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Procurement is a complex process that can be difficult to manage and maintain without the right dedicated platform to handle it. More and more companies are becoming aware that managing this process using old legacy systems or manual methods isn’t providing the best return.

Given the complexity of procurement, there are three major pain points: visibility, buyer-supplier relationship, and efficiency. Visibility is an age-old problem, as is efficiency, but an often-overlooked aspect of procurement is the buyer-supplier relationship. Just like we utilize a CRM for managing customers, a similar system is needed to gain the most value from vendor relationships.

A cloud-native Business Spend Management (BSM) tool offers all three benefits and should be used as an integral aspect of your business’ spend culture. Use it to automate tasks, set budgets, institute accountability, and empower informed spend decisions. It can easily play the role of relationship manager, as well as streamlining conversations and even housing a contract lifecycle management (CLM) tool.

What is Procurement?

No matter what kind of business, regardless of industry, there will always be products and services that need to be ‘procured,’ whether they make up the raw materials of your products (supply chain) or support the operations of your company (indirect spend).

Procurement is the act of carefully selecting goods and services for purchase that support the daily operations of a company. Procurement includes the process from bow to stern, including sourcing, negotiating, purchasing, fulfillment, and vendor payments.

A well-managed procurement team with a quality procurement software can not only increase a business’ profitability but also have a pipeline ready for any unforeseen issues with already-established vendor relationships. The COVID-19 pandemic showcased that, along with the need for reliable vendors and competitive pricing, there’s a need to diversify sourcing, as well.

What Are the Different Procurement Types?

There are several types of procurement that businesses perform on a daily basis, and they’re largely categorized based on how the item will be utilized versus what the actual item is.

Direct Procurement

Direct Procurement is anything purchased to produce an end-product. This can change dramatically depending on the industry. For example, a clothes retailer buys wholesale pants to resell to consumers – that’s direct procurement. A car manufacturer buying raw steel, rubber, plastics, and aluminum to build cars on the assemble line is also direct procurement.

Services (such as contingent labor needed to produce a product) can also be considered part of Direct Procurement.

Indirect Procurement

Indirect procurement is anything that doesn’t impact gross margins. This doesn’t mean indirect procurement doesn’t impact the bottom line, just that it’s not tied to revenue. This can range from providing teams with standing desks for better work habits to implementing major enterprise software systems to improve company performance.

One of the challenges of indirect spend is that much of it goes on in the background, outside any system or approval workflow, making it difficult to track.

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Why move to a cloud-based procurement platform?

Much like most other work processes, there are significant advantages to aggregating information, automating documentation, and having a highly visible, accessible single source of truth (SSOT) through a cloud-based platform.

Manual operations, like spreadsheets and email, take longer and can impact a company’s bottom line through missed discounts, transaction disputes, lengthy approval processes (or no approval processes!), contract discrepancies, and opaque vendor relationships.

By using a cloud-based procurement solution, you can centralize these processes, gaining full visibility into Supplier Relationship Management (SRM), sourcing, procurement, fulfillment, and invoicing. A smart BSM system can categorize, visually represent, and monitor your procurement types for you, taking the manual effort out of figuring out where your business spend is going.

Some of the main benefits of moving procurement to the cloud for your company include:

  • Improved supplier relationships with more detailed vendor profile information
  • Accelerated requisition approval with consistent workflow and rules
  • Enhanced real-time visibility and collaboration across global teams
  • Punch out catalogs with preferred vendors with pre-negotiated pricing
  • Digital payments and increased monitoring
  • Automatic capture of contractual vendor discounts

Clearly, there are numerous reasons to switch over to a cloud-based procurement platform, but let’s talk through three crucial aspects to every procurement process regardless of industry, type of procurement, or company size in more detail.

Top 3 Reasons Why You Should Switch to a Cloud-Based Procurement Platform

Improved Buyer-Supplier Relationship Management

Procurement and logistics professionals face particularly critical challenges due to the recent shortages and ever-present supply chain issues. While there’s no procurement or business spend management system that can solve either of these external factors, they can play a significant role in easing the burden.

Often the relationship between an organization and its suppliers isn’t the first thing that comes to mind when adopting a cloud-based procurement system, but deepening it is a crucial aspect of creating an optimized procurement process.

This B2B relationship needs to be fostered and monitored the same way all other B2B or B2C relationships are fostered to earn the ultimate rewards: reliable procurement and a win-win collaborative relationship.

There are a number of ways to set yourself up for success, beginning with vendor screening. Finding vendors that align with your company’s values, understanding their businesses, and developing a partnership that provides equal-opportunity success will lead to long-term quality and return on investment.

A BSM platform such as Coupa can help an organization manage its network of suppliers and provide this type of visibility while simultaneously streamlining the process of supplier onboarding, tracking vendor performance against purchase orders, and conducting AI-driven data sourcing. Coupa provides a built-in network of over 7 million suppliers that already exist in its system, giving organizations a jump start on the process.

Simplified onboarding starts a good supplier-buyer relationship off correctly and sets the foundation for a good long-term relationship. This can be further cemented via accelerated review and approval processes and establishing a straightforward method of communication for both parties to function correctly, on time, and as planned.

Enhanced Visibility & Collaborations

Using a cloud-based procurement platform allows for enhanced visibility and real-time collaboration from any device, anywhere. With a modern cloud-based system such as Coupa, authorized buyers can purchase goods and services for the company as they would purchase products at home – from their mobile device, with an “Amazon-like” experience.

The seamless flow of information makes data retrieval and collaboration easy, reducing overall turnaround time and increasing the decision-making process, a thorn in the side of most procurement professionals. It also keeps everyone on budget and adhering to company policies.

Another benefit is the decrease in status queries for a purchase – an easy-to-view dashboard can show the stage of procurement an order is in, whether the contract is being negotiated, and other crucial steps.

Digital Payments & Monitoring

Vendor payments are another sticking point with manual processes and legacy systems. From paper checks, to invoice matching, to ACH payments – there are a many elements of vendor payments that create inefficiencies within the procurement process. A modern BSM system provides your business with the ability to pay vendor invoices digitally, which provides efficient as well as security against fraud.

By providing one place to monitor and process supplier payments, invoices, and contracts, the risk of error and fraud is greatly reduced.

Spaulding Ridge and Coupa

Choosing the right partner to transform your procurement process is crucial to success. At Spaulding Ridge, we develop solutions to address even the most challenging issues our clients face, supporting them to, through, and beyond implementation. We partner only with the best cloud-native platforms, which is why we partner with Coupa, a leading Business Spend Management (BSM) solution.

For optimal business performance, you need increased visibility into spend, digital payments and monitoring, and excellent relationship management on the sell and buy sides of your company. Start your transformation today.

Have questions? Reach out to Emil Fernandez to talk about all your procurement needs.

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Emil Fernandez
Partner, Spaulding Ridge
About the Author

Emil has more than 25 years of experience design, implementing, and supporting enterprise business systems in the areas of ERP, Corporate Performance Management, Sales & Operations, Contract Lifecycle Management, and Procure-to-Pay. Emil is well-versed in best practices for digital transformation and program management for major technology initiatives. As a Partner at Spaulding Ridge, he serves as Executive Sponsor for many enterprise projects and is a member of several Client Steering Committees. A graduate of Rice University, Emil is based in Houston and has spent his entire career serving clients in the Texas region.