Monthly Archives

October 2017

Why you should automate purchase orders

5 Reasons to Automate Purchase Orders Instead of Doing Them Manually

By | Purchase Order Plus | No Comments

One of the biggest problems that procurement managers and supply chain executives are facing doesn’t lie in approving purchase orders, but in the time that it often takes them to create them. Creating a purchase order manually can be a tedious and repetitive process and this time the executives could use much better on some other tasks. That is why more and more companies are choosing to automate purchase orders and with good reason too.

In this article, we will give you five reasons why you too should stop creating POs manually and automate purchase orders.

1. Better Delivery Times

Thanks to automated purchase orders (and technology in general), procurement managers are much better able to answer any changes in their industry than they could ever if they were using traditional purchase orders. This is all because automated purchase orders allow them to adopt certain improvements in their PO process that their competition that doesn’t use it can’t follow.

Together, these improvements reflect positively in better delivery times for the company’s purchasing process.

2. Less Chance for Man-Made Errors

Manual purchasing orders, which tend to be repetitive, are prone to various mistakes. For instance, an employee could enter the wrong price or quantity in the PO. The risk for such a mistake only increases with the similarity of purchase orders an employee has to create.

However, organizations that choose to automate purchase orders don’t have to worry about making such errors as a computer system can not only create error-free POs, but also do them much faster than any human every could.

In turn, humans can turn to more creative tasks.

3. Better Efficiency

An automated purchase order system can also improves the organizations efficiency, at least as far as their supply chain goes. By automating most of the otherwise routine tasks that take up too much time to be done otherwise, such an automated purchase order system can greatly improve the efficiency of the organization that uses it and allow it to be more competitive on the market.

4. Better Inventory Management

In order to adequately respond to the strict requirements that the market puts before them, companies must always be one step ahead. Gone are the days when you could stock up a warehouse with your products and wait until you might need something from it.

Today, the game is won by those that are able to look ahead and anticipate what the market needs. Inventory management has become much more than neatly organizing boxes on shelves. An automated purchase order system allows businesses to streamline their inventory management and in doing so maintain high profit margins and low overheads.

5. Better Document Management

A traditional, paper purchasing order process usually invokes images of rows upon rows of folders and filing cabinets. It takes a true master  to find something in these. Or someone with a lot of time on their hands and equal amount of patience.

On the other hand, organizations that automate purchase orders are able to take back their document management, speed up communications between different channels related to the purchasing process inside the company and outside (with suppliers) and review their purchase records with much more ease.

Conclusion

As you can see, there are several ways an automated PO can aid your company. These don’t just include the five we’ve listed here. The bottom line is that, in the ever-changing business environment of today, creating purchase orders the traditional, manual way, simply won’t cut it any more. Instead, you need to automate purchase orders in order to stay competitive.

Do you need help with your purchase orders? Purchase Order Plus is an add-on for Xero that allows your organization to streamline PO approval process on mobile. Join our email list to stay up to date on Purchase Order Plus and its updates.

Do you have any questions about how to automate purchase orders? Or would like to share another reason for doing so? Let us know in the comments below.

Purchasing process shopping carts

Purchasing Process 101: What do You Need to Know Before Ordering?

By | Purchase Order Plus | No Comments

Does your organization have a purchasing process set? If it doesn’t how can you expect to adequately acquire the supplies you need to run a successful business? Without it in place, this is going to be very hard, if not impossible for you to do.

What is a purchasing process anyway and how you can ensure that your company has a good one and is following it?

What is a Purchasing Process?

A purchasing process can be defined simply as a “formal process of buying goods or services”. But in reality, although this definition is simple, the process itself is anything but. Not to mention that it is different from one organization to the next.

However, whatever the type of organization we are talking about, the purchasing process always has to answer two main questions.

These are:

  1. What do we need to purchase?

The need comes before everything else so it’s important to first answer what does your company need to obtain and in what quantity?

