Mostly Harmless, Part VII
In the last post, the purchase order was defined as well as some of the requirements for its generation. This post will address the challenges associated with purchase order generation, some associated best practices, and the benefits that could be expected from an appropriate e-Procurement solution.
Common Challenges
- Requisition Partitioning
A requisition contains requests for multiple goods or services, which are covered by multiple contracts at multiple rates depending on SKU, volume, or other terms. Which contract? Which rate? Which terms?
- Forward Matching
How will the purchase order be matched to incoming goods receipts and invoices?
- Duplicate Detection
How does one detect if multiple purchase orders contain a requisition for the same good or service? How does one detect if duplicate purchase orders were accidentally cut?
Best Practices
- Automatic Generation
The system should automatically generate the necessary purchase orders from approved requisitions.
- Automatic Price Confirmation
The system should automatically verify that contract or catalog prices are being adhered to.
- Automatic Distribution
An approved purchase order that sits on someone’s desk waiting to be sent can hold up the business or a production line if the parts or services are not delivered on time because the supplier(s) did not get the purchase order on time. Once a requisition is approved, the purchase order should be sent automatically
Potential Benefits
- Reduced Lag Time
An e-Procurement system can automatically create and distribute purchase orders as soon as the requisitions are approved.
- Reduced Overspending
The system can automatically grab and populate the purchase orders with contract pricing. Some categories, like office supplies or electronics, see a lot of overspending because buyers requisition at catalog, but not contracted, rates or don’t buy in the appropriate quantities (which can be flagged and corrected during the approval process).
- Reduced Errors
The system can automatically pull up the right codes, the right templates, and the right prices so that the supplier isn’t sending it back with a request for further explanation, which would only delay the process further.
Once the purchase orders are distributed, the next step is to wait for delivery and issue the goods receipt, which is the subject of the next post.
Next Post: Goods Receipts, Part I