Going Beyond Manual Purchase Requisition

Many businesses are still stuck using a manual system to perform their purchase requisition. But how do you ensure that all the purchase orders you keep sending out, are all strictly necessary with a manual system?

As a company, you want to keep spending under control. No single employee, manager or business unit should be allowed to spend without oversight and strict limitations.

In this article, we will look at the financial and organisational incentives for making a shift from a manual to an automated purchase requisition system.

Making the shift to an automated process

To curb unnecessary spending, you need an effective, streamlined workflow for your purchase requisition processes. Which means automation.

If you talked to many managers and COO in charge of making these types of decisions, they would probably say something like they feel their company isn't quite ready to take the leap to reinvent requisitions and take it into the digital age.

My suspicion is that the idea of making such a major shift might seem too daunting to many managers. Or they feel like it would take up too much of their already crowded schedules. It's true that just the thought of automating a complicated business process seems like a formidable undertaking.

If they would perform a thorough evaluation of the amount of time and money people in their organisation has to spend slogging through the manual requisition process, they would realise soon enough that that they are wasting a lot of money and resource on procurement and other related activities—which in the end leaves less for the rest of the company to use.

Modern business software solutions take the needs and limitations of the modern organisation into account.

These tools are set up from the start to streamline the whole process of creating a customised purchase requisition workflow.

If managers would just give it a chance, they would be able to take their manual purchase requisition process into the digital age in a relatively short time span.

In the end they would be left with a purchase requisition system that is customised to their particular needs and challenges, which will translate in a streamline, efficient process that will also save them a lot of money.

Direct vs Indirect Procurement

For an effective purchase requisition workflow, the value of each purchase needs to be maximised. Which means you need to clearly identify and distinguish between direct and indirect procurement.

Whether expenditures are necessary for the production of the goods and services that the company sells, or expenditures needed to run the company itself, is a huge difference. Both have a different strategic importance for the company.

Generally speaking, companies like to keep their indirect spend as low as possible and keep business overheads under control. Whereas direct spend is needed to produce the actual goods that the company sell. So you don't necessarily want to limit that expenditure.

So it becomes crucial to draw a clear distinction between these two spends. The problem is that manual procurement processes just aren't effective at making this distinction.

This is one of the main benefits of bringing your entire procurement process into the digital age. The system is able to  process direct and indirect procurement with different workflows and regulate the budget for each using different rules. The system will make certain procurement procedures available to you as separate functions that can be lined into a logical workflow that suits your needs.

So with the right software tools, you will be able to manage both types of procurement in a single platform in the most cost effective and efficient way possible.

The benefits of automation

There are specific procurement automation tools available that will take charge of the entire process from initiating the procurement workflow to paying for goods and services rendered.

One of the main benefits of automating your purchase requisition processes, is that you will always know which purchase requests are being made, and who are making them.

An automated system will  monitor every aspect of your  purchase requisition workflow at all times. Suddenly, your purchase requisition workflow becomes seamless end-to-end—while every step of the process is managed effectively and securely.

The system will stamp out redundancy, flagging repeated and unnecessary purchase requests, while laying a solid audit trail for every transaction. This will both eliminate fraud and unnecessary expenditure on goods and services your company really doesn't need to thrive.

An automated system will drastically reduce the number of emails involved with each purchase request. You don't have to wade through a sea of emails anymore to get to the bottom line of why spending is so high in your company. Or to answer the question: where did all the money go?

Automation will make it possible to streamline all your purchases requisition processes and ensure that all of your information is secure.

Which means you will have a much better handle on everything related to purchase requisitions.

The system will usually be able to integrate with the rest of your vendor management functions. Which means you will also be able to manage the entire vendor management lifecycle from a single interface.

In a single system you will be able to handle the processing of a purchase request, the onboarding of new vendors, ensuring that they stick to the stipulations of their contract, plus their eventual off-boarding and closing of their contract.

Developing a purchase requisition workflow

There are a couple of steps you should follow to set in place a purchase requisition process that is both effective and cost-efficient:

1. Lay out the steps

In the course of running a business, most managers don't think about mapping out the business processes that make everything work. But that's what's necessary if you want to improve your purchase requisition process.

What you have to do is to lay out the different steps involved in igniting and concluding any purchase requisition. Be careful to jot down every action that you have to take, every communication that has to be made, as well as every place where there is a lag or you have to wait for someone to get an appropriate piece of information, or have to make a decision.

The more thorough you are in mapping out the process, the better idea you will have of the current state of affairs—and the better job you would be able to do in renovating the whole system.

You want to create a purchase request workflow that is both robust and suited to the particular needs of your organisation.

Now take all the steps you identified and create a flow diagram of the entire process. What you will find is that it will of necessity include several checkpoints, conditions that have to be met along the way, as well as dependencies.

When you have everything on your diagram, step back and consider the complexity of your process. The end goal is to eliminate steps that aren't strictly necessary and hold up the whole process so that you can end up with a workflow that is both simple and versatile.

2. Digitise the process

After the whole purchase requisition process has been mapped onto a workflow and has been evaluated for redundancies, it's time to digitise this process.

