There are four types of procurement solutions commonly found in the business environment. All four of these solutions require significant expertise to set up, support, and manage. Procurement or purchasing is a term used to describe activity related to the acquisition of goods and services for a business or organization. A purchasing solution can be an electronic tool, software solution, third-party supplier, or contracted services firm.
There is a growing trend toward electronic procurement, which reduces the time required to complete the purchasing cycle by using electronic documents, automatic approvals, and related work flow tools. In order to set up an electronic procurement solution, suppliers must create an online product catalog, complete with item descriptions and pricing. Business users must have a method to access the catalog, select their items, and provide a payment method. Many large companies have an electronic procurement system integrated with the financial system.
Almost all computer accounting systems include several procurement solutions. Each of the different accounting systems provides a range of functionality within the procurement system. Standard procurement solutions provide tools to create purchase requisitions, orders, bids, and tenders. The ability to process goods receipts, goods returns, and invoices may be part of the procurement solution or the accounting system. The integration of procurement and accounting requires a significant amount of effort and may not be possible with all systems.
A third-party supplier is often contracted to supply and support proprietary procurement solutions. In this model, the procurement software is fully hosted, managed, and supported by the supplier. Users within the firm are provided with user accounts and the ability to perform the purchasing activity required in his or her position.
Activity reports, cost savings, and audit trails are provided to senior management on a monthly or quarterly basis. This type of procurement solution is popular with small firms with multiple, remote offices. The cost of implementing and supporting an Internet-based procurement solution can be prohibitively high.
Contracted service firms that offer procurement solutions are typically focused on providing expertise in the traditional procurement services. These areas include bid tendering, auction management, requests for proposal review, and contract negotiations. In small and medium sized firms, these activities don't occur very often. Staff members don't have sufficient opportunity to develop the level of skill necessary to complete these tasks effectively. Procurement represents an area of possible savings for most firms, and it is important to use the correct resources to obtain these savings.