In the face of economic uncertainty, market volatility, and fragile supply chains, it is crucial for companies to maintain stability and control over their procurement processes.
However, due to the increasing workload and the emergence of new business opportunities, this can be quite challenging. This is why many companies are choosing to digitize their procurement management.
Procurement management digitization allows companies to automate many operations and optimize the workflow. As a result, companies can focus more on their business development while clinching lucrative deals with various suppliers in the market.
In this article, we’ll look into how procurement management systems (PMS) can improve procurement management in your company and how to build your own procurement management solution step by step.
What Is Procurement Management?
Procurement management, also known as supplier management, is one of the fundamental processes for businesses that need to purchase goods or services from various suppliers.
It helps companies evaluate various factors such as prices, terms and conditions, quality of services and products, delivery times, supplier location, and quantity of goods, as well as select the best suppliers to work with. In this way, companies can save their budget while receiving the best goods and services on time.
Procurement management is a complex process. It typically includes various procurement functions, from procurement planning to completion, supplier relationship management, analytics, and so on.
Though there are many ready-to-go options, many companies choose to build custom procurement management systems that address their company’s needs.
These systems allow companies to:
- Handle every step of goods or service purchasing and track them in the system.
- Evaluate the suppliers’ performance and get the most value from the services they provide.
- Define how companies could improve their cooperation with their suppliers.
Benefits of Building an Effective Procurement Management System
Many companies invest in PMS to automate and optimize their procurement operations. Let’s have a closer look at how businesses benefit from using supply management solutions in their daily workflow.
Cost Savings
With PMS, the cost-saving activities start at the very beginning of the procurement process and continue throughout its entire lifecycle. The system allows companies to assess potential suppliers and find relevant goods and services with the best value for money.
Moreover, companies can negotiate prices with their suppliers and identify how to make their supply chains even more cost-effective, using analytics and reporting features.
Improved Supply Transparency
Any procurement management solution unites various business departments as well as suppliers into a coherent and well-organized system. This allows all the participants to stay updated on the latest changes and obtain all the necessary information required for a successful procurement process.
Moreover, these systems can integrate with other third-party digital solutions, updating and syncing related data with them.
Careful Supplier Management
Finding stable and skilled suppliers who provide high-quality services or products can be a real challenge. Supply management systems help companies to tune up the selection process and choose the critical factors essential for a particular business.
After a company adds its suppliers to the PMS, it starts monitoring the customer-supplier relationships, helping companies to manage them.
For example, it can evaluate supplier performance, notify procurement managers of the latest data, or alert them when a supplier’s qualifications are about to expire, and many other activities.
Procurement Processes Automation
Procurement management systems eliminate the need to process procurement steps manually. As a result, a company significantly accelerates the procurement process, minimizes the number of possible errors in documentation, and avoids uncontrolled expenses.
This way, a procurement team can focus more on other strategic activities like price negotiating, investigating new sources of supply, and others.
Streamlined Contract Lifecycle
Creating a procurement contract is an essential step in the procurement process. Supply management systems provide their users with quick templates, collaboration, and compilation tools that can ensure that the contracts have a standardized language and include complete information.
Contract reviewers can simply make any contract changes during negotiations and conclude transactions much faster.
Core Functionality of a Procurement Management System
By using supply management systems, companies can effectively manage their supplies and quickly adapt to changing economic conditions, any turbulence in supply chains, or risk-involving circumstances. For this, these systems include a wide range of e-procurement functionalities.
Supplier Management
Supplier management is the key component in any procurement management system. It helps businesses search, onboard, manage, and analyze the suppliers they work with. This module can include:
- The data on suppliers in the form of a database with transactional and order history, purchase catalog, qualifications, policy compliance, payment details, etc.
- Supplier onboarding and management, like the status of orders and payments tracking, delivery schedules, and others.
- Notifications on supplier management, e.g., risk factors, supplier capabilities, etc.
- Supplier performance analytics throughout the supplier lifecycle management.
