For those outside of the finance team, procurement might seem like a fancy word for “the way to buy stuff.” In reality, procurement encompasses much more, including sourcing vendors and vital materials, negotiating prices and contract terms, and arranging for payments and recordkeeping. When the procurement process works smoothly, everything from supplier relationships to cost control hums along efficiently. But when it doesn’t, the smallest issue can grind operations to a halt.

That’s where procurement modules can help. These software tools turn what was once a reactive, manual procurement process into a streamlined, strategic powerhouse that drives efficiency and profitability. This article explains what procurement modules do, describes important features and functions and highlights their benefits and challenges.

What Is Procurement?

Procurement is the process of sourcing the goods and services that keep a business operating smoothly, from the raw materials needed to manufacture products to the office supplies employees rely on. Bigger picture, procurement also focuses on building and managing strong partnerships with external suppliers, working out favorable deals and contracts, analyzing spending to identify cost-saving opportunities and improve cash flow, and making strategic decisions that drive business value.

What Is a Procurement Module?

A procurement module is specialized software — often found within an enterprise resource planning (ERP) system — that turns a tangled web of manual procurement tasks into a seamless, automated workflow. Simply put, it centralizes every step of the procurement life cycle, fueling faster, smarter decision-making. For example, a procurement module makes it easy to track supplier performance and payment. It also automates the many tasks associated with POs and provides real-time spend analyses that businesses can use to understand their purchasing habits, control costs and allocate resources more efficiently.

Key Takeaways

  • Procurement modules centralize a company’s purchasing activities — from supplier management and purchase orders to approvals and analytics.
  • Key features of procurement modules include PO management, supplier relationship management and invoice automation.
  • Businesses that use procurement modules realize bottom-line benefits as a result of increased efficiency, cost controls and better visibility.
  • Common challenges stem mainly from the way procurement modules are configured and the accuracy of the information entered into the system.
  • Procurement modules are often core components of enterprise resource planning (ERP) systems.

Procurement Module Explained

Procurement modules are an important driver of efficiency, removing the bottlenecks that occur in manual processes. For example, when it’s time for a manufacturer to restock raw materials, a procurement module creates an automatic workflow for the entire process: It generates a PO, routes it for approval and tracks it all the way to delivery. The module can also identify issues in a company’s supply chain. For example, by tracking supplier performance metrics, such as order accuracy and compliance with contract terms, a procurement module can notice when a vendor’s performance is slipping. It can then automatically flag the issue so the procurement team can take action before the lag impacts operations.

Since they’re often part of an ERP system, procurement modules can connect with other parts of the business, such as finance and inventory, so everyone works from the same data. Finance managers can monitor spending in real time as supply chain teams track deliveries, keeping the entire process transparent.

In addition, companies can scale procurement without adding complexity. A midsize business, for example, can easily manage dozens of suppliers and thousands of orders without missing a beat, thanks to the automated workflows and reporting provided by a procurement module.

Why Are Procurement Modules Important?

Small and midsize businesses (SMBs) in the U.S. work with 27 key suppliers, on average, according to Capterra’s 2023 Supplier Relationships Survey. Another study from Europe notes that SMBs typically have nine times as many suppliers as employees. In many cases, each supplier has its own contract, delivery schedule and pricing. When using manual processes and spreadsheets, procurement teams are forced to meticulously track and record every purchase order, delivery and payment by hand — inevitably contributing to missed deadlines, duplicated orders, mispayments and other mistakes that slow operations, damage relationships with key suppliers and inflate costs.

Unfortunately, many companies still find themselves behind the curve when it comes to procurement technology. According to a 2023 survey by SpendHQ, 73% of respondents said they still use spreadsheets to track procurement metrics, and 75% said they doubted the accuracy of their procurement data.

Procurement modules take the complexity out of the procurement life cycle by automating routine tasks and providing real-time visibility into every part of the purchasing process. For example, a procurement module can flag delays in PO approval before the deadline passes. In addition, by centralizing and analyzing data about spending patterns, procurement modules help companies make strategic decisions about where to cut costs and how to negotiate better contracts with suppliers.

