ERP & Procurement
ERP & Procurement
procurement, all manufacturers’ operations come to a halt. No raw
materials to use in manufacturing, no finished goods to sell. Despite
this strong dependence, procurement is not often seen as a core function
to be incorporated into ERP systems. However, including procurement in
your ERP system can add to your organisation’s profitability through
sourcing diversification which can lead to improved input costs and
resultant increased cashflow through removing costs associated with
holding large amounts of stock.
With increased globalisation,
procurement has greater options and is in a better position to establish
supplier agreements more in line with the organisation’s goals.
comes into play in facilitating the gathering and sharing of information
needed to facilitate the effective relationship between organisation
and supplier. In addition, stock trend analysis, forecasting and
material requirements planning help to refine input requirements even
Below are eight features which should be included in an ERP system:
1. Purchase Orders
document is at the centre of procurement. It is a request to deliver
goods within a certain time constraint. Every purchase order is broken
down to include a PO Line, each line refers to a single specific item
and quantity to be purchased. Ideally, delivery dates and locations can
be specified. Seamless conversion into a Supplier Delivery
Note/Invoice is a must.
2. Credit card and/or Banking Payment Integration
procurement is completed without a purchase order. Credit card payment
is quick and easy and avoids the necessity of establishing credit
between the parties for a single purchase. ERP can handle these
transactions directly through financial processes where the general
ledger account is posted without a purchase order receipt using a
generic supplier. Some can even process the payment clearing through
integrations with payment processors.
An ERP system should allow
the organisation to choose which Supplier Invoices to set for payment –
to facilitate cash flow - and create files for export to upload to the
bank for automatic payment.
3. Contract Management
importance of contract management within an ERP procurement module comes
down to ERP’s role as the financial centre of the organisation. With
Accounts Payable and Receivable integrated with contract management,
contractual deadlines or milestones are more easily adhered to and other
contractual agreements have taken advantage of, for example, ensuring
prompt payments to take advantage of agreed settlement discounts.
option to scan and store/link supplier contractual agreements to
supplier accounts is important for the relevant employees to be able to
access the information timeously.
4. Supplier Database
should have the ability to record the suppliers and vendors from whom
purchases of materials and services are procured. The databases will
have name and addresses, the commodities the supplier can provide, tax
identification and banking detail data, and related contacts.
5. Sourcing Queries
databases mentioned above can be queried during sourcing. Sourcing may
take place from an existing supplier or additional suppliers which have
been added to the ERP. Some supplier records are added to ERP but are
not necessarily ever used for procurement as another was selected. This
is where strong database query and reporting functionality can help
identify suppliers which effectively meet an organisation's operational
6. Second Sourcing
Many businesses feel it
is good practice to have more than one source for a product or service.
Often this is simply insurance against the unexpected. Some feel the
practice keeps the primary supplier “honest”. Other people feel an
excellent relationship and full communication with a single supplier is a
better option. ERP procurement modules should allow the assignment of
alternative sources to each supplier.
The ability to be able to
upload and view multiple supplier price lists on stock items is
advantageous in that the buyer can check and select the most
cost-effective price from a range of suppliers, at the point of order,
based on their location. The ability to set or change the preferred
supplier on stock items helps to speed up processing.
7. Supplier Audits
includes supplier audits. ERP should support quality assurance at the
same time it supports procurement. Should quality assurance to be used
by the supplier, performance verification will ensure something is made
or supplied in the way required by the organisation. An audit, generated
by ERP, from purchasing, engineering, and quality personnel can verify
expectations are met.
Should issues be identified, serial and
batch number tracking on raw materials is very helpful in identifying
and eliminating problematic items from the system.
8. Supplier Relationship Management
ERP, this is the place communications between a supplier and the
business and the person(s) involved are recorded. These communications
can range from requests for quotes, purchase orders, requests for credit
and other forms of documentation and the follow-ups thereto and by whom
and when they were actioned.
SRM will also provide a place to
record audits and findings. If any corrective actions are the result of
an audit, those are tracked within SRM.Omni Accounting ERP system
has many of the above features available as part of its Supplier/Procurement module. Contact our Sales Team
to find out how this section of the ERP module can add value to your organisation.
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