The entire modern software procurement process, step by step

Effective procurement management means something different in the age of SaaS. Getting by with spreadsheets is no longer effective and can cost more money than they save.

What does it mean to establish a modern procurement strategy for your company? What steps are in an effective procurement process, and how can technology help get you there?

Today we’ll look at the elements of the modern procurement approach. You'll learn how the right procurement system can drive value creation. Better yet, it can strengthen the financial health of your organization.

What is a procurement process?

Procurement is a series of processes used to buy goods, services, and raw materials. Procurement is not one process but a collection of many interconnected activities. These techniques improve cost efficiency. They also reduce procurement cycle times and ensure good supply chain management.

Using a documented and streamlined procurement process, organizations can:

• Identify business needs and use a collaborative approach to fulfill them.
• Strategically source goods with a proven list of suppliers. Preferred suppliers align well with corporate initiatives.
• Acquire goods on shorter timelines, allowing them to increase production.
• Perform supplier and delivery evaluations to ensure high-quality products and advantageous terms.
• Track and analyze purchasing activities. Use metrics to surface bottom-line savings and increase efficiency in specific areas.

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What makes a modern procurement process?

The traditional procurement process relies on the same basic principles one. The key difference — one many businesses struggle with today — is manual, paper-based processes.

The surge of SaaS software and remote work has made manual procurement ineffective. The volume of purchases and licenses involved in running a modern business makes it hard to keep up. It is not a matter of increasing headcount. Even in a small business, it overwhelms the ability of an accounts payable team to manage.

Every step in the modern procurement process

Whether you’re buying office supplies or implementing a major ERP system, the same procurement practices apply. Here’s the process.

Identify procurement needs

Whichever procurement method your company practices, every purchase starts with a need. Stakeholders identify materials, products, software, and supports needed for success.

This identification of company needs kicks off the evaluation process. Then comes an automated approval process. Automation allows cross-departmental stakeholders to evaluate and greenlight purchases. Once approved, the system can complete those purchases, and submit payments to providers.

Purchase requisition

The first action step in purchasing a filament is the purchase request. This is also sometimes known as an intake form. The purchase requisition contains all relevant information for sourcing and acquiring goods. In a modern procurement practice, purchase requisitions are build in the procurement platform. This centralizes all relevant data on the new supplier, timelines, and product specifications. Supplier management platforms may even provide stakeholders with pre-approved supplier options.

Approve requests

A completed purchase requisition proceeds through an automated workflow. From there, it gains necessary sign-off from all departmental stakeholders. The approval workflow is dynamic. This allows admins to set guidelines by department, budget, or contract value. With automation, the legal team, IT department, finance committee, and security teams can check the details. They can ensure contract risk management, and prepare to negotiate the contract. The system can route requests for information back to the stakeholder.

Sourcing

Once approved, the procurement team begins the purchasing process. This starts with by selecting suppliers for materials or products. In a modern technology-enabled procurement practice, this can happen in several ways:

• Direct sourcing through a preferred list of suppliers. Many buyers use an e-procurement platform or marketplace.
• Producing an RFP or RFQ to solicit bids electronically from suppliers.
• Electronic delivery of the purchase order to an established supplier already in contract.

When establishing a relationship with a new vendor, procurement teams uses data and benchmarks. These and other external sources provide info on the supplier's capabilities and track record. Stakeholders may use security questionnaires to ensure data security from a potential supplier.

Negotiation

Procurement or finance then proceed with negotiation of best price and terms. The focus on cost savings is often secondary to establishing best total costs and terms. Modern procurement relies upon strategic procurement. This works best with strong supplier relationships where both parties benefit.

Fulfillment

Using technology to support procurement allows you to monitor delivery automatically and ensure compliance with contract and payment terms. With an E-procurement platform, you can monitor real-time data about deliveries. You can also report on quality and compliance using a centralized supplier database. This database becomes a source of truth for future negotiations. It can also aid supplier performance reviews and lifecycle management.

Payment

Thanks to integrations with other financial systems, procure-to-pay solutions streamline the payment process. invoice reconciliation, three-way matching, and integrated payment. Accounts payable activities are often a large part of the total procurement process. Automating these procurement activities with a platform reduces cycle times. This lets AP teams can focus on other high-priority tasks.

Reporting

A powerful component of a technology-enabled procurement practice is access to procurement data. This information helps organizations increase their license utilization. It streamlines the technical stack and helps optimize spend.

Best practices to keep procurement on the cutting-edge

Creating a first-in-class procurement practice requires forethought and attention to detail. The payoff? A streamlined process and a procurement department. With cutting-edge technology, they leave the busy work behind drive value creation.

Here are 5 top best practices for building a transformational procurement process:

Establish a repeatable procurement process
Every purchase in your company should go through the same process. This eliminates costly errors, keeps projects on schedule, and prevents issues. It also reduces or eliminates maverick spending that can eat into budgets.

Define your procurement prerequisites
Establish table stakes up front. Include them in your procurement process. With cross-departmental alignment on your procurement plan, approvals and fulfillment can happen more quickly.

Used technology to create dynamic purchasing policies
Technology makes it simple to stick to guidelines. These dynamic rules are customizable by department, role, budget, and project. It ensures every purchasing decision follows a predictable pattern.

Commit to continuous improvement in supplier relationships
Suppliers are your ally when driving value and cutting costs. Build deep relationships with a list of suppliers for better strategic procurement.

Use technology to avoid costly procurement pitfalls
Get away from spreadsheets. Move to a procurement software platform that avoids costly issues like missed cancellations.

How Vendr can modernize your software procurement process

Building a modern procurement process flow becomes more manageable using the right technology. Using procurement software eliminates manual processes, discrepancies, and waste spending. It can free your top performing team members from manual work and unleash productivity across the board.

If you’re ready to modernize your procurement process, start with a free cost-saving analysis.