8 Procurement Module Key Features and Functionalities

Procurement modules don’t just make the procurement process easier — they make it smarter. By automating routine tasks and delivering real-time insights, these tools can improve the way companies handle everything from purchase orders to supplier relationships. Here are seven prime features of procurement modules.

1. Purchase Order Management

A procurement module takes the clunky, labor-intensive task of PO management and turns it into a seamless, automated process. Instead of staff having to chase approvals and juggle paperwork, the system automatically generates POs, sends them to the right people for sign-off and tracks every step from approval to delivery. The end result: fewer mistakes, faster turnaround times and no more stress over lost forms or duplicated orders.

Consider a hospital that is running low on masks and gloves. When inventory levels dip below a preestablished threshold, the procurement module automatically creates a PO, routes it for approval and keeps tabs on its whereabouts. All of this information is tracked in one place, so there’s little risk of miscommunication. It also frees the team for more strategic work.

2. Supplier Performance Monitoring

Supplier performance monitoring is an analytical function that constantly evaluates how well suppliers are meeting set standards, like delivery times, quality level and compliance. The procurement module acts as a scorekeeper, identifying suppliers that are excelling or falling short. If a supplier’s on-time delivery rate slips, for example, the system will automatically alert the procurement team, who can make fact-based decisions about how to proceed — whether that means negotiating penalties, finding alternative sources or just having a candid discussion. The emphasis is on real-time monitoring that ultimately leads to corrective action.

3. Supplier Relationship Management

Supplier relationship management takes the data from supplier performance monitoring and uses analytics and data discovery to build and maintain strategic partnerships that drive long-term value. The procurement module helps manage communication, contract negotiations and long-term planning, so the business isn’t just keeping track of vendors but is also fortifying a network of trusted partners.

For example, if a supplier is late on a delivery, the module warns the procurement team, giving them the chance to investigate the cause and prevent it from becoming a bigger problem. On the flip side, the system can also help nurture relationships with reliable vendors. For example, by tracking performance and past interactions, companies can reward these vendors with increases in sales volume, while also negotiating better terms for themselves.

4. Vendor Management

Vendor management is similar to SRM, but it focuses more on the transactional processes as opposed to the broader and more collaborative SRM. Modules involve the processes that oversee and optimize a business’s relationships with external suppliers, such as selecting vendors, negotiating contracts, managing performance, controlling costs, mitigating risks, and ensuring the timely delivery of quality goods and services. Effective vendor management is crucial for achieving business objectives, maintaining operational efficiency, and fostering mutually beneficial partnerships.

5. Invoice Automation and Processing

When it comes to invoices, manual processing can slow down operations and create a mess of errors, lost paperwork and late payments. Invoice automation capabilities in a procurement module can eliminate those headaches. When an invoice arrives, the system cross-checks it with the relevant purchase order and delivery details — a process called three-way matching — to ensure that everything lines up before approving payment. This obviates the need to chase down missing information or sift through stacks of paper. As a result, payments can be processed faster, and the risk of overpayment or late fees is significantly reduced. It’s also a smoother, more reliable way to manage cash flow and keep suppliers happy.

6. Contract Life Cycle Management

Contracts are the backbone of procurement, but managing them manually can result in missed renewal deadlines, forgotten terms and lost opportunities to secure better deals with suppliers. From contract drafting to renewal, a procurement module keeps track of every stage of a supplier contract, sending reminders when key dates or milestones are approaching. In the case of a contract renewal, for example, the system automatically alerts the procurement team well in advance of the due date, giving them time to renegotiate terms or explore other options. It also stores all contract details in one place, creating a central hub for information about pricing agreements, service levels and compliance terms; this gives companies greater control over their contracts and avoids costly lapses. Another key benefit: The module strengthens their negotiating position by empowering them with data-driven insights they can leverage during discussions with suppliers.

