The purpose of this blog is to emphasize the importance of digital procurement solutions within an organization. Procurement managers do not have the luxury of not getting it right the first time. For one thing, paperwork errors can be costly when acquiring the products or parts. Meanwhile, suppliers cannot afford to mishandle the sales order and shipment or fail to address any nonconformity-related issues that may have resulted during the transaction.
What better way to have a strong and healthy customer-supplier relationship than adopting a cloud-based digital procurement service that streamlines customer-supplier transactions from the beginning to the end?
Managing the risk associated with the tedious procurement process using the aforesaid improvised systems can be time-consuming for procurement professionals. Nevertheless, there are other factors, which can also impede the smoothness of a procurement process, that are worth mentioning. Transaction costs for instance, regardless of which type is relevant to an organization, may have significant impacts on an organization’s procurement.
Some of those costs can be easily managed internally meanwhile others may be outside of a company’s control. It is equally important to keep in mind that having a digital procurement solution over a traditional one will not only help reduce the associated transaction costs but also save time.
Den Butter and Linse describe transaction costs as hard costs and soft costs in the article “Rethinking Procurement in the Era of Globalization”. Hard costs are transport charges, import levies, and tariffs. Soft costs include the costs of creating and checking contracts, information costs, and costs resulting from cultural differences and communication failures. Additionally, costs can be related to knowledge of legal procedures, building trust and reputation, network building, risk mitigation—including regulation—and security requirements (Den Butter & Linse 2008, p.76-77)[2].
Den Butter and Linse also contend that the soft costs are of a more strategic importance for organizations as the distance between trading partners grows and their economic, cultural, political, and social systems are intertwined in the global markets (Ibid. p.76-77)[3].
The conversation to adopt a new way of doing procurement within an organization is not an easy one. The bigger the organization, the more difficult to overcome the bureaucracy that encompasses getting a manager’s approval. Companies must decide if implementing a new procurement, whether a stand-alone software or a partially integrated software, will provide the ideal return on investment (ROI).
Most professional procurement managers would agree that the stakes are too high not to get the right digital solution. Implementing the digital procurement solution that makes the most sense for your business can be beneficial in the management of inventory, monitoring contract life cycle, analyzing relevant spending, submitting e-invoicing, overseeing supplier quality management, optimizing transport, and collaborating with others using live data.
AirFaas’ cloud-based digital procurement solution offers both customers and suppliers a streamlined and centralized procurement process from requesting a quotation to invoicing with real-time collaboration access. Through its open portals, AirFaas provides transparency and simplified communications between parties. AirFaas’ strategic procurement solution also supports companies’ soft costs and direct purchasing. Contact us and schedule a Demo to see if our cloud-based digital procurement solution is the right service for your organization.
[1] Coleman Radell & David Schannon (2019) DIGITAL PROCUREMENT: The Benefits Go Far Beyond EFFICIENCY. Supply Chain Management Review. 23 (2), 14–21.
[2] Frank AG den Butter & Kees A Linse (2008) Rethinking Procurement in the Era of Globalization. MIT Sloan management review. 50(1),76-.
[3] (Ibid. p.76-77).