A Vendor Management System should be a strategic support tool to your underlying business processes. It should not be a heavyweight, cumbersome, or overly complicated system that drives the wrong behaviors and actions within your organization.
Key features that you should look for are: 1) Vendor Master Data Management - A good VMS will enable you to load vendor master data and match it with other systems such as financial (GL, accounts payable, etc.), human resources (HR), and sales force automation (SFA) systems. The information in the vendor portal software should be consistent across these disparate systems, to give a holistic view of the vendor risk from all of these different perspectives. 2) Vendor Collaboration - A good vendor management system will enable you to collaborate with vendors in the following ways:
Unexpected expenses, poor performance or an unreliable vendor can cause a huge disruption to your business. Vendor management systems are needed by any organization dealing with third parties that are important for the company, involve high risks and generate significant amounts of money. The challenge is to find the right solution for your needs. Also, many organizations have multiple vendors that need to integrate in one vendor management system which makes it hard to find the best software that serves everyone. Find out how TYASuite cloud-based vendor management system can help you define and scope your vendor risks, understand their likelihood and impact as well as assign them to the right people who are able to take action.
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The literal definition of procurement is the action of obtaining or procuring an entity or a commodity. Here, the term procurement is used in the realm of business. On the surface level, procurement might seem like it is all about acquiring supplies of an organization that needs to function daily. These include vendor management, fraud prevention, payment processing, invoice processing, quality control, etc.
However, there is more than which meets the eye. Procurement can be divided into two niches - direct and indirect procurement. While both direct and indirect procurement are essential to the smooth functioning of any business, it is very important to understand their place in the business so that you can prioritize and emphasize where and how they are required. What is direct procurement?Direct procurement is the acquisition of raw materials and goods required for production. Such purchases are made in bulk amounts and are acquired from a supplier based on the best possible price, quality, abundance and reliability. This is necessary for the everyday functioning of a business. For example, rice is a direct procurement commodity for someone who works as a chef. Cement is a direct procurement commodity for a builder, metal is for the iron and steel industry and so on. Direct procurement is so essential that if it stops functioning or encounters any kind of blockage, companies will no longer be able to manufacture their product and generate revenue. Hence, it can be said this niche of the procurement software stems from the manufacturing sector. What is indirect procurement? Indirect procurement is the purchase of services that are required to keep the business running. They do not directly influence the functioning of the business, but they do affect the outcome. It is defined as the activity directed at ordering goods and services that support your primary business, but do not deliver directly to end customers. For example, in the mobile phone industry, silicon chips are a direct procurement commodity, because without them, a phone will not function, but a proper service center is an example of indirect procurement. Would the manufacture of mobile phones get halted because of a lack of service centers? Of course not. However, would the outcome of the company as a whole be affected? Absolutely. So, we pretty much understand the difference between the two in the basic form. How to manage direct procurement?Direct procurement process is one of the most overlooked yet important aspects of business operations. It is directly related to the processes involved in purchasing of the raw materials required to make a product. Managing it isn’t very easy, especially when it's across an organization with thousands of products and services. Direct vs. Indirect ProcurementDirect procurement software involves the performance of two main functions. First, it is concerned with purchasing the core component of your products. Second, it is concerned with enabling you to meet your customers’ needs more effectively by granting you access to capital that will enable you to increase your inventory levels. Furthermore, this function is concerned with ensuring that the organization’s stock of raw materials has an appropriate turnover rate, so as to enable not only efficient meeting of customer demands but also effective exploitation of assets. On the other hand, indirect procurement software functions are aimed at securing goods whose consumption does not have a direct effect on customers or production cycles. Here are three core areas of procurement where the distinctions between direct and indirect procurement are laid-out:
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January 2023
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