7. Strategic Sourcing Solutions

Strategic sourcing aims to find the best suppliers. Procurement modules help hone this to a science by analyzing data across vendors, such as pricing, quality and delivery times, to help procurement teams make solid decisions. In fact, this is what elevates the role of procurement from that of simply buying materials to building a reliable supply chain that drives long-term value, strengthens partnerships and optimizes supply chains for growth. When sourcing a new supplier, a procurement module considers factors, like past performance with similar or existing suppliers and cost efficiency, to build a clear picture of which vendors deliver the most value. This way, companies aren’t caught off guard by unreliable vendors or hidden costs.

8. Comprehensive Spend Visibility

Lack of visibility into corporate spend is a critical problem. Indeed, 82% of procurement leaders acknowledge that their companies are not sufficiently managing their spend on indirect purchases, such as office supplies and equipment maintenance, according to a survey from Globality. Using a procurement module is like putting on a pair of eyeglasses that immediately sharpen a company’s view of how every dollar is spent, with real-time access to spending data across departments, suppliers and regions. This makes it easy to spot waste, identify cost-saving opportunities and make better financial decisions. For example, a company might realize through its module that it’s consistently paying more for a particular material from one supplier, compared with another vendor that charges less for the same product. Armed with this information, the company can renegotiate contracts or shift purchasing to save money.

Benefits of Procurement Modules

The benefits of procurement modules go beyond saving time and cutting costs. When used to support a comprehensive procurement strategy, they create lasting value for businesses by driving smarter spending and fostering stronger, more productive supplier partnerships. Advanced procurement modules typically offer the following five benefits.

  • Increased profitability: Procurement modules boost profitability by turning the process into a finely tuned operation. They cut out waste, such as overpaying for supplies or losing time to manual processes, so companies can focus on getting the best deals. With a clear view of every dollar spent, companies can make solid decisions, build stronger supplier partnerships and simplify their supply chains to fuel long-term growth.
  • Cost controls: Procurement modules give companies real-time access to purchasing data, which helps them identify areas where costs can be trimmed without sacrificing quality. For example, a procurement module can highlight when a specific supplier’s prices start to creep up, prompting the team to try to renegotiate or seek an alternative source before costs spiral out of control. This proactive approach to spending means companies can anticipate and manage their expenses for better financial outcomes.
  • Enhanced visibility: Companies often face a lack of clarity around spending, supplier performance and procurement bottlenecks. This can lead to overspending and delayed orders, to name just two consequences. With a procurement module, however, every detail is at a company’s fingertips: which suppliers are delivering on time, where costs are rising and where lack of approvals are holding back purchases. With this kind of insight, companies can make decisions with confidence and address concerns before they turn into costly setbacks.
  • Variance identification: A common challenge for companies is identifying variances among what was ordered, what was received and what was invoiced. Without a clear way to spot such discrepancies, companies can end up overpaying or dealing with stock issues and missed opportunities for cost recovery. Procurement modules flag mismatches automatically and in real time, allowing businesses to address the issue quickly so that operations continue to run smoothly.
  • Improved supplier relationships: A major pain point for many companies is having to manage inconsistent communication and misunderstandings with suppliers, which can strain relationships and disrupt the supply chain. Procurement modules bridge that gap by creating a clear, consistent line of communication and tracking supplier performance. With real-time data on deliveries, contract terms and performance metrics, companies can address issues quickly and build stronger, more transparent relationships with suppliers.

Challenges of Procurement Modules

Even the best procurement modules can encounter challenges that can disrupt operations and create financial risks if not properly addressed. Understanding the following potential pitfalls can help companies better navigate their procurement modules for smoother implementation and more effective use.

  • Ineffective vendor communication: Miscommunication with vendors can cause problems. If suppliers aren’t fully on board with using the procurement module or if their technology doesn’t sync up, critical updates, like delivery delays or order changes, can get lost in the shuffle. For example, if a supplier notifies the team of a shipment delay via email instead of through the software, it can create unintended bottlenecks.
  • Excessive expenditure: Overspending can sneak up on companies. For instance, if the procurement module isn’t configured to flag discrepancies between the agreed-on contract price and what’s invoiced, a company could unknowingly overpay a supplier. Or if the module isn’t set up to alert a buyer when an order is close to qualifying for a volume-based discount, the company could miss out on potential savings.
  • Inaccurate data capture: Inaccurate data can be extremely costly. In 2022, for example, Unity Software reported a loss of $110 million in revenue and took a hit of $4.2 billion in its market cap, citing the “consequences of ingesting bad data from a large customer.” If procurement data, such as supplier details, pricing or order quantities, is entered incorrectly at any point, the entire procurement process can be thrown off, despite using a procurement module. A simple typo in a price field could result in a massive overpayment or a delivery order for far more materials than needed, leading to financial losses and operational delays.

