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PunchOut 101

Complex Challenges Demand Streamlined Solutions

Large companies, government agencies, and institutions typically manage their Indirect supply chain and buying process using e-procurement systems. These organizations depend on their e-procurement system to automate their daily purchasing activities and contribute to their business goals throughout the year.

As technology continues to evolve, organizations increasingly rely on electronic procurement systems to help guide their corporate strategic vision plan and reduce costs. Both of these goals can be reached with a B2B e-commerce solution combined with PunchOut solutions.

Let’s take a look at why companies are turning to e-procurement systems and how PunchOut websites can help organizations reduce costs and improve operational workflows today!

What Is An E-Procurement System?

Electronic procurement is the process that corporations, government agencies, and other large institutions use to order items for operational needs.

For example, if a department in a large company needs to order more paper clips, an employee can use the procurement system to find, research, and order paper clips for the department.

This process may sound similar to an individual jumping onto Amazon or Walmart.com to buy personal items. However, B2B e-commerce requires an e-procurement solution with specialized functionality and customizations to regulate employee management policies, vendor agreements, and other spend management considerations.

From government agencies looking to save taxpayer dollars to large corporations that need a way to remain competitive, e-procurement systems support all organizations because they govern employee permissions, automate approval workflow, and reduce time wasted on inter-department communication.

Why Does An Organization Need An E-Procurement System?

An e-procurement system aims to streamline the process for employees to search, compare, and purchase items throughout an online store. This internal system operates a lot like traditional e-commerce websites with added layers of functionality to support the buying organization’s policies and regulations.

There are lots of moving parts in large organizations, and e-procurement systems can help companies overcome procurement challenges like:

Save Employee Time: The procurement process in large organizations can be long and tedious as employees have to check pricing, vendors, and compare to procurement policies manually.
Automate Approval Workflow: Sometimes, an employee will need to make a large purchase outside their budget permissions. Instead of wasting time with emails and phone calls, an e-procurement system will send a purchase request to the appropriate department manager for approval as needed. The system handles all the heavy lifting and communication so employees can focus on their job at hand.
Access Preferred Vendors: Organizations typically have preferred vendors to ensure low prices. An e-procurement system stores vendor contact information, payment terms, and other information for easy retrieval and review.
Improved Budget Control: Organizations are looking for ways to reduce overhead, and e-procurement systems ensure employees never spend more than they are authorized to spend.
Streamlined Record-Keeping: Once a purchase is approved, an e-purchase system handles the communication of purchase orders, shipping/receiving confirmations, and invoice management for accounts payable.
Preventing Dark Purchases: Dark purchases are items that are bought by an employee that falls outside of the organization’s defined procurement process. Dark purchases are uncontrolled costs, and companies can experience lost revenue if dark purchases are not controlled.
Resolve Sourcing Issues: Supplier management is a critical challenge for procurement professionals. E-procurement systems help organizations keep track of quality, vendor performance, and other complications.
Shortened Procurement Cycle: Sometimes, items are ordered with urgency, but the long purchasing process can end with employees not receiving their items for weeks or months after the scheduled delivery date.
Enforce Risk Management: All procurement processes contain inherent levels of risk to compliance, policy adherence, and conflict between participants.

While the procurement process is complicated, employees need to order the goods and services to do their jobs. Enterprise-level companies and organizations need a system to help employees purchase items from approved vendors and streamline the entire process.

E-procurement systems are a necessary component for all large organizations, and one way to support an organization even more is with the PunchOut solution.

What Is PunchOut?

Now that we have a solid understanding about what an e-procurement system is, what it does, and how it benefits suppliers and buyers, we can jump into PunchOut for ERPs.

PunchOut is an electronic communication system between the buyer’s ERP system and a supplier’s e-commerce store. This e-commerce mechanism provides direct access to a supplier’s catalog through the buying organization’s procurement application. PunchOut websites streamline the purchasing process as it automates catalog integration.

The term “PunchOut” was initially developed in 1999 by Ariba as a way to connect ERP applications to e-commerce hubs. Ariba, now owned by SAP and known as SAP Ariba, named the process “PunchOut” because users would literally “punchout” of their procurement application to access the supplier’s catalog, then “punch” back in to process the order after checkout.

PunchOut makes it fast and easy for employees to browse available items on a supplier’s website directly through the organization’s existing ERP or e-procurement system.