For instance, if we are talking about a construction company, you may need to obtain different types of materials, like cement and the like. How much cement do you need? Where do you need it? Make sure to have these questions answered before moving onto the second main question and that is:

  1. Where will we obtain this?

Cement doesn’t grow on trees. You need to go somewhere and buy it first. But where? That’s the second main question you have to answer in the purchasing process.

Who will be your supplier? Finding a qualified supplier is an involved process and to get a list of vendors, you might want to take a look at the following:

  • Supplier websites, catalogues and information files
  • Trade shows
  • Mail advertisement
  • Phone directories
  • Trade directories and registers
  • Sales and company personel
  • Supply management departments
  • Different professional organizations

This list of resources will help you create a robust list of potential vendors for your purchasing process.

How to Ensure Your Supplier is Good?

The entire purchasing process relies on answering these two questions correctly. When it comes to the supplier, this means selecting one that is able to meet your quality and other requirements. This is why it’s necessary to evaluate every supplier before your organization can start working with them.

To help you with this, you can use Peter Kraljic’s portfolio matrix that describes the relationship with the supplier based on relevant criteria. The matrix looks something like this:

Peter Kraljic matrix

How to Make Peace with Everyone in the Supply Chain?

One of the biggest issues concerning the purchasing process is that the different elements in the supply chain can often be at odds. This is usually caused by the lack of proper communication between the links in the chain.

Let’s say that an organization needs to order some material. That’s the first step right there, recognizing the need. To some, this doesn’t become evident until it is too late.Once they identify the need, they have to go through the requisition process or make an order request. Now that order needs to be approved by however is in charge of that, which naturally takes some time.

Following this and once the order is approved, you need to find a supplier and obtain a quote from them. This also takes time, especially if you don’t have a supplier ready. Even if you do, you need to negotiate with them before placing your order. So, more time gone.

Finally, once everything is done, you need to make a payment for your order.

As you can see, the purchasing process can have many delays, big and small, that will impact its efficiency. How  can you deal with them in a way that doesn’t cost you too much money and time? Learn what solution best fits your situation. This is why you need to develop a purchasing process.

Did you enjoy this article? Let us know in the comments below if you have any questions about the purchasing process and don’t forget to sign up for our launch list to be the first to hear the news about our Purchase Order Plus add-on for Xero.

Benefits of centralized purchasing

What are the Top Benefits of Centralized Purchasing?

By | Purchase Order Plus | No Comments

“Strength in numbers”. We can use pretty much anywhere, and it’s no different when it comes to business and the purchasing process. Unless an organization is very powerful, getting the best prices and services from its suppliers can prove to be a difficult task. This is why many companies are banding together in what is called “centralized purchasing” or “purchasing groups”.

There are many benefits to the company joining centralized purchasing and here are just the top ones:

7 Benefits of Centralized Purchasing

  1. Better negotiating power

Since they are able to increase the purchase volume to a level that wouldn’t be reachable to any individual member of the purchasing group, centralized purchasing allows the businesses in it to have more negotiating power. This usually translates into lower prices from vendors, compared to what they could get alone. These savings can go up to 30-35%.

  1. More purchasing power

Just by joining forces with others, an individual business is able to tap into the scale economy and have the aggregate purchasing power that would be out of their reach if they tried to deal with the vendor on their own.

  1. Sharing information about suppliers, technologies and/or the market

One of the biggest advantages of centralized purchasing doesn’t lie in more purchasing or negotiating power, but in the ability to share and obtain information from other members about suppliers, emerging technologies and the market itself.

  1. Reduced workload

Another benefit of centralized for individual companies is that it allows them to focus more on their core business. This is because all stages in the contract are managed by the purchasing group. As a result, members can spend less time on purchasing itself and more on their core business.

  1. Simplified procurement process

The procurement process for a company can often be complicated. However, through joining a purchasing group and adopting centralized purchasing, organizations can make their purchasing processes much simpler. As a result or less contracts they now need to negotiate, prepare and manage, individual businesses can see several benefits to their procurement process. Two of the biggest are the reduced cost per unit of purchased goods and the reduced cost per transaction.

  1. Sharing best practices

Centralized purchasing also allows network companies to share best industry practices and in doing so improve their business results.

