The procurement process is the life cycle of purchasing, from the creation of a purchase order, receiving into inventory, allocating it to the correct internal need, and finally making a payment. Vendor Management is the how you manage your vendors, from paying bills appropriately, purchasing using agreed terms, quality assurance of product received, and inventory management.
The use of a cloud based ERP System in the procurement process allows you to have confidence in your data and move from reliance on paper or excel spreadsheets. Access to appropriate parts of the system helps to lock the suppliers into a relationship that is a core part of your IT strategy and capability. The reason for this is because cloud based systems provide real time visibility, from viewing your stock levels, outstanding orders or items that are on backorder. The benefit of an ERP system like NetSuite is that it provides you with the functionality to set up reorder points, minimum stock levels, alongside automatic Purchase Order creation when stock reaches a minimum level. These Purchase Orders can be automatically sent or be added to as and when demand changes. Preferred Vendors and purchase prices can also be set, allowing for costing to be better informed and cost effective for your business.
When a Purchase Order is moved to the next stage in the process, Receipting the goods into inventory, this fulfilled by the warehouse ops. A Cloud based system allows you to be aware of delivery dates in advance, giving your team an opportunity to move stock around and reallocate within the warehouse locations, ensuring that upon delivery receipt, put away is a much more efficient process. Another benefit of a fully integrated ERP system is that when receipting takes place inventory levels and purchasing costs are automatically updated. The AP balance is updated to show the outstanding payment that needed to be made.
Billing a Purchase Order is the next stage in the process, this can be done immediately on a per PO basis or in bulk, inline with the agreed credit terms. Looking at NetSuite as an example of an ERP Cloud based system, to Bill a Purchase Order in line with its credit terms a bill can be automatically generated and reminders sent to the AP Clerk to make payments for any bill that has reached the terms deanline.
Finally paying a Bill closes out the procurement process, this shows payment to the vendor, debiting your Accounts Payable and Crediting your bank. The cloud automates this process, eliminating manual processes, with a bank integration a payment can even be made through NetSuite, if not this will be the only process to be completed externally of your system.
A cloud based ERP system allows for a far greater vendor management experience. How you may ask? A prime example of this is by using up to date, real time visibility surrounding your vendor, information like your previous purchases, costs, pricing and credit terms. This allows for a more streamlined, 360 degree view of your relationship with them, meaning that when it comes to negotiation, you have better visibility and accurate, real time data on hand.
Looking at a particular ERP system, NetSuite is a prime example of how to utilise the cloud, access to a vendor centre can be set up, this allows for your vendors to log in to your system and manage their transactions with you, view outstanding balances and current POs, Bills and payments. This gives you and the vendor an interwoven, seamless relationship, not to mention transparency between yourself and the vendor.