End-to-End Procurement

What is end-to-end procurement?

By definition, end-to-end procurement refers to the complete process of managing the procurement lifecycle, from the initial identification of a need for a product or service, right through to the final payment and management of supplier relationships.

It encompasses all activities and tasks required to efficiently procure these goods or services.

This comprehensive approach ensures seamless integration across all stages of the procurement process. Ultimately, by prioritizing efficiency, end-to-end procurement aims to streamline workflows, reduce costs, and improve acquisition timelines.

The stages of end-to-end procurement

1. Needs identification – A department or individual employee will identify the need for a product or service, and initiate a purchase requisition to begin the procurement process.

2. Sourcing and supplier selection – While an employee may have a preferred supplier in mind, the procurement team will typically research and identify potential options, before evaluating and choosing the most suitable one based on factors such as price, quality, and reliability. Before heading into the contracting and agreement stage of the end-to-end procurement cycle, it is worth establishing a BATNA, that being the Best Alternative to a Negotiated Agreement, as this can serve as a benchmark when evaluating offers.

3. Contracting and agreement – During the contract negotiation stage, companies will need to establish the terms and conditions of the purchase agreement, making sure that the terms are favorable and aligned with business objectives, protecting their interests, managing risks, and ensuring flexibility where needed. This should include negotiating payment terms, delivery schedules, warranties, service level agreements (SLAs), and even penalties for non-compliance.

See a full list of what can be negotiated within a software contract

4. Ordering and procurement – Once a supplier has been selected and the contract agreed upon, the order is placed. The procurement team will need to ensure that the goods or services are delivered or implemented according to the agreed specifications.

5. Invoice and payment processing – For physical purchases, procurement will need to verify the accuracy of the invoice, matching it with the purchase order and delivery receipt, before processing payment according to the agreed terms. For software purchases, procurement will need to pay attention to recurring billing cycles, usage-based pricing, renewal dates, and the specifics of the service level agreement, ensuring that payments are made accurately and on time.

6. Supplier relationship management – Effective supplier relationship management is key to ensuring the continued success of end-to-end procurement. This involves maintaining open lines of communication, addressing performance issues, managing contract renewals in a timely manner, and working collaboratively with them to resolve any challenges.

7. Reporting and analysis – Regular reporting and analysis of procurement activities allow organizations to evaluate performance, track savings, and assess supplier performance.

Why you need an end-to-end procurement process

When procurement goes unmanaged, companies risk losing control over critical elements of their operations, leading to inefficiencies, missed savings opportunities, and a lack of strategic alignment.

Lack of any comprehensive end-to-end procurement strategy can specifically result in:

• Fragmented processes – Separate, disconnected steps within the procurement cycle can lead to duplicated efforts, human error, unnecessary delays, and a lack of visibility into procurement performance. This fragmentation creates inefficiencies that can prevent departments from working together cohesively, leading to delays in decision-making and confusion over roles and responsibilities, for example in the approvals process.
• Increased costs – Uncontrolled spending and maverick buying – the process of employees bypassing official procurement channels – are far more likely to occur without a centralized procurement process. This lack of oversight also limits opportunities for bulk purchasing, negotiating discounts, and optimizing costs, which in turn leaves companies paying more than necessary for goods or services.

90% of companies overpay for their software by an average of 26% – but you don’t have to. See how Vertice helped one company save as much as $155,000 on a single software subscription.

• Compliance risks – Without a standardized end-to-end procurement process, it’s incredibly difficult to ensure regulatory compliance and adherence to internal policies, for example purchasing from unapproved or unauthorized suppliers. A lack of oversight can also expose the organization to the risk of breaching supplier agreements, which could lead to legal penalties and contract disputes.
• Missed strategic value – Without a robust process in place for procuring goods or services, procurement leaders simply don’t have the time to focus on anything other than transactional tasks, such as order processing or contract negotiations. This lack of focus on long-term strategic goals prevents organizations from optimizing supplier relationships, leveraging market insights, and aligning procurement with broader business objectives, ultimately limiting growth opportunities and innovation.‍
• Supplier management issues – When suppliers or vendors aren’t effectively managed, the risk of poor performance and delays increases. Implementing a robust end-to-end procurement process enables companies to continually evaluate suppliers, mitigate potential risks, and maintain optimal quality and consistency of products or services.

Common challenges that can arise in end-to-end procurement – and how to overcome them

Increased costs – Inflation is not only responsible for rising costs across the supply chain, but in the context of SaaS, it is contributing to price hikes of 11.4% each year. Whether procuring direct or indirect goods, procurement leaders face the daunting challenge of managing this escalating spend – something that becomes all the more difficult without a robust end-to-end procurement process in place. By centralizing procurement, companies can gain full visibility and control over spending, enabling them to identify opportunities for cost reduction.

Maverick buying – When employees bypass official procurement channels and make unauthorized purchases, often from unapproved suppliers or without negotiating pricing, it not only leads to wasted spend, but it also exposes the company to potential compliance issues. By centralizing end-to-end processes and leveraging automation to detect instances of maverick buying and shadow IT, procurement leaders can ensure better visibility, enforce procurement policies, and control spending more effectively, reducing both risk and inefficiency.

Internal resistance to change – Employees may be reluctant to adhere to new procurement processes or technologies due to a lack of familiarity or fear of losing autonomy. To overcome this issue, companies should consider implementing a clear change management strategy, engaging stakeholders early on in the process, and providing them with adequate training and ongoing support to ensure smooth adoption and buy-in.

