Sourcing and Procurement
What is end-to-end procurement outsourcing?
Are you still managing your procurement process from within the ERP or accounting system? Studies have shown that 80% of businesses still use manual or semi-digital procurement methods. With increasing competition and the need to build resilient supply chains, these businesses will be looking to outsource and leverage technology in the end-to-end Procurement business process outsourcing. This will bridge procurement and finance for a 360-degree view and generate greater value for the business.
What is end-to-end procurement management?
Medium to large businesses often have hundreds of suppliers providing goods and services to different departments. End-to-end procurement is a continuous process of identifying the need, as well as finding and getting suppliers onboard and managing them efficiently.
- Identify the need for a product or service: Departments within a company identify the requirement and its business benefits. For example, the factory floor in a manufacturing unit identifies the need for a new machine or replacement parts for existing ones.
- Create a purchase requisition: The department creates a paper or e-requisition and sends it to the purchasing department where it undergoes a series of approvals depending on the need and business benefits.
- Approve it with the purchasing department and create a purchase order (PO): The purchasing department approves the requisition and raises a PO. In case of a rejection, the department provides the necessary reason.
- Get budget approval from the accounting department: The purchase order then goes to the accounts department for budget approval.
- Float a tender and request quotation: Once the budget approval arrives, the purchasing department floats a tender to request quotations and an assessment of the product or service offering from different suppliers.
- Negotiate the terms and sign the contract: The company receives multiple tenders, shortlists the ones that are suitable, and negotiates the terms of the contract. This includes prices and terms of quality and delivery.
- Start receiving the goods and services: The goods and services start arriving as per the terms of the contract. The quality team inspects the delivery time, total cost of ownership, and overall supplier performance.
- Perform three-way matching: The accounts department does three-way matching of purchase orders, packaging slips, and vendor invoices before clearing the payments.
- Inspect and approve the invoices and release payments: Once the three-way matching is complete, the accounts department releases the payments within the agreed timelines.
- Maintain records for auditing: The purchasing and accounts departments maintains all the records for future auditing.
This is an ideal scenario with no disputes or mismatches. In case of a dispute, invoke an appropriate resolution process. For a semi-automated or manual procure-to-pay end-to-end process, this usually takes days or even weeks, which places the cash flow under stress. In fully manual processes, invoices can get lost in transit or go unnoticed, which damages the relationship with the supplier and keeps the purchasing and accounts departments in a state of never-ending confusion and uncertainty.
Why outsource end-to-end procurement?
Outsourcing end-to-end procurement allows you to get the required technology and skill onboard for automation and management. Businesses can scale up or down their procurement to optimise their spending. You can get access to a global pool of talent, which is impossible to maintain in-house. Transactional activities such as PO creation, invoice verification and payments, and vendor management are best fit for outsourcing. It also includes outsourcing strategic activities such as contract negotiations and pooling in with other businesses to procure goods and services at competitive rates. From the strategic point of view, businesses stand to gain:
- Better time-to-value
- Wider visibility of their spending
- Improved transparency and compliance with the rules that apply to their industry
- Lower cost of operation
For organisations on the digital transformation journey, agility is key in responding to a rapidly changing technology and business landscape. Now more than ever, it is crucial to deliver and exceed on organisational expectations with a robust digital mindset backed by innovation. Enabling businesses to sense, learn, respond, and evolve like a living organism, will be imperative for business excellence going forward. A comprehensive, yet modular suite of services is doing exactly that. Equipping organisations with intuitive decision-making automatically at scale, actionable insights based on real-time solutions, anytime/anywhere experience, and in-depth data visibility across functions leading to hyper-productivity, Live Enterprise is building connected organisations that are innovating collaboratively for the future.
How can Infosys BPM help?
The advanced AI-based capabilities for procurement transformation enable faster decision-making within a business. Read more about end-to-end procurement outsourcing at Infosys BPM.