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What is procurement?
Procurement is a critical aspect of any organization as it involves the process of acquiring the necessary goods and services from suppliers or contractors to facilitate day-to-day business operations. It is not just about purchasing items and services, but rather, procurement is a strategic business function that involves the careful execution of processes like selecting the right suppliers, negotiating contracts, managing relationships and ensuring that goods and services are delivered on time and delivered to the required quality standards that an organization upholds.
In today’s globalized and highly competitive market, procurement has become increasingly complex, and organizations must look for ways to implement efficient and effective procurements processes to ensure that they remain competitive. Well executed procurement management provides high ROI for organizations like cost savings, improved relationships with suppliers and better risk management.
What are the top challenges & issues facing procurement?
Like any other function in an organization, procurement is not without its own set of challenges. Here are some of the top challenges and issues that procurement teams are facing today:
- Supplier Management – One of the biggest obstacles facing procurement is the management of relationships with suppliers. Identifying and working with reliable and trustworthy suppliers who deliver quality products and services on time is critical in streamlining the procurement processes for organizations. However, managing supplier relations can be time-consuming and even complex, as it involves contract negotiations, performance monitoring and dispute resolution.
- Cost Control – Cost control is another top challenge that procurement must face. With organizations becoming more competitive as they compete on a global scale, there is increased pressure to reduce costs and increase profitability. Procurement can play a vital role in this by identifying cost-saving opportunities by negotiating better prices with suppliers and optimizing the procurement process to reduce wastage.
- Supply Chain Disruptions – Disruptions in the supply chain are more common than ever and can be caused by a variety of factors including natural disasters, political instability and economic downturns. These disruptions can impact the availability and cost of goods and services, increasing delays in shipments and increasing costs.
What are the steps of the procurement process?
The procurement process involves a series of steps that organizations follow to acquire goods and services from suppliers. Here are the six steps in the procurement process, starting with the initial request and ending with the approval of contracts:
- Requests (Intake to Procure): The procurement process begins with a request for goods or services from a department or individual within the organization. This request may come in the form of an internal requisition, a request for proposal (RFP), or a request for quote (RFQ). The procurement team reviews the request and determines if it is within the scope of the organization's procurement policies and procedures.
- Purchase Requisition: Once the procurement team has approved the request, they will create a purchase requisition. This document contains all the necessary details about the requested goods or services, such as quantity, specifications, delivery dates, and budget.
- Purchase Order: The purchase requisition is then used to create a purchase order. This document is sent to the selected supplier and serves as a formal agreement to purchase the requested goods or services. The purchase order includes details such as the agreed-upon price, delivery terms, and payment terms.
- Invoice Management: After the goods or services have been delivered, the supplier will send an invoice to the organization. The procurement team reviews the invoice to ensure that it matches the purchase order and that the pricing is accurate. If there are any discrepancies, the procurement team works with the supplier to resolve them.
- Vendor Management: Effective vendor management is critical to the procurement process. The procurement team must evaluate potential suppliers and select those that can provide quality goods or services at competitive prices. Once a supplier has been selected, the procurement team works to maintain a positive relationship with them by communicating effectively, resolving issues quickly, and evaluating their performance regularly.
- Contract Approval: Finally, the procurement process ends with the approval of contracts. This step involves reviewing and finalizing the terms and conditions of the purchase agreement, such as warranties, service level agreements, and termination clauses. The contract is then signed by both parties, and the procurement process is complete.
What are the stages of procurement?
The procurement process consists of several stages that organizations follow to acquire goods and services from suppliers. Here are the three primary stages of the procurement process:
- Sourcing Stage: The sourcing stage is the first step in the procurement process. It involves identifying potential suppliers and selecting those that can provide quality goods or services at competitive prices. This stage may involve conducting market research, issuing requests for proposals (RFPs) or quotes (RFQs), and evaluating supplier bids based on factors such as price, quality, and delivery time. During this stage, the procurement team may also negotiate with suppliers to secure better terms and conditions. Once a supplier has been selected, the procurement team works with them to finalize the agreement and prepare for the next stage of the procurement process.
- Purchasing Stage: The purchasing stage involves the creation of purchase orders, the delivery of goods or services, and the receipt of invoices. Once the procurement team has selected a supplier, they create a purchase order that specifies the goods or services being purchased, the agreed-upon price, delivery dates, and payment terms. After the goods or services have been delivered, the supplier sends an invoice to the organization. The procurement team reviews the invoice to ensure that it matches the purchase order and that the pricing is accurate. If there are any discrepancies, the procurement team works with the supplier to resolve them.
