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procurement management
Midsize business

Why procurement management is essential for efficient supply chains

Procurement management is the process of acquiring the supplies and services needed to perform business operations. It involves multiple steps, including negotiating contracts, monitoring budgets, and processing invoices.

This article will discuss procurement management's importance, its benefits to your business, and how to make the process more efficient.

What is procurement management? 

Procurement management refers to the process of working with external sources to acquire supplies and services, including raw materials, warehouse equipment, application tools, or third-party services. 

The exact procurement management process looks different within every company. For example, procurement can be the purely functional activity of facilitating purchases, or it can take a more strategic approach that involves identifying ideal supplier outsourcing models. 

In most cases, procurement management involves a combination of the following activities:

  • Resource planning
  • Budget allocation 
  • Supplier sourcing and assessment 
  • Purchase requisition 
  • Purchase order processing
  • Order reconciliation
  • Invoice approval 
  • Vendor payment 
  • Vendor management 
  • Contract management 

No matter what role procurement management plays within a company, its goal is to provide various project teams with the resources needed to operate effectively, while also maximizing the value of overall spend.In the long run,procurement management directly impacts the company’s bottom line and competitiveness in the market.

Why is procurement management important?

Aside from ensuring all essential products and services are supplied to a company, procurement management provides a number of other important benefits. 

A good procurement management strategy supports two of the most critical areas of operations: supply chain and financial management.

Procurement management is closely linked to broader supply chain operations, handling the internal matters that enable logistics and manufacturing to take place. It is responsible for upholding high quality standards, building supplier relationships, and securing favorable terms to get the optimal value for money.

By guaranteeing the reliable supply of resources, procurement enables companies to streamline supply chain operations, from production planning to shipping fulfillment, and successfully meet market demand.

Along the same lines, procurement is uniquely positioned to help reduce order costs and increase cash flow. For example, procurement teams can negotiate with suppliers to get better prices for larger orders or longer-term procurement contracts. This frees up working capital that can be invested in business development. 

Companies looking to expand can also leverage procurement to diversify suppliers or explore supplier relationships in new geographies. 

Ultimately, by facilitating the supply chain and maximizing resources, a procurement management plan helps companies improve overall operations and gain a competitive advantage.

Benefits of strategic procurement operations

Given procurement’s integral function within a company, a more proactive approach can help reap the maximum benefit. Here are a few benefits that come from building strategic procurement operations:

Faster sourcing process

A large part of the procurement process is spent on strategic sourcing for goods and services. Developing a standard workflow to evaluate potential suppliers speeds up procurement timelines and defines an approved list of trusted third-party partnerships.

Better resource utilization 

Being mindful of how procurement currently operates often uncovers areas for improvement. For instance, there may be underutilized resources, redundant efforts, or discrepancies and inefficiencies across team members. A supply chain or inventory management systemcan easily track end-to-end procurement so managers can identify the best opportunities for a more cost-effective process.

Less wasted expenditure

Better resource utilization usually leads to less waste. A strategic procurement approach aligns the entire supply chain and effectively consolidates all expenses. With a dedicated business management platform that centralizes every purchase, procurement teams are able to combine orders and deliveries for increased cost savings. It also becomes easier to spot any maverick spending or unapproved purchases that are outside of approved contract lifecycles. 

More secure supply chain 

Maintaining oversight into procurement can help procurement professionals get ahead of any last-minute disruptions, such as out-of-stock supplies or logistical issues. While it’s impossible to remove all risks when dealing with external parties, a strong procurement strategy should include alternative suppliers and contingency plans to guarantee supply chains are continuously operational. 

How to make procurement efforts more efficient

With all the activities and teams involved in procurement, there are a number of ways to streamline the management practice. The following are some recommended steps to make procurement activities more efficient:

Standardize your procurement process

Procurement requires a significant amount of paperwork and approvals. Simplify the process for stakeholders by outlining all the steps needed to go from the initial request for proposal (RFP) to final supply delivery. If possible, provide templates and guidelines on what types of purchases will be approved. This initial effort can end up saving everyone time in the long run.

Automate routine tasks 

Using automations to handle repetitive tasks not only saves time, it also prevents accounting errors, misplaced paperwork, and other mistakes common to manual processing. Automations increase efficiency throughout procurement and free up the team to work on more important tasks, such as negotiating contract terms and planning supply strategies. 

Centralize all third party information

Working with even a single supplier involves multiple touchpoints, documentation, and other details. This only compounds in time, especially as companies expand their third-party network. 

To keep tabs on all the important information, it’s best to use a business management platformthat organizes all the supply details and makes it easy to filter and access across teams. 

Use software to track and improve processes 

Most procurement teams rely on supply chain or order management software to keep track of movements throughout the supply chain. All procurement requests and documents are recorded and updated in real time. By collating all information in one place, procurement management systems improve accuracy across operations and make it easier to draw insights that improve inventory forecasting and future planning.

How QuickBooks Enterprise supports procurement management 

With all the responsibilities that fall on procurement, dedicated procurement software makes the entire process much easier to manage. QuickBooks Enterprise offers best-in-class funactionality to give you a clear line of sight across operations and the necessary information to improve decision-making, efficiency, and productivity.

A centralized dashboard contains real-time delivery details of inventory and orders from warehouse production to your customer’s doorstep. QuickBooks Enterprise enables your team to enter expenses as they occur, and Enterprise automatically generates invoices and reports so procurement management can easily stay on top of job costs. 

Additional expenses, such as materials, overhead, and labor can be tracked and quickly reallocated, depending on the current needs of the business. 

QuickBook Enterprise enables procurement professionals to make the best business decisions and gain efficiencies across the order purchasing process by creating a single source of accurate data. 

Final thoughts

An effective procurement management initiative ensures a company’s needs, including all supplies and services, are available on time to operate effectively. It’s a critical part of the financial and supply chain management process, ensuring that a company remains profitable and can meet market demands over time. 

With so many steps involved in project procurement management, automating routine tasks and reviewing critical information is necessary to optimize the process continuously. QuickBooks Enterprise offers the visibility needed to better utilize resources, coordinate across teams, and streamline overall procurement management across the organization. 

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