Over the past few years, the procurement industry has experienced a significant transformation due to the widespread adoption of e-commerce and the advancement of the internet. As a result, nearly 68%⁽¹⁾ of B2B buyers now purchase goods online. 

More specifically, the procurement preference of B2B buyers has shifted towards dedicated solutions rather than relying on the procurement modules of traditional ERP systems. This shift is happening due to the unique advantages offered by dedicated e-procurement solutions, such as enhanced transparency, increased efficiency, and improved supplier relationships. 

This blog will delve deeper into the benefits of using e-procurement solutions.

Competitive Advantages of e-Procurement Solutions

E-Procurement solutions have become increasingly popular among businesses due to their significant competitive advantages over traditional ERP systems. While an ERP system integrates business processes and is generally built for finance departments, it lacks the specialized features required for effective procurement management. 

In contrast, an e-procurement solution is designed specifically to manage procurement functions.

So what are the competitive advantages of e-Procurement solutions?

1. Procure Smarter, Not Harder: Leverage Automation with e-Procurement Solutions

Procurement operations can be made more efficient and cost-effective with automation. Unlike ERP systems, which often involve manual processes, e-procurement solutions offer fully integrated and automated processes. 

By utilizing the benefits of automation, you can accelerate the procurement process, minimize errors, and streamline the entire digital procurement value chain. 

2. Unlock Flexibility with e-Procurement Solutions 

Traditional ERP tools can handle basic procurement, but for a broader range of procurement strategies, e-procurement solutions offer more adaptability. These solutions make managing complex proposals that involve multiple geographies, stakeholders, and suppliers easier. 

With an e-procurement solution, you can customize and tailor the tool to suit your specific procurement needs.

3. Maximize Cost Savings with Analytics

A recent study by Deloitte found that e-procurement can result in a 60% reduction in operational costs. 

4. One Stop Shop for Business Insights: Benefits of Data Consolidation

With the help of a procurement analytics tool in-built into an e-procurement solution, you can transform your organization’s spending practices by obtaining real-time tracking of costs. Better cost monitoring can help allocate resources toward more strategic initiatives.

An e-procurement solution can streamline your business by consolidating key areas such as purchases, sales, inventory, and finance. With all your business data in one place, you can quickly gain valuable insights and make informed decisions without sifting through multiple reports.

Unlike ERP tools, which lack comprehensive data presentation, e-procurement solutions offer a holistic view of your business operations.

5. Stronger Supplier Relationships 

An effective e-procurement system can lower transaction costs, decrease supply chain risks, and enhance supplier collaboration and transparency. With better supplier management, your organization can build stronger strategic partnerships while reducing overall risk.

Embrace the Future of Procurement with e-Procurement Solutions 

As a result of these advantages, a survey conducted by McKinsey⁽³⁾ found that CPOs believed that digital procurement could lead to a 40% increase in annual savings, 30-50% less time spent on sourcing, and a 50% reduction in value leakage.

Businesses can unlock numerous benefits by selecting dedicated procurement solutions that enable them to optimize procurement processes, make informed decisions, and build stronger strategic partnerships.

An ideal sourcing solution can help achieve better visibility over the supply chain, reduce procurement costs, and drive business growth. Learn more about Moglix to understand how our sourcing solutions can lead you into the future of B2B commerce and supply chain management.

Additional resources:

1. E-Procurement: Its Future in the Digital World

2. https://www2.deloitte.com/hu/en/events/esemenyek/2021/a-beszerzes-jovoje-2022.html

3. https://mck.co/404R9PX

Almost 68%¹ of CPOs state that supplier management will be their top priority going forward for achieving strategic business outcomes. This makes most sense, as effective supplier relationship management (SRM) enables businesses to get deeper insights into pricing trends, raise profitability, and improve their cost baselines—at times, by 5–10%²—by innovatively collaborating with their suppliers.

Yet, nearly 49%³ of procurement managers have failed at transforming their supplier relationships. So, how can you avoid their fate and gain greater visibility into your suppliers’ relationships to ensure long-term success?