For example, most purchasing groups hire industry experts for the product markets they manage. These experts know the ins and outs of that particular industry and are able “bestow” their knowledge to individual businesses in the network. For instance, this might include an improvement in the Total Cost of Ownership (TCO).

Total Cost of Ownership is a financial estimate that serves to help the buyer and seller both determine the direct and indirect costs of a product. It is the purchase price, increased by the cost of operation. In other words, if the purchase price is the short-term price you are looking at, TCO is the long-term price. Items with the lower TCO obviously have better value in the long run.

  1. Individual companies can see more profit

In the end, every business wants more profit. This is another benefit of centralized purchasing. Thanks to the savings group purchasing enables, individual businesses in the network can increase their profits.

Do you think centralized purchasing is a good idea? Why are you for or against teaming up with other businesses in this way? Let us know your thoughts in the comments below this post and don’t forget to pay a visit to our site and join our mailing list to stay up to date with Purchase Order Plus.

procurement mistakes - spilled coffee

5 Most Common Procurement Mistakes and How to Avoid Them

By | Purchase Order Plus | No Comments

As much as a procurement system of your company could be fast, easy, efficient or all of the above, it is still not mistake-proof. Problems with the procurement system can be caused anything from human factor to bad organization and if this happens, your company’s procurement and purchasing ability will suffer. To help you avoid this, we have identified five most common procurement mistakes you can make and how to avoid each of them.

1. Going Above Your Budget

Naturally, every organization must keep a tight rein on its spending and procurement is an area where you need to be especially vigilant. Supposing you are not spending recklessly, you probably need to take a better look at your procurement protocol. You will likely find a communication or a coordination gap somewhere in it that causes you to exceed your budget.

Don’t leave things like this unattended for too long. The sooner you get on top of this type of procurement mistakes, the sooner you’ll fix it. Demand a regular budget update from every link in your chain to put a stop to this problem.

2. Accidental Order

It is not at all uncommon to order something by mistake. These days, transactions are so fast that accidental orders are a common thing. If you end up ordering a wrong item or the wrong quantity, the best thing you can do is immediately contact your vendor and explain the situation.

Hopefully, you have already established a good business relationship with your supplier and he’ll have no problem meeting you to solve this issue.

However, if something like this keeps occurring, then you likely need to make some changes in your procurement protocol. Adopting a multi-level approval protocol could be the ideal solution.

3. Receiving Damaged Goods

If you order something, you expect it to be in pristine and working condition. But if the supplier delivers damaged goods, you have no obligation whatsoever to accept those goods. This is why it’s important to check the goods before you accept them.

Be sure to report any problems to the supplier and courier as soon as you see them.

What you need to do in this situation is find out at what point did the damage happen. Contact both your supplier and the courier and determine who is to blame.

If you paid for the transport, then the responsibility lies with the courier, not the supplier, so it’s a good idea to work with several couriers and not just one.

4. Rigid Suppliers

The relationship between a buyer and a supplier is very important. Suppliers that don’t want to offer you any discounts are probably not the best to work with.

Negotiations are the key here. Before you start working with a supplier, find out how flexible they are first. Do they offer discount on bulk orders? Are they paying for shipping? Can they offer any other discount? If the answer to one or two of these is “no”, that’s probably okay, but if the answer is negative to all of these questions, you probably don’t want to deal with that supplier.

5. Impulse Buying

Yes, there is such a thing as “impulse buying” when it comes to organizations as well. In fact, these are the most common procurement mistakes companies make.

To avoid this in the future, you need to introduce and implement a procurement process straight away, especially if you just launched. With fast-growing startups, this is a common error and it’s usually caused by the desire to have everything in place as fast as possible.

Conclusion

Procurement mistakes are often made, but are not the end of the world. The point is not making them over and over again. Hopefully, this article will help you avoid them in the future.

Do you need a reliable way to be in control of your purchasing orders? Our add-on for Xero allows you to more easily approve or decline your employees’ purchase orders, track payments and review them. Join the Purchase Order Plus mailing list and stay up to date on POP.