Okay, we admit it: we spend a lot of time of talking about the procurement process, but little about actual procurement process implementation.
Forgive us – we’re so keen on ensuring that everyone understands the proper procurement process. Unfortunately, in, the process, we sometimes we forget to discuss how to set up such a process in your business.
Now that we’ve got that out of the way, it is incumbent on me to say that not all implementations are created equal. In fact, depending on the state of your procurement function, the procurement process implementation you are facing can be wildly different than an organization with a procurement function in a different (potentially more developed) state.
Although we could spend all day dissecting different implementations based on specific procurement functions, for the purposes of this post I will focus on two broad implementations: one for a company with no process at all, and one for a company looking to begin using an e-procurement software solution.
So…your organization has no established procurement process. You’re buying whatever you need on the credit card (as are your employees), sending/receiving emails to detail purchases and you aren’t even using purchase orders.
All too often, this is the case with small and medium sized businesses. If this is situation you find yourself in, then the procurement process implementation you’re facing is establishing the procure-to-pay cycle (you can find out more about the procure-to-pay cycle in this blog post).
The procure-to-pay cycle is the standard process for the procurement practice.
Steps in the procure-to-pay process are:
- Identification of Requirement
- Authorization of Purchase Request
- Final Approval of Purchase Request
- Identification of Suppliers
- Receipt of the Quotation
- Selection of the Vendor
- Purchase Order Acknowledgement
- Advance Shipment Notice
- Goods Receipt* Invoice Recording
- 3 Way Match
- Payment to Supplier
See here for a detailed breakdown of each of those steps.
Note: the procure-to-pay cycle can be modified to suit your business. Above is an exhaustive list of each and every step, but those steps can be altered as not all businesses are created equal and will require different pieces of the procure-to-pay cycle in order to function at their most efficient.
Going from no formalized procurement process to following the procure-to-pay cycle can be difficult, but there are a few key steps to follow.
Design a chain of approvals/approval routing: Establish a series/hierarchy within your business for approvals. For example, an approval chain would resemble this process: a request is made by employee X, which then moves to the next manager up the chain. If the request is for a purchase of less than, say, $5,000, the manager approves the request. If it is more expensive, it moves up the next, more senior manager.
Use purchase orders: Purchase orders are legally binding documents that bind the buyer and seller to the transaction in question. And, importantly, purchase orders are drafted with critical information such as price, date, supplier and PO number.
Receipt of goods: When the goods are received at the warehouse of the buying organization, the receiving staff checks the delivery note, PO number etc. and acknowledges the receipt of the material. Quantity and quality are checked and any unfit items are rejected and sent back to the supplier. This may sound obvious, but it is critical part of the procure-to-pay cycle.
If your organization is already using the procure-to-pay cycle (or some version thereof) than the procurement process implementation you are likely looking at is the implementation of an e-procurement software solution.
Simply put, the use of technology (e-procurement software) will manage the entire procure-to-pay cycle (everything from request to payment of supplier) for you.
Like implementing the procure-to-pay cycle, implementing an e-procurement solution isn’t easy. But using the procure-to-pay cycle is a big step forward – an e-procurement solution will work right alongside that process (well-designed e-procurement solutions are designed with the procure-to-pay cycle in mind).
So, how does one implement that technology in a business? What does that procurement process implementation look like?
Well, this comes down to the size and needs of your organization. Simply speaking, there’s an e-procurement solution for every conceivable need out there.
As for the implementation, the software provider and the buying organization jointly handle that process. The software provider should input account codes etc. so that the buying organization gets the most realistic look at the software during any trial/pilot periods.
A well-designed e-procurement solution will erase the need for lengthy training periods – a hallmark of a good software solution is how easily employees pick it up. The trial/pilot period is critical because this is when your organization tests out the software and decides if it will purchase it or not. Effectively, your organization is using the full breadth of the software at this point – a major aspect of implementation.
If the decision to purchase the software is made, the final aspects of procurement process implementation are to make the software available to all at the buying organization (or as many users as the buying organization wants). Then, it is up to the buying organization to train its staff and, of course, the benefits of e-procurement software.
Procurify is an e-procurement software that handles all of these functions and more. Our customer success team helps to make implantation as seamless as possible, while focusing on user adoption, training, and optimizing for your business’s needs and overall success. Take the next step towards taking your company’s procurement to the next level – sign up for a free trial today!