The Problem With Supplier Relationships

Regrettably, supplier relationships are often marred by an over-emphasis on cost-cutting and a lack of trust. To add fuel to the fire, communication gaps and misalignment of goals worsen this relationship further. 

So to effectively deal with these challenges and ensure greater supply chain continuity, firms must focus on building strategic and value-based ties with their suppliers.

5 Strategies for Building a Resilient Supplier Management Framework

Strong supplier relationship management (SRM) entails a structured approach to evaluating diverse vendors and their strategic importance to the firm. Firms can configure successful supplier relationship management by adopting the following strategies:

Segment Your Suppliers Per Their Relative Importance

• Supplier segmentation, i.e., the practice of classifying suppliers into different categories based on their strategic importance to the firm is the most fundamental step of effective supplier management. 

• Generally, managers default to the Kraljic Matrix for undertaking supplier segmentation. It assesses suppliers on their profitability and risk, classifying dealers with a high-profit impact and higher risk as strategic and relegating others as transactional.

• Alternatively, you can also opt for the Pareto principle, which necessitates that 20% of suppliers must account for 80% of buyers’ spending. 

• Essentially, the goal is to direct your resources to the suppliers with the highest impact. 

Create A Supplier Management Framework 

• To foster solid collaborative relationships, firms must design a governance framework, which clearly defines the goals, objectives, and responsibilities of both the suppliers and the buyers. 

• Clear communication lines should also be established to ensure all parties are on the same page at all times.

• Moreover, you must develop detailed contracts that clearly outline your expectations about quality parameters, lead times, and payment terms. 

• Finally, you should have a risk management plan in place to help tide over unforeseen circumstances, such as supply chain obstructions (like COVID-19) or supplier failures.

Establish KPIs for Monitoring Supplier Performance

• The key to efficacious supplier performance management lies in establishing key performance indicators (KPIs), such as defect rates, order accuracy, cost savings, etc. 

• These KPIs can vary per segment and must be continuously monitored to remain cognizant of any supply chain risk (cue-Suez canal crisis). 

• You can, additionally, arrange periodic meetings at various executive levels to discuss strategy and goals, track performance, and clear roadblocks.

Be A Good Customer, Pay Your Suppliers on Time

• Supplier relationship management is not exclusively restricted to what suppliers can and should do for you. 

• It also entails buyers keeping their end of the bargain by making payments as per the agreed terms. 

• Firms must strive to pay on time unless constrained by exigencies—in which case, effectively communicating your limitations is the path to tread.

Leverage Technology for Better SRM

• Tech-driven solutions, like SRM software, aid supplier management by offering a comprehensive overview of suppliers and their risks. 

• They can further augment your supply chain and digitize procurement by automating daily operations, simplifying onboarding, and providing extensive inventory management visibility.

Unlock the Potential of Your Supplier Relationships with Moglix

Effective supplier relationship management is indispensable for firms looking to cut costs, improve bottom lines, and add value to their supplier relationships. And Moglix is the perfect go-to collaborator that can help you achieve this and more—as it has done already for an automotive OEM. 

Moglix’s supplier consolidation solution assisted the OEM in resolving the difficulties of a fragmented supplier base, bad credit terms, and working capital blockages, resulting in a colossal 2% cost savings! Download the case study to learn the finer details.

Additional resources:

1. https://mck.co/3FnivJr

2. https://procurementleaders.com/content/supplier-collaborations-success-research

With the rise of digital technologies such as automation, and advanced analytics, procurement operations are undergoing a transformation. In fact, the global software market will be worth $9.5 billion by 2028⁽¹⁾. 

A recent study⁽²⁾ shows that almost half of all procurement activities can be automated using existing technologies. One such process that has the potential to greatly benefit from these advancements is the Procure-to-Pay (P2P) process. 

But is the P2P process relevant for your company? If yes, how can it benefit you in the long run? Continue reading as we explore the procure-to-pay process in detail and answer your questions. 

