This article is the first in the Eyvo educational series of blog articles.
That is NOT what I ordered !
If you have ever worked in a professional buying department that did not have a computerized purchasing system then we would place a bet that you will have heard that statement before !I didn’t order that !
Frustrated requisitioners, upset line managers, a confused process complaints, returns, credit notes, arguments with the vendor ; the list goes on regarding the speed bumps in the supply chain process.
However it all would be eased by using the right eProcurement solution but you will not be surprised to learn that all such systems are not created equal.
At Eyvo we believe in the concept of Closed-Loop Procurement ; its a phrase we use often. Its a checks and balances approach that should be in place to ease the dreaded formal audit.Closed-Loop Procurement Request it, Order it, Receive it, Pay for it
The crucial element here is that we don’t want your requestors to have to worry that their request was not executed or not understood. We have in place within our solution a series of checks that ensures their original requisition was passed along the chain in a timely fashion and hit the desks of all the people it was supposed to.
Its an efficient workflow of information and it works something like this :Procurement Workflow 1 Request Initiation
The originator (lets call him Bob) raises a new Requisition for the required goods or services he needs – This document can be as long and as complex as he wants and can contain multiple document attachments. e.g. a supplier quote, design artwork, images, etc..2 Initial Sanity Check
Now Bob has a direct Boss called Alice and in this case the system ‘knows’ that Bob’s requests all have to be seen by Alice before they can go to purchasing – How does it ‘know’ ? Well the relationship between Bob and Alice has been put into the back-end admin side of the system.So once Bob has finished entering everything in for his requisition- he hits and off it goes to Alice.
Alice receives it – checks it and says “OK yes I agree” and hits But what if Alice is away or on vacation ? The system knows who to send it to in her stead! Smart right ? But wait it gets better.
Now all Alice has done at this point is an initial ‘sanity check’ on Bob’s Request for purchase ; She is asking herself “does Bob really need this ?” Note she is NOT asking herself ..”can we afford this ?” that comes later. But in reality you can program the workflow to ask any of these questions in any order at any stage. But we will keep this example simple for the moment.
If Alice disapproves of Bob’s purchase then she simply hits and then an email goes back to Bob stating its been rejected allowing him either to edit his Request and try again or just cancel it. But if Alice says OK to it then it gets forwarded to the purchasing department – this would be the first time they have seen it in the procurement department.Requisition Routing
Now it gets a bit more interesting ; You can configure your workflow to do lots of different things in eBA, for example you could,
Configure the Inbound request to go directly to the Purchasing Managers InBox where he can then manually direct the request to one of his buyers to work on OR
Configure the Inbound request to automatically go directly to the buyer who specializes in the type of purchase being described on the requisition OR
Configure the Inbound request to be deposited in the purchasing departments group InBox where the first buyer thats available can grab it and work on it OR
some other workflow you determine is suitable for you.
Lets assume for this discussion, its (c) and that one of the buyers (perhaps the only buyer you have), say Jack, has seen the request come in and decides to take ownership of it. OK so now what ?4 Purchase Order Generation
Jack can do one of 2 things with it ; he could,
i) Just turn it into a PO for a direct purchase from a sole source vendor that he knows can fulfill the request OR
ii) Run an RFQ exercise and have multiple suppliers bid their best price, delivery, etc.. for this job – a description of the RFQ process is beyond the scope of the article – so we will assume Jack goes for Option (i)5 PO Approval
So now he has turned the request from Bob into a Purchase Order – but before he can send it to the supplier he has to get it financially approved.
Now this approvals process can either be automatically figured out by the system or manually instructed by the buyer. The eBA procurement system can determine who should approve it as its ‘aware’ of the company’s approval hierarchy, the signing levels of all the approvers and what areas of business they can sign-off against – the system will suggest a list of people who should sign-off – it could be one person or it could be more than one – the final determination is made by the system and confirmed optionally by the buyer.
The order goes out for Approval by email – each approver in turn either Approves it or Rejects it. You can have a serial approvals process or a parallel approvals process or both ! Again its beyond the scope of this document to describe the entire Approvals process. But lets assume it comes back fully Approved.6 PO Dispatch
So Jack (our buyer) gets a system notification that its all clear to send the PO to the supplier – so he sends it – Bob get a notification that’s its been sent and waits for the supplier acknowledgment and execution of the PO.7 Receiving
If its physical goods that were ordered by Bob they will now start to arrive – if its a service it will start to get performed – but what tools do we have in place to monitor these activities ? Well eBA has a full and complete receiving suite – When Bob (or his delegated authority) starts to receive his items he can simply book them in through the Goods Receiving suite – same for any services that were ordered.This is the beginning of the Closed Loop we are referring to – We start to monitor that the items we ordered are actually arriving. The system can also account for over-deliveries, shortages and rejects – the total quantity and dollar value received must match what was ordered otherwise it will throw an exception – that’s called a 2-way match8 Invoice Matching
The final piece of this puzzle ; The supplier isn’t going to just send you what you ordered by way of goods/service – they will also send you an invoice to match – normally this is sent to your accounts payable function who are a wholly separate department – nothing to do with procurement or purchasing … until now !The object here is to ensure you only get invoiced (a) for what you ordered (b) and you only pay (c) for what you received (d) – this is called a 4-way match. At the end of the process – if a = b = c = d the Loop and been Closed and that transaction is complete.
..and we haven’t even touched upon inventory, assets, portals, catalogs etc but that’s for another day.
Please Contact Us if you feel we can help make your process SOX Compliant by implementing a process like the one described above.
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