Procurement software

Last updated October 08, 2024

Procurement software refers to a range of business software designed to streamline and automate purchasing processes for businesses and organizations. By managing information flows and transactions between procuring entities, suppliers, and partners, procurement software aims to cut costs, improve efficiency, and boost organizational performance.

Software functions include issuing and evaluating tenders, raising and approving purchase orders, selecting and ordering the product or service, receiving and matching the invoice and order, and payment of invoices, enabling the procurement department to see everything that is ordered, ensure that nothing can be ordered without correct approvals, and secure the best value by combining several orders for the same type of good or even getting suppliers to bid for the business. A buying organisation's choice of software may be driven by the particular strengths offered by each individual system and the number of vendors available through them. A multinational or other large organization will use a shared procurement system to take advantage of economies of scale to drive down the cost of purchases. Whilst some services are available to purchase through automated systems, the key strength of these systems lies in the procurement of commodities that are much easier to standardize.

History

The market for procurement software emerged in the 1980s as Manufacturing Resource Planning (MRP) systems such as SAP, ASK and Oracle began incorporating modules for managing procure-to-pay processes. Early solutions focused largely on purchase orders, receiving and invoicing. As the market matured, more comprehensive sourcing, contract management, invoice automation, and spend analytics features were introduced. In the first internet boom, dedicated e-procurement software systems were available from companies like Ariba and Commerce One to automate the purchase requisition process by allowing users to browse online catalogs to view products and services from approved suppliers.

The rapid success of pure-play procurement software firms Ariba and Commerce One in the late 1990s prompted major business software players Oracle and SAP to introduce their own solutions. In 2004, Oracle acquired PeopleSoft,^[1] gaining their nascent PeopleSoft eProcurement application in the process.^[2] Oracle quickly built out and rebranded this as Oracle Procurement. Meanwhile, SAP quickly launched an E-procurement offering (EBP) which was eventually released as SAP SRM in 2005. Though behind initially, Oracle and SAP's procurement offerings matured over the next few years to provide integration with their broader ERP systems and challenge the first-mover advantage of the best-of-breed procure-to-pay specialists. This established fierce competition continued to pressure innovation and dominate the market for years to come.

However, by the early 2010s it became clear that deeper integration with core business systems was a priority for many buyers. This led Oracle and SAP to align procurement capabilities with their ERP and financial software.^[3] But the space was still ripe for new entrants, most notably Coupa in 2007.^[4] Ariba was acquired by SAP in 2012.^[5] Best-of breeds adopted open integration architectures to flexibly connect with a range of back-end systems.

While the procurement software market remains divided between integrated and best-of-breed options, there is now greater focus on interoperability and joint go-to-market partnerships across vendors.

Benefits

The key benefit for organisations using procurement software include ease of administration, access to information, and potential long-term cost savings. Having a single interface for procurement related management information cuts down the time and effort required to monitor organisational spending. The use of such software also allows procurement managers to control the vendors used by the wider organisation so all employees take advantage of negotiated rates and other terms of service. Notable companies in the market include, SAP, Coupa, Oracle, Infor, Precoro, Workday, Proactis and Procurify.^[6]

Common features of procurement software systems

Requisitions – Creation of a purchase order with line items to be fulfilled by a vendor. Automated sending via fax or email.
Vendor follow-up – Automated or reminders to follow up with vendors to confirm purchase orders.
Receiving of goods or services – Maintaining a physical inventory of goods.
Financial settlement – Creation of financial and/or inventory-related transactions as goods are physically received.
Document management system – To archive relevant documents.
Electronic signature – Tool to sign documents online.^[7]

Related Research Articles

Enterprise resource planning (ERP) is the integrated management of main business processes, often in real time and mediated by software and technology. ERP is usually referred to as a category of business management software—typically a suite of integrated applications—that an organization can use to collect, store, manage and interpret data from many business activities. ERP systems can be local-based or cloud-based. Cloud-based applications have grown in recent years due to the increased efficiencies arising from information being readily available from any location with Internet access.

<span class="mw-page-title-main">Accounts payable</span> Money owed by business to its suppliers

Accounts payable (AP) is money owed by a business to its suppliers shown as a liability on a company's balance sheet. It is distinct from notes payable liabilities, which are debts created by formal legal instrument documents. An accounts payable department's main responsibility is to process and review transactions between the company and its suppliers and to make sure that all outstanding invoices from their suppliers are approved, processed, and paid. The accounts payable process starts with collecting supply requirements from within the organization and seeking quotes from vendors for the items required. Once the deal is negotiated, purchase orders are prepared and sent. The goods delivered are inspected upon arrival and the invoice received is routed for approvals. Processing an invoice includes recording important data from the invoice and inputting it into the company's financial, or bookkeeping, system. After this is accomplished, the invoices must go through the company's respective business process in order to be paid.

A purchase order, often abbreviated to PO, is a commercial document issued by a buyer to a seller, indicating types, quantities, and agreed prices for products or services required. It is used to control the purchasing of products and services from external suppliers. Purchase orders can be an essential part of enterprise resource planning system orders.

SAP Business One is an enterprise resource planning (ERP) application designed for small and medium-sized enterprises, and marketed by the German company SAP SE. As a company, SAP Business One focuses on automating key business functions in finance, operations, and human resources.

