PO management tool, what is it really?

So, here you are wondering what is a Purchase Order (PO) management tool? A reasonable question we’d say, and we thought we’d provide a comparison with two other tools commonly used by retail companies today; ERP’s and PLM’s.

Let’s start with the basics

First off. Going from product design to end consumer delivery is not a one man show. It requires collaboration with multiple stakeholders, where your supplier is one of your key stakeholders. You’ll need to cooperate in all stages from design, development, planning, production, delivery and invoice handling. Moreover, the retail and FMCG industries have evolved immensely and reaction time today is fast. Long gone are the days where companies launch 2 collections a year with ample planning time. This stresses the need for real-time updates and collaborative tools.

Ok, got it. So... what is an ERP?

ERP’s (Enterprise Resource Planning) manages a company’s internal undertakings, such as financials, operations, supply chain, commerce, and reporting on one platform. They’re usually used to automate the core processes and flow of data between various departments, providing one truth and regulating procedures across the enterprise. As much as ERP systems are considered the glue that holds businesses in place, and the fact that ERP’s have evolved to offer more visibility across business ventures, they still remain rigid regarding the depth and flexibility required for effective purchase order and production management.

Ok, that’s ERP. What is PLM? 

A PLM (Product Lifecycle Management) tool manages product development processes and milestones. Many changes, updates and milestones occur during the development of a product and supplier feedback is required on multiple occasions. However, the PLM leaves off once the design and product specification has been determined. It does not involve supply chain related operations. 

So, what about managing actual production and delivery?

Glad you asked. As the question indicates, it doesn’t make sense to spend time and money in perfecting the  product design and planning phases, inventory management and payment processes, and then not prioritise how you manage actual production and deliveries. And that’s when the PO management tool comes in handy. 

A PO management tool allows a company to manage all of their tasks related to placing and managing purchase orders. It allows users to keep up with price negotiations, manage MOQ’s and supplier relationships, PO deadlines, milestones, booking and delivery - all while collaborating with the suppliers on the same platform. Moreover, a PO management system will hold all your production data and enable you to evaluate actual supplier performance. 

In essence, a PO management tool picks up where the ERP and PLM ends. The three can work simultaneously together, it’s not one or the other. To help out a bit further, we took the liberty of putting together a simple overview:

What can be noted is that ERP’s can manage purchase orders, but do not allow for collaboration with suppliers. This means, once PO’s are created in an ERP system, submitting PO’s and handling updates is all done through emails, excel files and manual updates in the ERP system. It’s a hassle for the employee and the supplier, and it’s a waste of resources using a skilled employee to do manual tasks. 

To conclude

Running a business with only PLM and ERP systems will result in critical risks regarding supply chain operations simply because of the lack of transparency and feedback from the production and shipment side of things. But it’s also a waste of employees doing manual reporting instead of focusing on the exceptions.

By implementing a PO management tool, an organisation can be assured that the PO information is being accurately managed, that supplier feedback is instant and that all events are logged. This is essential to achieve on time market launches, minimise operational costs, evaluate supplier performance and keep employees performing their best.