Understanding Corporate Purchasing & Procurement: From Basic Concepts to Advanced Tools
All businesses are based on selling and buying, and whatever business you choose, one of the most critical parts will always be procurement. In this article, we will shed light on the corporate purchasing process, from corporate procurement definition to the tools and software businesses use to make their procurement process more transparent and efficient. We will also tell more about the global journey from ERP systems to procurement marketplace solutions like Virto Commerce offers.
- UNDERSTANDING CORPORATE PROCUREMENT
- THE ROLE OF CORPORATE PROCUREMENT POLICY
- CORPORATE PROCUREMENT STRATEGIES FOR SUCCESS
- HOW DOES PUBLIC PROCUREMENT DIFFER FROM CORPORATE PURCHASING
- CORPORATE PROCUREMENT BEST PRACTICES
- CORPORATE PURCHASE TOOLS AND SOFTWARE
- LEVERAGING VIRTO COMMERCE FOR CORPORATE PROCUREMENT
Understanding Corporate Procurement
Any process of buying something is called purchasing in the business world. So, what is corporate procurement? When the business purchases a lot and needs specific tools, processes, and purchasing rules, the process's name turns into corporate procurement. So, diving deeper into the corporate procurement definition, you will find a long list of actions companies take when purchasing the products they need: from negotiation to money transfer. So, corporate e-procurement is a complex process of purchasing goods the business needs to use or resell.
The Role of Corporate Procurement Policy
When a small business purchases goods, all processes might be clear: the manager provides the list of needed products, and the employee connects straight to the supplier to get them. As the business grows, the purchasing process becomes more complicated and loses its transparency. In case of any mistake, the company has to delve into each step once again and investigate what happened.
Bigger businesses need a well-defined corporate procurement policy to make this process easier, more structured, and more transparent. Below, we provide generalized things that must be included in any corporate procurement policy template:
- Purpose and scope. Actually, one of the most apparent parts as each corporate document introduces it. These help to ensure that the employee engaged in the procurement process knows what they are doing and why.
- Roles and responsibilities. This section of the document is tailored to set the rules regarding what department (and, sometimes, employee) is responsible for the specific part of the process. This makes procurement more transparent and easier to control.
- Procurement methods. Here, we provide each step in detail, explaining how the goods are purchased.
- Ethical and legal compliance. The whole procurement process must comply with all the local regulations, which is particularly important for cross-country businesses.
- Environmental and social considerations. This part is related to the previous one. While many companies believe this part is the least important one, big players always consider environmental and social care in their projects as it strengthens them to give extra profits compared to competitors.
- Risk management. In this section of the document, businesses describe force-majeure situations and all risks related to procurement to avoid them in the future.
Depending on the company, corporate procurement policies might differ; some include a supplier criteria section, while others use industry-specific segments aimed to make the whole process easier.
Corporate Procurement Strategies for Success
Whatever specific details you include in the process, corporate procurement policy is not everything and cannot resolve all potential challenges. Here are some effective strategies to use when building your corporate procurement:
- Think over your general corporate purchase strategy. Strategic sourcing helps you build stronger supplier relationships and consolidate your volumes. This may result in lower costs and greater lifetime value for your customers.
- Optimize your processes: standard rules and lean operations can help you eliminate waste, avoid unnecessary spending, and more.
- Introduce metrics and KPI measurements. This way, you will be able to see supplier performance and analyze the efficiency of internal processes.
- One of the most important things is to use robust corporate procurement technologies. Wisely chosen software can save money and time and even differentiate you from competitors.
How Does Public Procurement Differ from Corporate Purchasing
Basically, public purchasing aims to procure public and governmental entities like schools, hospitals, and so on. Corporate procurement is tailored to provide needed products to private businesses and companies. The main difference between them is that they use different rules and regulations. Public procurement must comply with governmental regulations and rarely can change anything in their processes. Corporate procurement must base its processes on governmental regulations but is allowed to build its policies by the company’s rules that do not contradict the governmental regulations.
Moreover, the goal of public procurement is often to use the budget set by the government: these organizations may have fewer financial opportunities and freedom of choice compared to the private ones.
Corporate Procurement vs. Public Procurement
Here, we provide the main differences between the corporate and public procurement processes:
Corporate Procurement Best Practices
Whether your organization is corporate or public, you must streamline your procurement processes. For corporate purchasing, there are some proven and tested ideas on how to enhance your procurement process.
- Adopt a strategic sourcing approach. This includes more than just finding and purchasing goods: trying market analysis, understanding cost structures, and using data to make decisions. This will also help to identify and mitigate risks timely.
- Stop thinking about suppliers as short-term contractors: build strong relationships that will last long and bring more benefits in the long term.
- Use all the available technologies possible. Automating a routine and moving to the latest software will enable you to accept any innovation needed and be ahead of your competitors.
- Train your procurement teams and develop an exchange of experience. This helps you stay on the high level of technology and communication with your suppliers. This is specifically important when we mean corporate procurement manager roles. These people make strategic decisions, ensure compliance with all policies and manage your spendings. Without mentioning innovation readiness, you would definitely like your employees to be the best.
- Encourage collaboration between your procurement team and other departments. This way, you can build more transparent processes and get an integrated approach to sourcing.