Procure-to-Pay Cycle Tools
Supply management systems offer all the tools required to fulfill procure-to-pay transactions from placing an order to purchasing. Companies can streamline and automate the procurement processes and make sure that they comply with the policy and pricing.
Another important feature in PMS is invoice automation. When done manually, the process is quite time-consuming and error-prone.
In contrast, the system automates the invoice approval process, ensuring that all the invoices match the data of purchase orders, receipt notes, and exclude any incorrect information.
Contract Management
The contract management feature helps businesses accelerate contract handling, shifting it from manual to automated processing.
PMS offers its users guides on contract creation, including standardized templates, clause libraries, and collaboration tools. As a result, companies can create contracts much faster and under established standards.
Above all, the contract management function allows for sending notifications about expiring contracts, so that companies can take the necessary measures in a timely manner and avoid any risks.
Budget Management
Budget tracking and budget management allow companies to better allocate their expenses among suppliers. Dynamic approval workflows encourage companies to be more flexible and more effectively manage their budgets, as well as better resolve any approval issues.
The budget management module in PMS should provide:
- Customized budget monitoring
- Purchase compliance checks for each item and purchase step
- View reports of current expenditures
Reporting and Analytics
Procurement management systems should keep their users updated on the latest events and provide high-quality data analysis. This way, businesses can gain the most actionable insights on how to conduct their further procurement policy.
The system should provide procurement data in various formats, such as easy-to-understand graphs, tables, charts, and others. In addition, it should automatically generate customizable and visually appealing reports that facilitate decision-making and improve predictability.
Integration with Other Software
The ability to integrate a property management system (PMS) with other digital solutions, such as accounting software, project management applications, or financial and banking applications, opens up a wide range of possibilities for work.
This allows applications to exchange data, fill in missing information, reduce the likelihood of human error, and update data in synchronized applications with a single click.
Additional Enhancements to Use in PMS Systems
Many modern organizations often complement the core functionality with extra enhancements to maximize the output, reduce risk, and gain strategic insights.
- Supplier Catalogs & Self-Service: Traditional procurement systems often require manual entry and constant updates of supplier information. With supplier-managed catalogs, vendors can update product details, pricing, availability, and shipping terms directly within the system.
- AI-Powered Analytics and Insights: Integrating artificial intelligence into procurement systems provides predictive and prescriptive insights. AI can analyze historical purchasing patterns, supplier performance, and market trends to forecast demand, spot cost-saving opportunities, and highlight potential supply chain risks.
- Fraud Detection and Compliance Monitoring: Procurement involves financial risk, from duplicate invoices to policy violations or fraudulent suppliers. Advanced PMS systems can flag suspicious transactions, detect duplicate invoice submissions, and enforce compliance rules.
- Sustainability and Green Procurement Features: Many organizations prioritize sustainability in their supply chains. Advanced PMS platforms may include tools to evaluate supplier environmental impact, track carbon footprint, or recommend eco-friendly alternatives.
How to Build a Procurement Software Management System Step-by-Step
Getting a system is not just about choosing features or technologies. Creating a procurement management system is a structured process that begins with aligning with business objectives and ends with a fully functional, ready-to-use solution.
Step 1. Clarify Business Goals and Prepare a Procurement Management Plan
The process begins with identifying what the procurement system should achieve. This includes understanding which procurement strategies and processes need automation, how approval workflows should work, what level of reporting is required, and which systems the solution must integrate with.
Step 2. Partner with a Software Development Team to Design and Build the System
The most critical step is choosing a software development team capable of delivering the entire solution end-to-end. At this stage, the development partner validates requirements, designs the system, and integrates it with other solutions. By working with a single responsible team, companies avoid coordination issues and guarantee high quality of procurement management processes.
Step 3. Test, Validate, and Enforce Security
Before launch, the system must be thoroughly tested to confirm that workflows function correctly, data is processed accurately, and integrations work as expected. Special attention should be paid to security, access control, and compliance requirements to protect sensitive procurement and financial information.
