Procurement management: Missions, Guide, Automation

Procurement management is one of the most important aspects of a company’s operations planning. This activityfeeds raw materials or goods into the production chain – a similar parallel can be drawn for the purchase of services. It relies on various processes such as inventory forecasting, order management, external supplier management, approval circuits, stock storage, transportation…

In this article, we’ll share with you content to organize and automate your inventory management. Our objectives: to increase your margins and reduce your costs and lead times.

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Definition of Procurement management

Designed with Lapala, next-gen procurement management software

Procurement management is a corporate function that feeds and supplies the company’s various businesses (especially production). Whether or not centralized by a department or manager, purchasing processes create the flows and inventories of goods, raw materials and merchandise needed to keep the organization running smoothly.

Operational challenges :

Achieve financial profitability in line with customer expectations
Maintain relations with suppliers to avoid stock shortages caused by various factors (disputes, accidents, crises, etc.).

Procurement can be :

Decentralized purchasing. In other words, each business unit independently carries out its own procurement and is responsible for its own Procurement processes.
Centralized purchasing. A procurement function allows you to centralize or even pool your requirements. There are many different players in a procurement department: directors, procurement managers, buyers, quality managers, management controllers, etc.

The 4 missions of procurement management

Knowledge of business processes and market research

A company has a certain way of operating, from the arrival of a request to its invoicing, via the approval circuit. A procurement department needs to understand the key moments in production, the business challenges, requirements and operating constraints. On the other hand, in parallel with internal processes, buyers must analyze external phenomena (market, customer objectives, competition, supplier challenges and landscape, standards and regulations).

The procurement department is positioned as a correspondent between the company and the outside world. This enables us to propose solutions that are relevant and adapted to the business.

To this end, buyers are asked to carry out process audits and market studies from time to time. Over and above the business aspect, these projects enhance the value of the buyer’s profession among the teams, and strengthen collaboration.

Find out more in our article on how to conduct a process audit.

Defining a procurement management strategy

In collaboration with management, production and any other relevant department. The procurement Manager must build a purchasing strategy adapted to internal operations and customer expectations.

Depending on the case and the supplies to be procured, he then has the choice of implementing different procurement methods and objectives. For example:

Recurrent supervision (calendar method) :

Checking and purchasing on fixed dates
Suitable for non-seasonal businesses

Just-In-Time:

Supply at the customer’s request
Based on continuous flow, takt time and Pull system

Visual management (using measurement devices) :

Use of visual indicators (e.g. red line) for minimum stock levels
Manual or automatic control triggering
Can be managed physically or with software (e.g. Kanban)

Just In Time procurement management method

Methods based on history and/or forecasts :

Analysis of past procurement data
Use of future order forecasts
Ability to integrate market and competitive data

Identifying the right suppliers and negotiating

Procurement managers will need to carry out referencing with known suppliers, as well as with new ones (from a recommendation or a search). Through this referencing, the procurement department will be able to assess the level of quality (reliability, lead times, satisfaction, terms and conditions, price, etc.) of several suppliers.

To verify all this theoretical information, don’t hesitate to judge the quality of suppliers through “small” orders (more or less complex). This experience will enable you to make a complete analysis of the supplier.

Once referenced, buyers can negotiate to ensure optimum profitability between quality and cost. Everything is negotiable (price, % down payment, payment terms, etc.).

Implement continuous improvement

Secondly, it is important to consider the performance of the various procurement processes. This can be done by setting up measurement and monitoring systems at strategic points in the process. These systems can take many forms: measuring lead times, identifying inventory bottlenecks, regular exchanges with managers, etc.

The identification of sub-optimizations can be studied by the procurement department. And various optimizations can be implemented: process evolution, implementation of digital tools and measurement devices, automation of tasks and processes.

Find out more in our article on process automation

Procurement management processes

Process procurement requisitions

From an incoming request, through various validations, approvals and calls for tender, to receipt of the order and invoice. The purchasing department must drive an efficient procurement process.

Keeping the portfolio up to date

The procurement department needs to have its products and services catalog under control. It must be up to date with stock levels. Regular manual or automated inventories can be carried out.

Referencing suppliers

Whether at the time of a contract renewal or spontaneously, the aim of buyers is to identify the best possible service providers for the company during a prospecting phase.

Manage supplier relations

Regular exchanges with business units and service providers enable us to anticipate incidents, stock shortages and disputes. Whether in human or financial terms, the buyer has the role of correspondent.

Control, quality and risk

Through a variety of measurement, listening and auditing systems, the procurement department can ensure the efficiency of the various processes and compliance with regulatory constraints.

Procurement strategy

Build a strategy adapted to the company’s operations and market trends (prospects, customers, competitors). This strategy also has an impact on the HR organization of the Purchasing team.

The main software packages for procurement departments

Purchasing or e-procurement software

E-Procurement software includes numerous functions for managing purchase requisitions, placing orders and negotiating contracts.

Frequent problems:
– Complex integration with other company software
– Lack of customization leads to resistance to change.

SRM supplier relationship management software

Supplier Relationship Management allows you to centralize supplier information, evaluate their performance and offer collaboration tools.

Frequent problems:
– Difficult for suppliers to sign up, as it doesn’t integrate with their IS
– Data quality problems, cumbersome data entry and updating.

Analysis software (BI or Spend Analysis)

After collecting, transforming and analyzing the data, these software programs create visualizations, graphs and expense reports to support decision-making.

Frequent problems:
– Difficulty collecting and cleaning data due to lack of standardization
– Complexity of creating reports without prior training.

Contract management software

They generate, create signature circuits, centralize, track and manage all contracts to ensure compliance, deadline control and risk management.

Frequent problems:
– Lack of functionality to manage complex contracts
– Complex integration with a company’s financial and legal information systems.

Inventory management software

Centralize all raw materials and merchandise. Reference remaining stocks and their location. Identify critical stock levels to anticipate orders.

Frequent problems:
– Difficulty handling unexpected fluctuations
– Complex updates and input errors

Lapala the simplest way to manage powerful workflow

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The Lapala platform for rapid efficiency gains in purchasing management

Imagine a platform that adapts perfectly to your procurement needs. That’s exactly what Lapala offers: a 100% customizable, no-code solution that connects to your existing software.

Process created on the free Lapala platform – find out more

With Lapala, every stage of your purchasing process becomes flexible:

Create intuitive forms for easy data entry
Define customized approval circuits
Set up automated software updates
Display your data in real time by connecting your tools

A concrete example of a purchasing workflow:

Supply management - Purchase requisitions

Initiating the request:

An employee fills in a personalized form.
Choose to start from a previous order or from scratch.
Import, display and select data from your existing systems via API

Approval circuit:

The number of actors in the validation circuit is unlimited
Managers examine the application
In the event of refusal, the request is returned for modification or cancellation.

Procurement department intervention:

Now it’s the procurement department’s turn to interact. They receive all the information, which is automatically entered into their software.
Purchasing staff can display the list of suppliers in Lapala, select them and solicit them automatically, thanks to the automatic generation of an adapted communication.