Selecting a Procurement Module

Selecting a procurement module requires a thoughtful approach, beginning with a clear assessment of business needs and any existing procurement challenges, perhaps in the form of inefficient supplier management, lack of visibility into spending or manual processes that consistently slow things down. This analysis helps define the features a company truly needs from its procurement solution.

The next step is to determine if possible solutions under evaluation can integrate seamlessly with existing systems, such as ERP, accounting and inventory, to avoid creating data silos or manual workarounds. Once the ability to integrate is confirmed, the focus of the evaluation should shift to ease of use. An intuitive and user-friendly system promotes faster adoption and incurs less training time, both essential for smaller businesses.

Automation capabilities are another key consideration. The ability to automate repetitive tasks, such as order approvals and invoice processing, can save time and cut down on errors. It’s also a good idea to test multiple modules through demos or trial runs, in addition to assessing each vendor’s support services. Finally, scalability is an important feature. The growth of cloud-based procurement solutions is largely driven by their ability to quickly scale up to handle greater volumes as businesses grow. Indeed, the global procurement software market is projected to grow to $18.3 billion by 2032, up from $7.3 billion in 2023, largely due to a surge in cloud-based solutions.

Maximize Procurement ROI With NetSuite

NetSuite Procurement gives small and midsize businesses a smarter way to streamline purchasing and boost ROI. By automating workflows, NetSuite Procurement cuts through approval bottlenecks, speeding up the entire process from sourcing to payment. At the same time, it eliminates manual tasks and reduces errors, freeing teams to focus on more strategic endeavors. NetSuite’s powerful purchase management tools make it easy to create, approve and track purchase requests, helping control costs and build stronger supplier relationships.

With real-time visibility into spending and vendor performance, procurement teams gain valuable insights that bolster decision-making. NetSuite also centralizes supplier data to provide more negotiating power for better contract terms.

As part of NetSuite’s cloud ERP system, the procurement module connects purchasing to finance, inventory and more, offering a unified, real-time view of operations. This integration supports scalability and ensures smooth business growth. Plus, with its automatic updates and built-in compliance, NetSuite handles IT agita and keeps businesses aligned with the latest industry standards.

infographic procurement module
NetSuite Procurement helps companies manage complex supplier relationships.

The right procurement system has the potential to reimagine how companies manage their purchasing processes, improving not only profitability but also risk management and decision-making. By embracing the power of procurement technology, companies can turn a process that’s often overlooked into a strategic advantage that fuels growth and efficiency.

Procurement Module FAQs

What are the 5 R’s in procurement?

The five R’s in procurement refer to the essential principles for effective purchasing: the right quantity, the right quality, the right price, the right place and the right time. These factors guide procurement professionals in ensuring that goods or services are sourced efficiently. By focusing on these five areas, companies can optimize costs, avoid supply chain disruptions and meet operational needs.

What is the difference between purchasing and procurement?

Purchasing is the act of buying goods or services, typically by focusing on the transactional aspects, like placing orders and making payments. Procurement, on the other hand, is a broader process that includes purchasing but also covers sourcing, negotiating contracts, managing suppliers and ensuring compliance. Procurement is strategic, aiming to create long-term value and optimize costs, while purchasing is more tactical and transactional.

What does the word procurement mean in business?

In business, procurement refers to the process of acquiring goods, services or works from external sources to meet an organization’s needs. It involves not only purchasing but also sourcing, negotiating contracts, managing suppliers and ensuring compliance. Procurement aims to optimize costs, improve efficiency and build strong supplier relationships. It plays a critical role in maintaining operational continuity and supporting business growth.