How to Stop the Dysfunction in your Procurement Process

A recent Google survey hosted by AmeriQuest has uncovered an unfortunate truth some manufacturers may not want to admit ­­— their business has a dysfunctional procurement process. When I say dysfunctional I don’t mean everyone argues about purchasing to the point of needing a therapy session – at least I certainly hope that’s not the case. What I mean is that there is a lack communication, visibility and sometimes a plan for procurement altogether.

In theory, one might think that the process of procurement should be easy. All you’re doing is finding a good vender for acquiring raw materials for your products, right? Sure it is, as long as it’s also a reliable resource, the materials fit into your budget, it’s in a good location for cheap, timely transportation to your warehouse, and the materials they send are up to quality standards. Many manufacturing companies don’t have a lot of time to waste on finding and negotiating with potential vendors. This usually leaves them to settle for a “good enough” vendor.

That isn’t the only trouble companies are having with purchasing materials. The Google survey found these statistics about the respondents:

  • 1 out of 5 said their company doesn’t have a procurement process in place
  • Nearly 1 out of 5 said procurement has no visibility within their company
  • 1 out of 5 said they were unknowledgeable about pricing and discounts that were available to them when purchasing materials for their company
  • Despite being directly involved in the process, 15% said they didn’t know which department manages procurement
  • Nearly a 25% said procurement sits within the financial department, 22% said the operations department, and 7% said it’s under IT. For many organizations, a combination of the three departments deal with procurement.
  • Almost one-third of respondents weren’t sure who has the rights to the final sign-off for procurement

As chaotic as it sounds, this is a reality for some company’s purchasing and acquisition functions. Your procurement process should go smoothly, not like a wild goose chase that attempts to answer “Whose job is it anyway?”. It should be taken seriously because it could lead to a hefty cut in your company’s cost of production. It is ideal to use a more sophisticated, no-nonsense approach to procurement, one that has been proven to effective. Some companies choose to hire a procurement officer to coordinate all procurement functions and handle any problems that may arise for a smoother process. Another option businesses turn to for relief is to use an ERP solution to help with interdepartmental visibility and communication problems as well as keeping records of purchases.

Fortunately, there are complete, all-in-one ERP systems that can do much more to assist businesses with procurement. ERP systems like Dynamics AX have a complete Procurement and Sourcing module that works as a company procurement officer. Some of its capabilities include:

  • Supporting purchase planning and logistic functions
  • Information about the prices, discounts, and rebate terms
  • Product receipt and invoice registration
  • Review vendor performance through procurement and account payable reports

The new Dynamics AX 7/Dynamics 365 for Operations is expected to continue the tradition with a Procurement and Sources module. If the Dynamics business software solutions are not in your company’s budget than Acumatica 6 maybe a practical alternative. As you know, by using an ERP that has robust functionality you gain more than just a smoother procurement process, you also use other functions, such as Finance and Sales, you already need to save even more time lost from switching screens. The only question left to answer is “What will your company use the extra time and money on?”.

Clients First is an expert at implementing Dynamics AX and Acumatica. Contact Clients First’s Texas or Minnesota sales team today by calling 800.331.8382 or emailing Clients First implements and supports clients across the U.S.A. and in 11 countries. Our team of professionals are ready to help implement the best finance and operations solutions for manufacturers, distributors, project based manufacturers, MRO (maintenance, repair and overhaul), and professional services.

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Sources: MHL News, AmeriQuest, Original Article on ERPVAR