful system. These functions are:

      • Purchase Requisition,
      • Purchase Order,
      • Invoice Approval,
      • Vendor Management,
      • Contact Approval.

Purchase Requisition

Purchase requisition simplifies the requisition process for individuals. It gives a requester a list of preferred and frequently purchased items from the selected vendors. The entire process is done in real-time to prevent mistakes and limit the impact of inaccurate information. This function is best managed using specialized software that captures and routes electronic data for approval in a consistent fashion.

Purchase Order

The purchase order helps an organization to articulate to a service provider the quantity and quality of goods or services required. Therefore, the purchase order generation must be done carefully to prevent mistakes. The best way to minimize errors is to use procurement management software applications, which automatically transform purchase requisition into a purchase order.

Invoice Approval

Before invoice approval, the purchase order is usually checked to ensure that no discrepancies exist. When using procurement management software, the invoice approval process is almost instantaneous. The software verifies the details of each requested item and confirms the service provider’s information based on set information. If no discrepancy is found, the system approves the invoice and forwards it to a human for final payment. If any difference is detected, the system rejects the purchase order, and the initiator reviews their request.

Vendor Management

Making use of a procurement management application helps an organization to avoid the repetitive nature of vendor management. It allows organizations to check and update the background details and reviews of their suppliers. Additionally, it enriches the relationship between organizations and their vendors by ensuring timelines are met and by improving the accuracy of operation.

Contract Approval

The contract approval process usually takes a lot of time before completion. For efficiency, procurement management application allows for smooth organization and storage of all contracts. Contractual templates allow for the management of contracts against standard terms. Also, it allows for continuous monitoring of contracts to ensure the fulfillment of all the agreed terms.

Procurement Management Increases Efficiency

There are several ways in which procurement management increases the performance of an organization. These are:

  • Using the latest version of software ensures effective management of all processes, including contract approval.
  • Better management of vendors also increases the effectiveness of procurement management. This process involves screening of new service providers and assessment of dealings with other vendors.
  • The use of procurement management applications can significantly improve the spending of an organization.
  • It allows for better compliance with policies and regulations.
  • It provides essential reporting features, which improves the general working condition within an organization.

Conclusion

The procurement management process is an excellent management tool that helps organize the procurement process to increase efficiency within the operations of an organization.