Supplier performance variability – Supplier performance can vary over time, leading to inconsistent quality, service delivery, or fulfillment of expectations. This is particularly challenging with software purchases, as many SaaS contracts tend to be locked in for extended periods. To mitigate this issue, we would always recommend negotiating an exit clause, allowing the organization to terminate the contract under specific conditions without facing heavy penalties.

How to implement end-to-end procurement

Implementing an end-to-end procurement process within your organization requires a strategic approach that involves streamlining and integrating each phase of the procurement lifecycle. By doing so, you can improve efficiency, reduce costs, and create value through stronger supplier relationships and enhanced business performance.

But what does this look like in practice?

‍Assess and define procurement needs

This is a foundational step in implementing a successful end-to-end procurement process. It involves understanding the specific requirements of the business and determining how procurement can best serve those needs while aligning with the organization’s overall goals.

Each department will have unique procurement needs, and understanding them is crucial for tailoring the procurement strategy and developing customized workflows. Procurement leaders should therefore seek to understand:

• The organization’s most critical procurement areas – Identifying which procurement areas are critical to the organization’s success can help to prioritize efforts and allocate resources.
• Common blockers – Each department may encounter different blockers in the procurement process, whether that be delays in approvals, confusion about procurement policies, or difficulties working with external vendors. By identifying these blockers, procurement leaders can develop strategies to mitigate them, streamline the process, and reduce inefficiencies.
• Budget constraints – Departments may have varying levels of flexibility when it comes to their budget. Procurement leaders need to understand these budget constraints to ensure they can negotiate the best prices and find cost-effective solutions.
• Unique specifications or requirements – Some teams may have specific needs when it comes to the goods or services they procure, for example HR may require specialized software that seamlessly integrates with existing systems, whereas IT might need to ensure compliance with security regulations or select suppliers who adhere to specific industry standards. Procurement leaders need to account for these unique specifications in the workflow, ensuring there are adequate review processes, compliance checks, and technical evaluations. For departments with highly specialized needs, workflows can include additional stages for validation, vendor selection, and contract negotiations to meet the required standards.

Establish a standardized procurement process

Establishing a standardized process for procurement is crucial for ensuring consistency, efficiency, and compliance. It should specifically involve:

• Outlining roles and responsibilities – Define roles within the procurement process to ensure accountability and avoid confusion. This should include procurement teams, department heads, approvers from the various departments, and even the suppliers themselves.
• Setting thresholds and approval hierarchies – Set up thresholds that determine exactly who and when a stakeholder needs to sign-off on a purchase. The CFO may need to approve the procurement of goods or services over a certain financial value, or IT may be required to give the green light for IT-related procurement.
• Automating and streamlining end-to-end procurement workflows – Automate routing and approval processes to improve efficiency and reduce human error. Use an end-to-end procurement solution that can automatically route purchase requests to the appropriate stakeholders based on the predefined thresholds and approval hierarchies. ‍

Develop supplier or vendor relationship management strategies

‍A well-managed supplier network is critical to the success of any procurement process. By fostering strong relationships with suppliers, organizations can often take advantage of better pricing, higher-quality products, and potentially a more reliable service. Developing these relationships does, however, rely on:

• Establishing clear communication channels – Have clear communication with your most strategic suppliers to ensure alignment on expectations, delivery timelines, and quality standards. While it won’t always be possible to develop strong relationships with every supplier – the average company now works with 130 SaaS vendors alone – it is important to have some oversight of these less strategic suppliers and have a plan in place to manage this tail spend.
• Regularly assess supplier performance – Regularly assessing supplier performance is crucial for maintaining a smooth and effective supply chain. While traditional metrics like quality and supplier payment compliance are important, it's also valuable to consider other key procurement metrics to get a full picture of supplier performance. These can include lead time and cost competitiveness.

See the exact metrics that the most advanced procurement leaders are tracking

Effectively manage contracts

‍Contract management plays a key role in any well-functioning procurement process, but as a company scales, it can also become increasingly complex. This is why it’s important to:

• Standardize contract templates to reduce risks and improve consistency across procurement agreements.
• Set up contract tracking systems to ensure that you’re staying ahead of renewal deadlines. When it comes to software renewals, our data shows that starting negotiation discussions 90+ days ahead of renewal dates can deliver average savings of 49%. See how this differs across software categories in our spend insights hub.
• Ensure you’re holding suppliers accountable and are mitigating risks by including penalty clauses.
• Utilize technology to automatically detect compliance issues within contracts, for instance those that don’t meet legal requirements or internal policies.

Track the performance of your end-to-end procurement process

By monitoring your entire procurement process, you gain visibility into each stage, from the initial request and supplier selection, to contract execution and renewal. Not only is this essential for maintaining efficiency, ensuring compliance, and achieving cost savings, but this comprehensive tracking specifically helps to identify potential bottlenecks, inefficiencies, and areas for improvement. Without this visibility, it can be difficult to pinpoint where delays or issues arise, which can impact overall performance and stakeholder satisfaction.

Take a look at these example procurement KPIs and get a better idea of how to select the right ones for your business

Need help driving procurement’s value?

At Vertice, we not only provide end-to-end procurement software that automates and streamlines your processes for maximum efficiency gains, but we also serve as a strategic procurement partner, delivering actionable insights, helping you make more informed decisions, and securing you the best possible deals on your contracts, while giving you back the time in your day to focus on more strategic initiatives.

See for yourself how we helped one company accelerate their procurement cycles by 55%, while saving another 115 hours on contract negotiations in just three months. Alternatively, take a self-guided tour of our procurement platform to fully understand how we can benefit your team and help you drive value across your organization.