Good procurement practices can increase corporate profitability; this is why it is essential to give more attention to your sourcing than we got used to.
Corporate Purchase Tools and Software
Procurement also started requiring software use as a standard way of any organizational process development. From the “almost manual technologies” like Excel tables, it moved to ERPs and now came to the capability of organizations to build their procurement marketplace. Let’s see which journey both public and private procurement went.
- Step 1. Using Excel tables.
Many start with Excel. The software provides a basic but versatile way to track and manage orders, suppliers, and spending. However, Excel has significant limitations. Once your business grows, you realize that it lacks real-time collaboration, allows errors and, most importantly, is really hard to manage transparently.
- Step 2. Transition to specialized software.
As businesses grew and procurement became more complex, software solutions offered better capabilities. Businesses started using separate small tools for different tasks like the following:
- Spend analysis tools tailored to analyze and optimize spending (Zycus is a good example).
- Software tailored to manage supplier relationships (like CRM but for suppliers) that could track supplier performance, assess risk management, and ensure all contracts are operated well. SAP Ariba is one of the most popular tools for this.
- Contract management software like Agiloft helps streamline the cycle of the contract.
- Inventory management software to check and track stock levels, deliveries, and more. Fishbowl can be a nice example here.
- Purchase order software that helps create perfect purchase orders like Kissflow.
- Request for proposal tools like Scout RFP that streamline the process of working with RFPs that are usually requested from all the suppliers.
- ERP systems or enterprise resource planning — the tool created to help businesses see the whole picture of their accounting, human resourcing, stocks and inventory, and more.
- Step 3. Gathering it all in one.
As the number of separate tools and tasks to track keeps growing, businesses need something that can collect all the needed capabilities on the same purchasing platform with a centralized view. This is why the procurement management system era came.
The main idea of this software is to manage procurement processes end-to-end. Order and vendor management, catalog management, and reporting are all connected.
At this step, punchout solutions appeared. Punchout means that you can connect some catalogs or data from suppliers via API. Punchout catalogs play a significant role still, though sometimes only connecting catalog data is not enough.
The only downside of e-procurement software is that it often costs a lot, requiring many resources, server capability and more. Some ancient systems encounter limitations and more.
- Step 4. Building it all on the cloud.
The time of the latest solutions — modern cloud-based B2B procurement marketplaces came. As this software is based on the B2B ecommerce platform technologies, solutions offer a comprehensive, integrated approach to procurement.
Besides common tools and capabilities that e-procurement platforms provide, these platforms provide real-time access to a global supplier base, advanced analytics, automation, and seamless integration with other business systems. Being one of such platforms, Virto Commerce is a perfect example of the most innovative technologies in the world.
When touching the cloud-based procurement tools topic, businesses will inevitably encounter B2B procurement marketplaces. Providing Virto Procurement Marketplace Solution as an example, businesses use huge platforms to unify all their suppliers and customers on the same platform, ensuring a B2C-like experience for all.
Benefits and trends of modern procurement tools
- Modern tools streamline procurement processes and automate routine reducing manual tasks. They provide cost-saving and time-saving opportunities.
- Advanced analytics and access to a wider range of suppliers are good for strategic sourcing and a global approach.
- Businesses can easily track everything that is going on between suppliers and buyers. This provides exceptional transparency and reduces chain risks.
- Cloud-based solutions offer scalability and flexibility, adapting to the changing needs of businesses.
- AI integration and machine learning will grow. Soon, every procurement will be (or must be) complemented by automating complex decision-making processes to get predictive insights and overrun competitors.
- There is a growing emphasis on sustainability and ethical sourcing, meaning businesses should consider innovation now.
- By digitalizing your procurement, you can build better CX and loyalty, leveraging long-term benefits and, at the same time, reducing spending.
Leveraging Virto Commerce for Corporate Procurement
In today's realm, Virto Commerce plays a significant role in the market of B2B procurement solutions. While being a wholesome B2B ecommerce platform, Virto can ensure the needed B2C-like experience for enterprise-level B2B users. The latest technologies used to guarantee success for everyone who needs a modern procurement:
- The API-first approach enables businesses to connect the system to any third-party tool they are using already and centralize all data and processes in one place.
- The unique modular approach (also called Virto Atomic Architecture™) allows you to build the system of any level you need and keep innovating, always adding something new.
- The cloud-native architecture (which means Virto does more than just work in the cloud: it is tailored to support all cloud capabilities) allows growth and enlarge capabilities almost momentarily, when needed.
One of the biggest milestones is building an OPUS along with OMNIA Partners, — the massive innovative procurement platforms for thousands of users. With Virto, even the biggest multivendor ecommerce websites can reach their goals faster.
Obviously, procurement is equally essential for both public and corporate organizations. And the more we grow — the more capabilities are needed.
This is why following the best practices and adopting modern, innovative software is key for all who want to enhance their procurement and even build their own procurement marketplace (it’s a perfect time to be one of the first in the market!).
Virto Commerce, a B2B ecommerce platform, is a great example of a valuable partner in corporate procurement as the platform tailored for B2B enterprise businesses, can provide any capabilities (including the ones people will invent soon). In case you need to learn more, the Virto team is always here: just book a meeting or contact us directly to learn more.