Here you have to recreate the workflow in digital form in your vendor management platform. Most programs also provide the possibility of using preset templates as a start-off point for creating a purchase requisition workflow.

You could also create a fresh workflow from the ground up, if you think it would suit the particular needs of your company better—but usually, one of the templates should work just fine for most companies.

3. Set workflow rules

Once you've established the basic structure of the purchase requisition workflow, you are now able to customise it to suit the particular needs of your business. For example, you could make changes to data fields or alter workflows to better suit your company culture.

You are also able to create specific rules that govern the workflow, including pre-determined exceptions to those rules. You could also make the workflow adaptable depending on the situation, for example, certain branches of the workflow could be hidden under certain circumstances.

4. Workflow automation

Since the workflow is properly defined in the system, it's now possible for it to be automated. Which means that the program will automatically perform the tasks of collecting and processing purchase orders. The approval and rejection steps can also be automated. You will have full control over which step the computer system must perform without human intervention, but also the places where information has to be put before human decision makers for processing.

What you have to realise is that you are in full control of the entire process. You can define the procedure for each step along the way. You will also be able to assign the appropriate accountability for the different stages of the process to the right stakeholders.

5.  Launch

At this point, you've come a long way towards creating an automated requisition workflow, and then tailoring it to fit your particular business needs. Since your policies and procedures surrounding purchase orders are properly spelled out and programmed into the system, you're ready for the next step—which is the launch!

Once again, the vendor management system will not only run the procurement workflow for you, but will also measure its efficacy. It will also alert you of any problems or bottlenecks, so that those can be ironed out. You will also be able to integrate your procurement workflow to the rest of your vendor management activities.

In this way, you will be able to devalue the strengths and weaknesses of your workflow on an ongoing basis. Since the system is able to measure its efficiency using actual data, it's possible to refine the workflow on an ongoing basis and create a system that truly serves your business and caters to any changes in the market.

Procurement software vs VMS

When deciding on digitising your procurement processes, you have the option of going either with a vendor management suite (VMS), or alternatively to opt for a standalone procurement software.

The question is, which is better? And which of these options will suit your business better?

The obvious reason to opt for a vendor management system is its ability to handle everything related to your relationship with your vendors in one, convenient and comprehensive interface.

This means that you will be able to manage all aspects of your vendor relationships in a much more efficient manner.

You will be able to onboard vendors and manage them in one interface. The system will give you specific tools to evaluate new vendors, take them through the onboarding process, monitor and measure their performance.

What's more, all of these processes can be adjusted and optimised in real time. So you're never stuck with a system unable to adapt as your business grows and shifts strategy.

Some VMS systems do have the drawback of operating in a silo, not directly connected to the procurement process as a whole.

If procurement is a large part of your business, you might need to invest in additional software to your current vendor management systems to handle this aspect of your business.

You want a system that includes all necessary functionality to manage your procurement tasks from sourcing goods and services, to making the final payment.

For your consideration, here are some of the factors you have to consider when choosing between a single-focus purchase requisition software, or using a vendor management system to also handle your procurement tasks:

• Which of the options will help you forge stronger and more efficient relationships with your vendors?
• Are you able to handle different parts of purchase requisition in a single system? For example, can the software manage different procurement processes such as starting the purchase requisition process, handle invoices and doing  payments, manage all the relevant billing information in a convenient interface, as well as contract handling with vendors in one system?
• Does the software offer you a single platform that is able to assess vendor performance—tracking their performance, managing all your vendor interactions, and then analysing the results?
• Does the system offer a transparent interface that clearly shows what is going on with your purchase requisitions, the issuing of purchase orders, as well as the whole process where a purchases requisition was either approved or rejected?
• Will the system be able to ensure that all vendors and stakeholders are compliant with applicable legislation and regulation?
• Is the system able to help you manage requisition spending and keeping it within predetermined budgets and strategies? How much visibility does the program give you into the spending activity going on in your company?
• Does the program interface with the other systems and tools you already implemented in your company? You don't want to adopt a system that is completely unable to integrate with the rest of your company.
• Does the program keep a clear audit trail of all purchase requisition related activities—to combat fraud and eliminate unnecessary spending?
• Does the program give you proper insight into vendor activity so that you can make informed decisions with regard to your vendors?
  
  

Conclusion

Manual procurement processing might be adequate for your current business. However, automating these processes will take your procurement to the next level.

It will allow you to build a procurement workflow that is streamlined, where the different parts of the procurement process are integrated into a well-oiled machine.

This means that all your procurement-related information is available to all the relevant stakeholders at a click of a button. The system will also send out automatic notices when decision makers have to take action to move the process forward.

The system will also eliminate the possibility of large-scale fraud and data breaches. All the while, you will limit the possibility of making mistakes in the procurement process that could end up costing you money.

You will also avoid the delays that come with human error. In this way, you will be able to manage purchase orders in the most cost effective and efficient manner possible.

This gives you a tactical advantage above the competition. You will be a nimble player in the market, able to adapt to any changes in the market and able to harness every profitable opportunity that comes your way—without the drag of your tools and processes putting the breaks on your progress.