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Continuously Conquer the Chaotic Dynamic of Procurement

Daily Procurement Confusion, “When Will My Goods Arrived?”.

As an operational expert, a client of knows that bringing the required material to the manufacturing factory is complicated, especially if the output of the manufacturing process is customized and project-based. The lack of simple materials, such as bolts and nuts, can stop the production process, and the risk of late delivery to the end client can snowball.

When a project comes, the planning department starts to identify the material required to produce the necessary products. The Purchase Requisition (PR) will be created and forwarded to the procurement department. A tender will be executed quickly if the required materials have no supplier. Based on the PR, The procurement will create a Purchase Order (PO) for the respective supplier.  Each supplier requires a different PO since it contains not only the product that will be ordered but also the details of the order term, such as when and where the goods shall be delivered, the incoterm, and the payment term. After a PO is created, the PO has to be printed, signed and scanned. The hard copy will be sent to the supplier. The digital version of the PO will also be sent to the supplier to speed up the ordering process.

The Complication Hidden from Management

The complexity begins the day after. The procurement must follow up on the PO that has been sent to receive the PO confirmation, which ensures that the supplier can fulfill the order entirely and comply with all terms stated in the PO. The PO must be canceled if the order confirmation is received. Thus, a new PO must be created for another supplier, and the cycle repeats. The confirmed order also must be followed up to guarantee that our order will be on time. We must be certain that the supplier pushes their best to produce the material. After the goods are ready, the procurement must track the Delivery Order (DO) to become confident that the goods are picked up, shipped, and handed over to third-party logistics. At this point, a delay might occur due to unscheduled delivery, bad weather, or a red line in the immigration line. In reality, partial delivery is often performed to minimize the effect of the delay.

After the goods arrive at the destination, the DO will be signed as proof that the third-party logistics has completed their job. Thereafter, the quality control staff will decide if the goods are qualified or not to be accepted. GR will be created based on the accepted goods and matched against the PO. Unfortunately, the GR is not carefully created and matched against the PO due to operational messiness in the field, leaving the procurement and operational team to remain unknown whether the goods have been received or not as the supplier sends the invoice, the invoice processing begins, where the invoice has to be matched against the PO and GR. At this point, procurement and finance must collect all the hard copies from PO, DO, and GR that may be scattered due to partial delivery.

In manufacturing and other industries with thousands of materials and high ordering frequency, procurement has less visibility on (1.) material that is required to be ordered in the future, (2.) whether suppliers have confirmed the material ordered or not, (3.) whether the goods are in process, on delivery, or have been received, and (4.) whether the goods have been billed and paid or not. The visibility is critical to ensure the required material will not become a production bottleneck, not to mention the risk of double ordering or double payment that directly impacts the company’s financial health.

Be Pride with Your ERP, but it Still Requires a Complement

Using Supplier Portal, the procure-to-pay process can be more collaborative by digitizing the interaction between the buyer and suppliers. Connected via API, PO created in ERP can automatically created in After approved within the platform, the digital PO can be sent to the suppliers and confirmed by the suppliers in just a click. The PO will be converted to DO to inform the buyer that the goods are in the delivery process. After being GR-ed, the PO will be matched against the GR to inform which materials have been received. By this method, each order can be monitored whether the material is in process, on delivery, or has been received. Invoice and payment status can also be read on dashboard to prevent double payments to the suppliers. 

The centralized information is not only accessible by the overall department to provide better decision-making but also to monitor the progress of the project and identify bottlenecks. also helps the procurement and finance team reduce operational work via automatic document-matching capabilities. Communication with suppliers will also become more transparent as records all changes regarding documents and facilitates discussion with suppliers at the document level. 

With the supplier portal and proper change management, the manufacturing company can continuously plan, track, and monitor their procure-to-pay process with a lighter operational burden. This technology is also available for all industries with different business processes.  Learn more about how can streamline your procure-to-pay and order-to-cash process and book our time now. 

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