Step 4. Deploy the System and Onboard Users
When the solution is ready, it should be deployed into the production environment. The development team usually supports onboarding to help procurement specialists, managers, finance teams, and suppliers quickly adopt the system and use it effectively in day-to-day operations.
Step 5. Provide Ongoing Support and System Evolution
After deployment, the procurement management software requires ongoing maintenance, updates, performance optimization, and feature expansion. This approach allows the solution to move alongside business needs and remain helpful over time without requiring a complete rebuild.
SCAND’s Experience in PMS
SCAND has vast experience in building effective PMS solutions that reduce the time and effort required to manage procurement processes. We can develop a PMS system containing a wide array of features, including:
- Customer & vendor management functionality
- Sale and logistics management
- Expenses management
- Supply chain coordination
- Contract management
- Reporting and task creation
- Mobile data access
One of the most prominent examples of SCAND’s work in procurement management is a multifunctional system designed to automate and streamline purchasing processes for a company with complex procurement needs.
The platform, built on a modular architecture and supporting multiple databases, provided complete transparency in spending, supplier management, contracts, demand planning, and forecasting, allowing the company to reduce manual labor, increase procurement efficiency, and improve decision-making processes.
Conclusion
As businesses grow and become more complex, companies require increasing levels of digitalization and automation of workflows.
In the area of procurement management, supplier management solutions are becoming a real lifesaver for companies that order goods and services from their supplier partners.
These systems allow companies to unify procurement data across different departments, quickly create purchase orders, track the procurement process at every stage, and select the best suppliers from a multitude of offers.
Therefore, companies that want to maintain a competitive advantage in their niche should consider creating their own supplier management system.
Frequently Asked Questions (FAQs)
What exactly is a PMS?
A PMS is basically a digital platform that helps a business manage everything related to purchasing, from finding suppliers and managing contracts to creating purchase orders, approving invoices, and tracking reports.
Why does procurement management matter so much for a business?
Good procurement management makes sure a company gets the right products or services at the right price from reliable suppliers. It keeps processes compliant with company policies, helps control costs, avoids supply chain problems, and provides valuable data to plan strategically.
Who actually uses a procurement management system?
It’s used across the organization: procurement teams, finance, project managers, and even executives. Anyone who needs to submit requests, approve orders, monitor budgets, or analyze procurement data will likely use it.
What are the main functions of a PMS?
At its core, a PMS helps with managing suppliers, creating and approving purchase requests and orders, handling invoices and payments, managing contracts, tracking budgets, and generating reports.
How does a PMS help with managing suppliers?
It keeps all the important supplier information (performance history, certifications, payment records, and risk assessments) in one place. You can evaluate reliability, track deliveries, and collaborate with suppliers more efficiently.
I keep hearing about purchase requisitions and purchase orders—what’s the difference?
A purchase requisition is basically an internal request to buy something, which needs approval first. Once it’s approved, a purchase order is sent to the supplier. The PO is the official order, so the supplier is legally obligated to deliver the items.
How does a PMS make invoice processing easier?
It automates a lot of the work by matching invoices to purchase orders and delivery receipts. This helps catch errors, speeds up payments, and makes sure everything follows contracts and budgets.
What kind of reporting and analytics can I get from a PMS?
Most systems give you real-time insights into things like procurement activity, supplier performance, spending trends, and compliance. You can create dashboards or custom reports that make it easier to spot trends and make informed decisions.
Can a PMS help with sustainability goals?
Absolutely. Advanced systems can track environmental impact, monitor carbon footprints, and suggest eco-friendly alternatives. That way, businesses can meet sustainability objectives without slowing down procurement operations.
How can AI be used in procurement management?
AI can be a game-changer. It can forecast demand, flag supplier risks, identify opportunities to save costs, and even help pick the best suppliers. Basically, it lets companies stay ahead instead of reacting to problems as they happen.