Stop the Dysfunction in your Procurement Process

A recent Google survey hosted by AmeriQuest revealed an unfortunate truth that some manufacturers may not like to admit ­­— their business has a dysfunctional procurement process. When I say dysfunctional I don’t mean everyone stands around arguing about procurement to the point of needing a therapy session – at least I certainly hope not. What I really mean is that there is a lack communication, visibility and sometimes a plan for procurement altogether that causes your business to not function correctly.

In theory, one might think that the process of procurement would be easy. All you’re doing is finding a good resource for acquiring base materials for your products, right? Sure it is, as long as the vendor is a reliable resource, the materials fit into your budget, the needed product can be procured in a nearby location making timely transportation to your warehouse consistent, and that the materials sent 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 in procuring materials. The even bigger problem is outlined in the results of 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 volume 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

This is only some of the confusion that goes on with procurement. Your procurement process should go smoothly, and not like a wild goose chase of emails, phone calls, cc, and bcc that attempts to answer “Whose job is it anyway?”. Purchasing 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 be 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 for businesses who need relief is to use an ERP solution to help with interdepartmental visibility, automated communication, and keeping track 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
• Providing information about pricing, discounts, and rebate terms
• Product receipt and invoice registration
• Vendor performance reviews through into procurement and account payable reports

The new Dynamics 365 and AX 7 is expected to continue improve the Procurement and Sources module. If neither of the Dynamics systems is in your company’s budget than Acumatica 6 maybe a practical alternative. Using an ERP with multifunctional suites doesn't just improve your procurement process. You also gain more control and funtionality in other areas of your business, such as Finance and Sales. The only question left to answer is “How will your company use the extra time and money?”.

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 sales@clientsfirst-tx.com. 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.

Resources: MHL News, AmeriQuest