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Pros & Cons: 3 Different Methods for Managing the Procurement Process

March 08, 2016 by Andres Kuuse

Traditionally procurement professionals have relied on two main tools, both with and without ERP, for managing the procurement process: email and Excel. However, with the advent of affordable SaaS solutions, more modern methods are now available to SMBs and small procurement departments with limited resources. Even with these e-procurement tools at hand, some companies are turning over the entire sourcing process to outside experts in order to better focus on their core business. There’s no “one-size-fits-all” solution, though. Weighing the pros and cons of these three methods and evaluating them against your organization’s unique situation is the key to determining the best way to manage your procurement process.

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Managing sourcing and procurement through a combination of outdated technologies like email, spreadsheets, or even snail mail, might seem easy, but it has some pitfalls.

Advantages

  • Little to no upfront costs
    One of the biggest appeals of this method is the ability to use tools which the organization has already invested in, eliminating upfront costs for the procurement team. Despite these initial savings, this method could cost the organization money in the long term.

  • Familiarity
    These tools tend to be a familiar option for people and require very little, if any, training — meaning they tend to be a “go-to” option.

Disadvantages

  • Limited visibility
    Since these tools are decentralized, a procurement officer has very little visibility into the procurement process, which can lead to compliance risk issues and savings leakage.

  • Communication breakdowns
    With the details getting overlooked in the shuffle, the likelihood of a communication breakdown between Procurement and internal customers or suppliers is very high.

  • Difficult bid comparisons
    It can be difficult for the purchasing team to sift through and accurately compare bids when collected in disparate systems, leading to longer turnaround times and a less cost-effective process.

Is manual procurement management right for my organization?
Manual management is plagued with a host of pitfalls that often outweigh the benefits. These methods can end up costing the organization much more in the long run and tend not to be very scalable for growing organizations. However, manual management could be a good option for very small businesses with limited procurement needs.

e-Procurement

Using an e-procurement solution can save organizations time and money while adding strategic value, although change management is required to achieve effective implementation.

Advantages

  • Time and cost savings
    E-procurement streamlines the procurement process by unifying all procurement actions into one centralized system. This can save buyers 25-60% more time and the organization 5-8% in costs.

  • Improved stakeholder experience
    A unified procurement tool makes it easy for every stakeholder to navigate their piece of the process. Internal customers can make and track purchasing requests, buyers can run RFPs and communicate with stakeholders, and suppliers can quickly submit bids.

  • Transparency and insights
    Procurement leaders are able to view every detail related to procurement efforts, which reduces the risk of compliance issues and allows them to make impactful, data-backed decisions.

Disadvantages

  • Seemingly higher costs
    Without a proper ROI analysis, investing in an e-procurement solution may seem like a hard pill to swallow at first. However, e-procurement solutions increase cost savings due to more accurate bid comparisons and by reducing maverick spend.

  • Change management 
    Implementing a new tool to manage an existing procurement process may require making some tweaks and broader change management initiatives.

Is e-procurement right for my organization?
Despite requiring upfront capital and change management efforts, e-procurement tends to be the best solution for a majority of organizations, particularly those who are scaling rapidly, have complex procurement needs, or have felt the pains of improper procurement management in the past (think: high costs and compliance issues!).

Outsourcing

Hiring an external company to manage the procurement process can take some work off your organization’s plate, but it may lead to loss of control.

Advantages

  • For an organization lacking internal procurement expertise, outsourcing allows for expert management to ensure best practices are being followed throughout the entire process.

  • Supplier networks
    An outsourcing partner may come with a network of qualified suppliers who have already been found and vetted, making choosing suppliers and managing relationships easier.

Disadvantages

    • Potentially costly

Is outsourcing right for my organization?
Outsourcing procurement is often right for smaller companies with scarce human resources if their time will be more impactful spent elsewhere. It’s also convenient for companies who lack internal procurement knowledge and need a group of experts to identify and execute the best strategies. However, approach outsourcing with a long-term mindset to avoid precarious hand-off situations in the future and loss of control.

 

Think e-procurement may be the best option for your organization?

Try DeltaBid FREE for 30 days and see how a total e-procurement system can improve your procurement process.

 

Try DeltaBid free for 30 days

 

 

 

Andres Kuuse

Written by Andres Kuuse

I am a co-founder and the Customer Support representative at DeltaBid. I’m passionate about creating an easy to use tool that helps procurement and e-sourcing people do their job better. Just as SalesForce revolutionized sales development, we will revolutionize procurement.

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