The IT strategy of an organization focuses on deploying IT systems and solutions to different functions to capture the cost advantages enabled by those systems. Each function may have the authority to decide the areas to be automated in consultation with IT department. Alternately, organizations may deploy ERP based systems that encompasses the whole organization.
The role of purchasing is seen as the buyer of materials for the production, maintenance and utilities function of a manufacturing organization and as a buyer of accessories and office supplies for other types of organizations. Purchasing is mostly a cleric activity driven by paper based processes and much emphasis is placed on verbal negotations for bargaining of prices with suppliers. The traditional view of purchasing is to squeeze every cent from the seller.
The major activities for procurement are receipt of requirement proposal that initiates the purchasing cycle from the end user. The purchasing department requests for requests for proposals from the prospective sellers. After negotiation process, through which the vendor is selected based on criteria such as conformance to specifications and past performance. This is followed by the physical delivery of goods, inspection and finally the financial settlement.
Purchasing management software is a server based application that is accessed by the users through log-in passwords. It contains modules which manage proposals, contracts and purchase orders. It also allows for electronic approval of purchase orders and tracks the order to the financial settlement. The software can be integrated with back end systems to have visibility of inventory, production scheduling and financial invoice clearance. The software can track the performance of suppliers using metrics such as on time delivery and goods returned.
A change from clerical to automation involves end user identification with the system. Users have to be trained during the implementation of the software. Purchasing management results in considering saving in inventories and supplier satisfaction as this eliminates paper based processes which have the inherent loss of data.