- Payment Stage: The payment stage is the final step in the procurement process. It involves the processing and payment of invoices to the supplier. After the procurement team has reviewed and approved the invoice, it is sent to the accounts payable department for payment. During this stage, the organization may have policies and procedures in place to ensure that payments are made on time and in compliance with legal and regulatory requirements. The procurement team may also work with suppliers to resolve any issues that arise during the payment process.
What are the three Ps of procurement?
Procurement involves several critical components that work together to ensure that the organization can obtain their necessary goods and services efficiently and effectively. Below are the three components of procurement, otherwise known as the three Ps of procurement:
- People: The people component of procurement includes those involved in the procurement process, including procurement professionals, departmental staff, and suppliers. These individuals play a critical role in ensuring the procurement process is done effectively. Procurement professionals are responsible for developing and implementing procurement policies and procedures, identifying potential suppliers, and negotiating contracts. Departmental staff members are responsible for identifying the goods and services they need and working with procurement professionals to acquire them. Suppliers are responsible for delivering high-quality goods and services in a timely manner. Effective communication, collaboration, and relationship-building among these individuals are critical to the success of the procurement process.
- Process: The process component of procurement involves the steps taken to acquire goods and services. It includes the various stages of the procurement process, such as identifying needs, sourcing suppliers, negotiating contracts, and managing the delivery of goods and services. To ensure that the procurement process is efficient and effective, organizations must develop and implement standardized procurement policies and procedures. These procedures should be designed to streamline the procurement process, minimize errors, and ensure that all procurement activities are carried out in compliance with legal and regulatory requirements.
- Paperwork: The paperwork component of procurement includes the documents and records generated during the procurement process, such as purchase orders, invoices, and contracts. These documents are critical for ensuring that the procurement process is transparent, accountable, and compliant. Effective document management is essential for ensuring that procurement activities are properly documented, and that the organization has the necessary records to support financial and legal compliance requirements. Organizations must develop and implement standardized procedures for document management to ensure that procurement records are properly maintained and accessible.
How automation & technology can help manage procurement
Automation and technology have the potential to transform procurement management by improving efficiency, streamlining processes, increasing accuracy, enhancing visibility and transparency and improving supplier relationships. As organizations continue to adopt new technologies and automation tools, procurement professionals will be able to focus more on strategic activities, such as supplier management, risk mitigation and cost savings.
The future of digital procurement
The future of digital procurement is rapidly evolving and transforming with the adoption of new technologies such as automation platforms, artificial intelligence and machine learning. Procurement professionals are embracing these technologies to automate routine tasks, analyze data and gain real-time insights into procurement activities.
The future of digital procurement is expected to continue to improve efficiency, reduce costs and enhance decision-making. With the adoption of these technologies, procurement professionals can focus on higher-value activities such as strategic sourcing, supplier relationship management and contract negotiation. The increased use of digital tools and technologies will enable procurement professionals to make data-driven decisions, reduce errors and increase transparency, leading to more effective procurement processes and better outcomes for organizations.
What is Procurement Automation Software?
Procurement automation software is the technology that allows procurement teams to digitize, streamline, automate and measure procurement policies, documents and frameworks.
Why is procurement automation important?
Procurement processes have been growing in complexity over the years and now rely on a myriad of policy documents, controls and people to ensure that they are properly interpreted and followed. To manage this, procurement professionals use technology that is often legacy, rigid and not interoperable. This results in multiple disjointed systems that cover at best 60-70% of the work that needs to be done while also being inflexible to adapt to any change in requirements as they arise from the business. To combat this challenge, procurement teams are forced to plug the gaps using DIY spreadsheet-based solutions and manage processes and workflow in email.
This method of working for procurement teams results in the following challenges:
- Difficulty in having organization-wide visibility and centrally tracking and managing procurement activities.
- Risk of non-compliance, incorrect decisions and loss of information.
- Inefficient use of time in administering policies and compliance rather than focusing on getting the best commercial and strategic outcomes for the organization.
- Confusion from the business around where and how to apply procurement policies.
Example use cases for procurement automation
Procurement automation empowers teams to digitize and automate many of the manual aspects of procurement processes, for both the procurement function as well as the business undertaking a procurement activity.