PunchOut handles communication between the buyer and seller to display specific information like items, prices, and purchase terms, so buyers have access to information they need to streamline the procurement process.

What Are The Benefits Of PunchOut?

Employees who need to purchase goods or services for their job usually can’t just go to Walmart or Amazon to complete the purchase. Organizations want employees to work with approved vendors to secure products at a predetermined quality and reduce costs compared to B2C solutions.

In most cases, corporations, governments, and large institutions have rigid policies for approved budget, preferred vendors, and department regulations around buying goods and services throughout the year. PunchOut helps organizations of all size streamline their procurement process with benefits like:

Save Money: Electronic catalogs like PunchOut offer substantial savings on goods for B2B purchases due to the reduced labor costs and the automated process. These savings are passed on to organizations to secure discounted costs from large suppliers.
Save Time: PunchOut eliminates the need to manually import a supplier catalog into your organization’s procurement system. The constant connection between your organization and the stores of your supplies means that you will save time, money, and resources since PunchOut automates the entire process!
Real-Time Updates: PunchOut Catalogs use enhanced interfaces to display items, prices, and availability in real-time based on employee permissions. This means you won’t have to update vendor catalogs nor worry about outdated information manually!
Improve Order Accuracy & Speed: PunchOut helps everyone throughout the procurement process. For buyers, this catalog makes it easier for employees to find approved items to buy. For sellers, a PunchOut catalog reduces the time and resources to process purchase requests and handles records and notifications with the buyer.
Centralized Solutions: Organizations can benefit in numerous ways by using PunchOut to create a single solution for their procurement needs. With an automated system, companies can keep all information updated and manage vendor catalogs with ease.

Once items are purchased, PunchOut relays information about the shopping cart back to the organization to confirm financial approvals. This process also helps ensure purchases and approvals follow the organization’s standard workflow steps set out by the Chief Procurement Officer and department managers.

How Does PunchOut Work?

A PunchOut catalog is built on a standard format used by most procurement systems called Open Catalog Interface (OCI). More accurately called a PunchOut website, this site looks like an e-commerce website but adds unique functionality to communicate with procurement systems directly through cXML.

While it may seem complicated, at its base, PunchOut takes a seller’s e-commerce site and puts it inside the buyer’s procurement system. Unlike hosted catalogs, PunchOut does not require buyers or sellers to manually update information between their systems. This means that the buyer’s purchasing system will always have accurate information to prevent complications throughout the procurement process.

Here is a quick overview of the primary points of communication between all aspects of a PunchOut website:

Connect: Employees use a purchasing system to navigate their B2B shopping experience when they need to buy goods or services to perform their job. B2B customers can access product catalogs and data through PunchOut integration with you and the supplier’s e-commerce store.
Data Transfer: PunchOut sends a PunchOut Setup Request (PSR) message to examine incoming data and route to the correct supplier catalog. PSR is usually formatted in specific commerce extensible markup languages like cXML or OCI.
Shop: Once connected, users can interact with a buyer’s e-commerce site quickly and easily. Once they find the goods and services they are looking for. Users can checkout with the items in their shopping cart. Users have their shopping cart items transferred to the buyer’s procurement application for processing.
Purchase Order: Once transferred to the buyer’s e-procurement system, the PunchOut solution guides workflow automation behind the scenes like checking approvals and accounting information. Once everything is approved, the buyer’s ERP sends the order through your fulfillment process.
Shipment Notice: A PunchOut website sends communication between the supplier’s eCommerce platform and the buying organization throughout the entire shipping process. PunchOut catalogs send notices between the seller and buyer so all parties can track packages in real-time.
Invoice & Reporting: Once items are delivered, the PunchOut site will relay information about the requisition back to the buying organization. This information will be used for accurate reports, budgets, and enterprise resource planning.

A PunchOut website uses various connections and automation processes to make requisition easier for everyone throughout the procurement process.

PunchOut Integration Next Steps

As discussed above, PunchOut integration offers to spend management, streamlines workflow, and reduces turnaround time for buyers and sellers. As more customers see the benefits of a PunchOut website, sellers need to meet customer demands while maintaining customer satisfaction.

The good news is that PunchOut integration is affordable and efficient for all parties when handled by a professional. The process is pretty straightforward, but you will need to ensure that all the Commerce Extensible Markup Language details are set and communication protocols are made across both systems.

Our team of PunchOut experts are ready to help you and your customers build PunchOut integration for your B2B eCommerce solutions today!

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