E-procurement is a collective term used to refer to a range of technologies which can be used to automate the internal and external processes associated with procurement, strategic sourcing and purchasing.

SAP NetWeaver is a software stack for many of SAP SE's applications. The SAP NetWeaver Application Server, sometimes referred to as WebAS, is the runtime environment for the SAP applications and all of the mySAP Business Suite runs on SAP WebAS: supplier relationship management (SRM), customer relationship management (CRM), supply chain management (SCM), product lifecycle management (PLM), enterprise resource planning (ERP), transportation management system (TMS).

cXML (commerce eXtensible Markup Language) is a protocol, created by Ariba in 1999, intended for communication of business documents between procurement applications, e-commerce hubs and suppliers. cXML is based on XML and provides formal XML schemas for standard business transactions, allowing programs to modify and validate documents without prior knowledge of their form.

ReadSoft was a global provider of applications for automating business processes. ReadSoft was founded by two university students in Linköping, Sweden, in 1991. The company was headquartered in Helsingborg, Sweden and its shares were traded on the NASDAQ OMX – Stockholm Small Cap list. ReadSoft had operations in 17 countries and a partner network in an additional 70 nations.

Field inventory management, commonly known as inventory management, is the task of understanding the stock mix of a company and the handling of the different demands placed on that stock. The demands are influenced by both external and internal factors and are balanced by the creation of purchase order requests to keep supplies at a reasonable or prescribed level. Inventory management is important for every other business enterprise.

A vendor management system (VMS) is an Internet-enabled, often Web-based application that acts as a mechanism for business to manage and procure staffing services – temporary, and, in some cases, permanent placement services – as well as outside contract or contingent labor. Typical features of a VMS application include order distribution, consolidated billing and significant enhancements in reporting capability that outperforms manual systems and processes.

Quadrem is a procurement support organization in the mining industry. It is an eMarketplace project launched in 2000 to support the purchasing process the mining industry. Quadrem is one of the few remaining eMarketplace projects still active, most likely because of its global approach and strong support by participating businesses. It plays an active role in the UNSPSC classification program and standardization of communication between suppliers and purchasers.

Accounting software is a computer program that maintains account books on computers, including recording transactions and account balances. It may depend on virtual thinking. Depending on the purpose, the software can manage budgets, perform accounting tasks for multiple currencies, perform payroll and customer relationship management, and prepare financial reporting. Work to have accounting functions be implemented on computers goes back to the earliest days of electronic data processing. Over time, accounting software has revolutionized from supporting basic accounting operations to performing real-time accounting and supporting financial processing and reporting. Cloud accounting software was first introduced in 2011, and it allowed the performance of all accounting functions through the internet.

NetSuite Inc. is an American cloud-based enterprise software company that provides products and services tailored for small and medium-sized businesses (SMBs) including accounting and financial management, customer relationship management (CRM), inventory management, human capital management, payroll, procurement, project management and e-commerce software. NetSuite was founded in 1998 with headquarters in Austin, Texas. The company is widely seen as the first cloud computing software company, with its founding pre-dating that of Salesforce by about a month.

Invoice Processing : involves the handling of incoming invoices from arrival to payment. Invoices have many variations and types. In general, invoices are grouped into two types:

Order to cash normally refers to one of the top-level business processes for receiving and processing customer orders and revenue recognition. Order to cash is an essential function in finance; the entire cycle of events happens after a customer places an order until the customer pays for the order; that is, the order is converted to cash.

Procure-to-pay is a term used in the software industry to designate a specific subdivision of the procurement process.

Coupa Software Incorporated is an American technology platform for Business Spend Management (BSM). The company is headquartered in San Mateo, California with offices throughout Europe, Latin America, and Asia Pacific. Coupa helps companies gain visibility into and control over how they spend money, optimize supply chains, and manage liquidity.

Amalto Technologies S.A. is a software development company based in Paris, France. The company develops and operates business-to-business (B2B) document exchange software solutions and provides system integration services. It serves the oil & gas, industrial, environmental and enterprise markets.

ERP Security is a wide range of measures aimed at protecting Enterprise resource planning (ERP) systems from illicit access ensuring accessibility and integrity of system data. ERP system is a computer software that serves to unify the information intended to manage the organization including Production, Supply Chain Management, Financial Management, Human Resource Management, Customer Relationship Management, Enterprise Performance Management.

References

↑ "Oracle Buys PeopleSoft". Dec 13, 2004.
↑ https://www.oracle.com/us/products/applications/peoplesoft-enterprise/eprocurement-191677.pdf ^{[ bare URL PDF ]}
↑ Ashlock, Justin (2020). Sourcing and Procurement with SAP S/4HANA (2nd ed.). Rheinwerk. ISBN 978-1-4932-1911-7.
↑ "Coupa Launches First And Only Freely Downloadable E-Procurement Solution". March 26, 2007.
↑ Berman, Jeff (May 23, 2012). "SAP to acquire Ariba, expand presence in the Cloud". Modern Materials Handling.
↑ "Procurement Software Vendors, Market Size and Market Forecast 2020-2025". Apps Run The World. 2021-12-24. Retrieved 2022-03-04.
↑ "Top Features that Small Businesses Look for when evaluating Procurement Software". purchasingboss.com. 2012-10-01. Retrieved 2012-02-16.