The Importance of Procurement Management by ERP

The Importance of Procurement Management by ERP

There is a big difference in the impact on enterprises between ERP and general system because of the ERP will involve the five functions of the overall enterprise management: Production, Sales, HR, R&D, Finance. Therefore, implementation of ERP is from the internal management of departments to the external management of suppliers and customers. It could be said that it is a “Big Project of Overall Enterprise”. After understanding the scope of ERP, we will manage the procurement and related department through the ERP system to ensure the material is sufficient for production while reducing the procurement costs.

Procurement management is an important part of enterprise production management. For enterprises, whether the purchase of raw materials in mass or small quantities, in order to achieve reliable management of procurement and inventory, enterprises should have a good foundation platform rather than relying on traditional manual record. Enterprises should be heading to modern management of the procurement process with the help of ERP system for enhancing the core competitiveness. Basic management needs to be done before the system is built.

First of all, it is necessary to establish the classification of the item code and its basic information before the procurement, so that enterprises could fulfill the standard management based on the basic data. The second is, enterprises should collect the total materials demand from each department/business unit and confirm the stock status of the overall before deciding the procurement strategy. For example, the requesters require the materials but the purchasing department also unclear whether sufficient to supply and caused the repeated purchase. Only after balancing control, the corresponding materials could be quickly mobilized and replenished before the shortage while avoiding the excess procurement and costs.

In addition, through the construction of information management in ERP system, we could establish modern, easy to trace and transparent management of the procurement process with the ERP information management. Beginning from the various information of the purchase materials, to the procurement process management, and finally stock in into the inventory management, all above can accurately record the purchase volume quantity, inventory and transaction record. With this we could greatly improve production efficiency, reduce the human resources cost of procurement, and finally achieving the reduction of the enterprise inventory amount cost

With the settings of the minimum replenishment point in ERP system, when the actual inventory is less than the safety stock settings, the system will automatically issue a warning, prompting the inventory manager to issue a purchase soon. Through the system’s early warning, the inventory materials can be replenished in time to prevent the shortage issue of production systems and reduce the negative impact of improper procurement on production. It will not only reduce the amount of inventory amount cost but also ensures the smooth operation of the production system.

Since enterprise are looking to achieve IPO, through the platform management of the ERP system, enterprises can establish a good procurement management mechanism and prove that they can have proper management capabilities for the purchased materials. In addition, regardless of the type of industry, with the continuous growth of the enterprise, the types of items will become increasingly complex. Under the different procurement suppliers, purchase amount and management conditions, you can understand and access multiple information at any time through the analysis of purchasing inventory, such as storage period of materials and the purchase status of raw materials. The proper purchasing decisions should be able to calculate and operating the sales forecasts and material plans requirement effectively, strengthening the inventory level analysis, reducing or preventing the occurrence of stagnant waste. In conclusion, every detail must be in modernized management in order to effectively reduce costs and enhance the enterprise competition.

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