Decoding the Procure-to-Pay Process

Procure-to-Pay encompasses activities and tasks, such as sourcing, procurement, invoicing, and payment, which come together to form the P2P cycle. 

The P2P process is typically managed by a procurement or purchasing department, designed to ensure that the organization purchases goods and services promptly and cost-effectively while maintaining control over spending. 

It starts with the identification of a business need and ends when you make the payment to the supplier. Effective management of the P2P process helps ensure you pay the right amount for the right goods or services at the right time. This improves your relationship with your suppliers and overall financial visibility and control. 

The process involves several steps that come together to form the P2P cycle, which we will explain in the next section.

Steps Involved in the Procure-to-Pay Cycle

The P2P cycle steps include requisition and approval, purchase order creation and confirmation, goods and invoice receipt, invoice approval, payment, and close-out. Let’s dive into these steps and see what they actually are.

Get the Go-Ahead

The P2P cycle begins when a need for goods or services is identified. The request for the product is usually identified using an enterprise resource planning (ERP) system or procurement management software. The request is then reviewed and approved by the management.  

Seal the Deal

After approval, the procurement team identifies potential suppliers. It evaluates its capabilities based on product quality, delivery times, and prices. 

At this stage, the most suitable supplier is selected based on price quotations and the required product specifications. The supplier is usually given confirmation via a confirmation email. 

Then, a purchase order (PO) is created and sent to multiple suppliers via either procurement software or an ERP system. A PO is a legal contract between an organization and its supplier, and contains the details of the product required, the delivery date, and the expected price.  

Time for Delivery

The goods or services are received from the supplier, and the receiving department confirms that the items match the specifications in the purchase order.

Double Check for Accuracy

The supplier invoices the organizations after the receipt of the goods, including details such as the amount owed and payment terms. 

The finance department verifies the invoice against the purchase order and approves it for payment. They may use invoice management software or ERP to ensure the invoices match the PO. If not, the discrepancies are resolved at this stage. 

Pay Like a Pro

Finally, the supplier is paid for the products via a payment management system or ERP. The payment process is usually transparent, secure, and compliant with the organization’s financial policies. 

At this stage, the procurement team often follows up with the supplier to ensure all aspects of the transaction have been completed. Then the order is closed out. 

As the organization’s size increases and the processes become more complex, companies use various tools and software like procurement management software, ERP systems, and invoice management software to automate and streamline the P2P cycle. This makes the P2P process much more efficient and reduces the risk of errors. 

Benefits of the P2P Process

The purchase-to-pay process is not intended to speed up payments to vendors. Rather, its goal is to improve the efficiency and financial control of the company. Some benefits of a P2P process cycle are as follows: 

• It streamlines the procurement process by connecting the different departments in a firm, making all points of information trackable. 

• A P2P process, when implemented using a procurement solution, can help reduce invoice processing costs and improve efficiency. 

• The process makes communication between vendors and companies transparent, improving their relationships.

• When suppliers know payment schedules and details, they will be more open to accepting terms that are more beneficial to buyers. 

P2P is the Future of Procurement Solutions

The majority of procurement teams are feeling pressured to respond to challenges quickly and effectively. While the complexity of the process can be daunting, there are solutions available that can help organizations streamline and optimize their procurement processes. The P2P process is a critical function that requires careful management and attention to detail, particularly for large enterprises. 

For example, the case study of one of India’s largest infra developers shows how a business can scale up its turnover growth by 2x in just a year by implementing an end-to-end P2P solution. By leveraging the right procurement tools and technologies, businesses can not only reduce costs and minimize risk but also achieve significant business outcomes.

So, whether you are using manual or semi-automated tools, it’s worth considering how a comprehensive P2P solution can improve your procurement process and boost your bottom line. Or, you can even partner with companies like Moglix, which specialize in providing end-to-end procurement solutions to businesses.

Additional resources:

1. https://procurementtactics.com/procurement-statistics

2. https://mck.co/429PNW0