What is procurement management?

Procurement management is also referred to as the source-to-settle process. It encompasses the evaluation, selection, and creation of formal contractual agreements as well as managing the company’s ongoing supplier relationships.

Procurement is a complex discipline spanning many interrelated activities. The procurement management process includes the transactional purchasing of goods and services, and integrates with accounts payable to complete the source-to-settle cycle by providing supporting documents to help with the processing of supplier invoices for payment.

Core functionality of a cloud-based procurement solution

In an increasingly complex and dynamics marketplace, companies need agile tools that will help them improve procurement processes. Strategic procurement organizations are increasingly adopting integrated, cloud-based software suites that combine supplier management, sourcing, contract management, and proactive risk management with transactional procure-to-pay capabilities.

With a complete procurement solution, companies can leverage critical information when making decisions while proactively managing ongoing activities throughout the source-to-settle cycle. An integrated, cloud-based procurement management solution consists of the following:

Supplier management

Strategic procurement starts by identifying and qualifying suppliers before initiating negotiations. It involves gathering, assessing, and monitoring of supplier data to ensure that suppliers comply with business policies. With procurement management software, you can collect important supplier qualification information through internal and external questionnaires and self-service profiles. Select the best suppliers by assessing supplier qualifications, risk factors, and policy compliance.

A cloud-based solution enables procurement teams to proactively manage supplier relationships. Use embedded social messaging to collaborate more effectively and achieve business alignment when planning and creating negotiation documents. Receive alerts when new information becomes available that might affect supplier management, capabilities, or risk factors. Suppliers and procurement teams gain real-time visibility into transactions as well as current and upcoming sourcing activities.

Sourcing

Defining requirements and manually compiling and comparing supplier bids can be time-consuming and leaves plenty of room for errors. It can even delay important purchases.

Smarter document authoring, negotiation engagements, and supplier selection leverages negotiation best practices to achieve bottom-line results. Embedded social collaboration makes it easy to combine efforts and create more effective negation documents. Award analysis tools allow you to quickly evaluate supplier bids based on predetermined factors—such as price, quality, and value—allowing you to arrive at the best possible award decision based on your unique business requirements.

Contract management

Effective procurement contract management is critical. It can take a long time to handle the process manually. But with a modern procurement management system, contract creation can be streamlined with guided authoring that uses preapproved clause libraries, standardized templates, and embedded social collaboration.

Standardizing and automating the contract management process helps you create quality contracts faster. You can gain complete visibility into your contracts while controlling costs. Analytics identify proposed contract language deviations from defined standards. Auditable workflows enforce document approvals. A secure, searchable contract repository with complete tracking and audit history enables users to quickly locate what they need. Automated renewal management capabilities give procurement teams early notification of expiring contracts so they can proactively take necessary action and avoid potential risk.

Requisitioning

Negotiated savings are quickly lost when buying is not properly managed during the procure-to-pay cycle. Modern procurement management software ensures that negotiated savings are enforced through business policies, controls, and approvals.

Off-contract spend can be reduced by providing employees with a self-service, consumer-like buying experience. With a user-friendly experience, employees can browse and shop for products or services easily and quickly. There’s little or no training required. Robust search capabilities, smart forms, shopping lists, and personalized buying experiences ensure that negotiated pricing and terms are automatically enforced through supplier catalogs and configurable approval workflows designed to control spend and reduce costs.

Purchasing

Automating routine procure-to-pay transactions, such as purchase order creation, frees you up to find new savings opportunities. With a cloud-based procurement management system, you can streamline the process while enforcing negotiated pricing and ensuring policy compliance. Create purchase orders from approved requisitions—without manual intervention. Provide your procurement teams with insight into exceptions, status, and actions required. Communicate with your suppliers using embedded social tools.

Accounts payable

Processing supplier invoices is often manual, error-prone, and time consuming. A complete source-to-settle solution streamlines and automates this critical function. In integrated procurement management system enables you to take advantage of early payment discounts and reduce labor costs. This includes a robust payment management system that provides electronic transmission of invoices from suppliers and faster processing aided by optical scanning, machine learning, and automated purchase order matching. Line-level invoice validation is fully automated for faster processing. Exceptions are managed through alerts and social collaboration with document sharing to speed resolution times.