At Checkbox, we have helped companies operationalize their procurement frameworks and policies on a single, intuitive system that can cover and end to end journey including use cases of:
- Procurement framework - Turn complex paper-based procurement policies into intuitive and efficient digital user journeys, customized to your needs
- Vendor agreement generator - Fast track procurements by creating self-service, automated agreements that are ready to go
- Vendor risk assessment - Decrease time on evaluating vendors and reduce overall internal effort through automating your vendor risk assessment
- Intake to procure – Evaluate and approve requests for goods and services to minimize the risk of unnecessary spending.
- Procure to pay – Streamline the procurement process from the purchase of goods or services to the payment of suppliers to ensure all procurement activities are resolved in a timely and efficient manner.
- Asset purchase agreement - Reduce time and efforts required to negotiate the terms of a purchase and provide a clear framework for resolving disputes that may arise during a transaction.
- Procurment agreement - Streamline the procurement process by establishing a clear framework for its ongoing relationship with suppliers.
- Purchase agreement
- Purchase order agreement - Establish a clear framework for company transactions that reduce the time and effort it takes to negotaition each individual purchase order, as well as improve the overall quality and consistency of the materials received.
- Service agreement - Improve the overall quality and consistency of services received by establishing trust and cooperation between the company and the service provider.
- Vendor Agreement - Ensure that the goods or services are delivered on time, within budget, and to the required quality standards.
- Vendor NDA’s - Create a more productive and efficient procurement process overall, as both parties can work more closely and openly with each other.
Features to look for in a procurement automation software
|Purchase Requisition Management||Purchase Order Management||Supplier Management|
|Contract Management||Supplier Collaboration||RFQ,RFP,RFI Management|
|E-Sourcing and E-Auction||Supplier Performance Management||Document Generation|
|Purchase Invoice Management||Inventory Management||Supplier Onboarding|
|Vendor Self-Service Portal||Purchase Analytics and Reporting||Integration with ERP|
|Mobile Procurement||Workflow Automation||Compliance and Risk Management|
|Supplier Relationship Management||Electronic Document Management||Real-time Dashboards and Analytics|
|E-signature||Approval workflows||Contract Lifecycle Management|
|Catalog Management||Purchase Requisition Approvals||Budgeting|
|Audit Trails and Reporting||Multi-currency and Multi-language support||Cloud-based|
Benefits of procurement automation
Procurement automation offers a range of benefits to organizations, including increased efficiency, cost savings, improved accuracy and greater visibility into procurement activities. By automating routine procurement tasks, organizations can free up procurement professionals to focus on higher-value activities, such as strategic sourcing and supplier relationship management, while also reducing errors and improving data accuracy.
Automation can also help organizations streamline their procurement processes, reducing the time and resources required to complete procurement activities. This can lead to cost savings and greater efficiency, as procurement professionals can manage procurement activities more effectively, identify cost-saving opportunities and negotiate more favorable contracts with suppliers.
By providing real-time visibility into procurement activities, automation can help organizations make better-informed decisions and improve overall performance. This can include identifying supplier performance issues, tracking spending and analyzing procurement data to identify opportunities for process improvement and cost savings.
Finally, automation can help organizations improve compliance and reduce risk, by ensuring that procurement activities are carried out in accordance with organizational policies and regulatory requirements. This can include automating the approval process for purchase orders and invoices, as well as monitoring supplier compliance with contractual obligations and regulatory requirements.
Checkbox as a procurement automation platform
The Checkbox automation platform empowers procurement teams to build intuitive, end-to-end digital processes that can be deployed across the organization, using drag and drop. Trusted by the best brands globally across procurement teams of all sizes, Checkbox has been a critical piece in their transformation journey, providing not only the best in breed automation technology but the expertise to ensure success.
Checkbox is known for being the easiest to use, yet powerful automation platform available for procurement teams. Combined with our deep expertise in automation and transformation, we are excited to demonstrate to you why the best chooses Checkbox and why they always succeed with us.
Frequently Asked Questions
What is an automated procurement system?
Procurement automation is the technology that allows procurement teams to digitize, streamline, automate and measure procurement policies, documents and frameworks.
How can legal technology improve your legal team?
1. Give back time to legal times 2. Business clients do not have to wait as long for legal services 3. Higher compliance rates among legal teams 4. Create consistency of service delivery 5. Enable data capture
What can be automated in procurement?
1. Procurement frameworks - Turn complex paper-based procurement policies into intuitive and efficient digital user journeys, customized to your needs 2. Vendor agreement generator - Fast track procurements by creating self-service, automated agreements that are ready to go 3. Vendor risk assessments - Decrease time on evaluating vendors and reduce overall internal effort through automating your vendor risk assessment