Improve supplier management. Manage costs. Enforce compliance.

Companies invest in procurement management solutions to streamline and automate the source-to-settle process. Procurement management software plays a major role in managing costs by increasing savings through negotiated buying agreements with suppliers. Expenses are managed by directing purchases to approved suppliers through applications that also enforce buying policies. Source-to-settle solutions also improve procurement efficiencies by streamlining internal processes and reducing risk through more effective supplier management and contracts.

By automating and optimizing procurement processes, procurement management systems provide the following benefits:

Improve cost savings

Cost savings begins with sourcing; the process of identifying and assessing potential suppliers and negotiating with them to buy goods and services. These activities ensure the company receives competitive prices and the best value. For most companies, negotiations are conducted through a bidding process where several suppliers compete for the company’s business. While it would be an oversimplification to say that cost savings is the only factor, it is at the top of the list of criteria by which procurement organizations are measured. When a supplier is selected and a contract is signed, they become the approved supplier for a particular product or service. By enforcing compliant spending, companies are able to maximize cost savings and improve profitability.

Increase influence over spend

Many organizations still struggle with purchases that occur outside of the established processes, with suppliers who are not under contract to provide competitive prices. Commonly referred to as “maverick” or off-contract spend. Procurement management solutions are designed to control this activity by enforcing compliant purchasing from approved suppliers.

Compliant purchasing is managed through multiple layers with procurement systems that use both incentives and deterrents. First, they provide a consumer-like buying experience. This makes it easy for employees to find what they need and make their purchases exclusively through authorized suppliers. Products or services are displayed in a user-friendly buying interface. These systems also use configurable spend management policies, rules, and controls consisting of workflows and managerial approvals to ensure that purchases are compliant and improve cost savings.

Improve efficiency and automate procurement processes

Cumbersome, manual processes prevent procurement teams from providing greater strategic value. Inefficient procurement processes can result in lost documents, uncontrolled expenses, and missed discount opportunities.

Procurement management solutions standardize, streamline, and automate typically manual, paper-based processes and reduce the amount of labor required to complete them. Companies can create better contracts faster and are able to maximize the value of negotiated agreements. Efficiency improves throughout the entire procurement management process: qualifying suppliers, speeding up negotiations, contracting, and monitoring purchasing activities. As a result, purchase requisitions receive faster approvals and supplier invoices get processed and paid more quickly. Valuable resources are freed up for more strategic activities such as managing suppliers, negotiating more favorable pricing, and researching new sources of supply.

Improve supplier management

Suppliers are critical business partners that provide the products or services your company needs. Qualifying a potential supplier’s suitability as a business partner is key. Procurement management software streamlines the process of assessing critical factors such as financial viability, compliance with the company’s code of conduct, and other factors that qualify them as a business partner.

Once qualified, the system helps manage the ongoing supplier relationships such as prompting procurement professionals when a supplier’s qualifications are expiring. The system also notifies users when new information becomes available that might adversely affect a supplier’s qualifications, capabilities, and change their risk profile.

Standardize and streamline the contract lifecycle

Procurement contracts complete the sourcing process. They formalize the business relationship between a company and its suppliers, their responsibilities, pricing, and define the conditions for handling disputes. A modern procurement management system helps you take control of the contract management process to gain visibility into agreements, shorten cycle times, and manage compliance.

The contract authoring process is done faster, with less risk with predefined language, templates, and workflows. During negotiations, contract reviewers can quickly identify proposed deviations from the standard language to highlight risks, make required changes, and gain required approvals prior to finalization. After contracts are executed, the system provides electronic storage and retrieval. Managers are notified with alerts of events—such as expiring contracts—to ensure timely actions and minimize delays.

Oracle Fusion Cloud Procurement

Procurement Cloud modernizes procurement business processes so you can proactively manage supplier relationships and activities throughout the source-to-settle cycle. This complete, integrated, and cloud-based solution enables you to transform your procurement organization to provide fast and compliant procurement services to all areas of your organization.

Leveraging digital capabilities, such as embedded analytics, social collaboration, and mobile devices, Procurement Cloud enables you to reduce supplier risk, source more effectively, control spending, and improve your organization’s profit margins.