Streamlining Procurement Using Requisition Systems - Complete Guide for 2024

Requisition systems are growing in popularity in procurement circles, owing to their ability to reduce manual work, improve policy compliance, and provide greater spend visibility. In this guide, we'll dive deep into what requisition systems are, how they work, the benefits they offer to both procurement teams and the wider organization, potential drawbacks to consider, and best practices for implementing them successfully.

Requisition system meaning: what is a requisition system?

A requisition system  is a type of procurement software that provides a centralized platform for employees to request goods and services, route those requests for approval, and generate purchase orders to vendors, streamlining procurement from end to end.

The procurement process in many organizations, especially those that still rely on manual or paper-based workflows, can be slow, tedious, and opaque. Requisitioners fill out paper forms and must chase down managers for physical signatures. 

Procurement teams spend hours manually entering purchase orders into financial systems. There is little visibility into organizational spending until an invoice arrives. Bottlenecks and off-contract purchases are common.

Requisition systems aim to solve these challenges by digitizing the entire workflow on a cloud-based platform. They allow organizations to configure robust approval hierarchies and automate the application of purchasing policies. They reduce manual work, improve efficiency, and provide real-time visibility into spending.

Examples of requisition system functionality

While exact capabilities vary by software provider, most enterprise-grade requisition systems offer the following key features:

Guided buying and requisition management

• Punch-out and internal catalogs allow users to easily search for and compare items
• Guided requisition forms ensure requesters fill out all required fields like item description, quantity, need-by date, and cost center
• Configurable business rules automatically apply purchasing policies and route requisitions for approval

Automated approval workflows

• Requisitions flow through pre-defined approval chains based on configurable criteria like requester department, dollar amount, and commodity type
• Approvers are automatically notified and can approve, reject, or comment on the request electronically
• The system tracks approval status and sends reminders to keep the process moving

Purchase order automation

• Fully approved requisitions automatically flip into purchase orders, pulling in pricing and vendor details
• POs transmit to suppliers via email or direct integration (e.g., cXML, EDI)
• The system tracks PO acknowledgment status, change orders, and other PO-related documents

Receiving and invoice matching

• Receivers can confirm delivery of goods/services in the system and note any discrepancies
• Procurement can flip the PO into an invoice and/or match vendor paper/e-invoices to POs and receipts
• Matched invoices flow automatically to Accounts Payable for processing and payment

Spend analytics and reporting

• Dashboards provide real-time visibility into in-flight requisitions, POs, and invoices
• Procurement can track spending by category, supplier, business unit, and more
• Reports identify maverick spending, price variance, fulfillment issues, and savings opportunities

Requisition system vs purchase order system vs procurement software

The terms "requisition system", "purchase order system", and "procurement software" are often used interchangeably, but there are some nuances in meaning:

• A requisition system focuses primarily on managing the internal purchase request and approval process. Its core functions are creating and submitting requisitions, managing approval workflows, and generating POs from approved reqs.
• A purchase order system emphasizes features related to managing POs after they are created. This includes sending POs to vendors, tracking acknowledgments and PO changes, and matching invoices to POs.
• Procurement software is a broader term that encompasses the full spectrum of tools used to manage both indirect and direct spend, from spend analysis to sourcing to contract management. Requisition and PO management are key components.

In practice, most modern procurement solutions combine the functionality of both requisition and purchase order systems, handling the entire end-to-end workflow from request to receive. 

A requisition system and a PO system are two sides of the same coin, you generally don't have one without the other. The key distinction is that a req system manages the process before the PO is created, while a PO system handles what happens after.

How does the requisition process work?

Let's walk through the typical steps in a requisition workflow powered by a modern requisition system:

Requisition creation: 

An employee, usually called the requester, creates a new requisition in the system by filling out an electronic web form. They specify what items are needed, the quantity, delivery requirements, suggested vendors, and relevant accounting details like cost center. Some systems allow users to shop from catalogs.‍

Requisition approval: 

Once submitted, the requisition automatically routes to the appropriate approver or approvers based on pre-configured business rules. For example, requisitions over $1,000 may require department head approval. The system notifies each approver in the chain and allows them to electronically approve, reject, or send back the request for changes.

PO creation: 

Once the requisition has received all required approvals, the system automatically generates a purchase order (PO) using the information from the requisition. The PO may route internally to Procurement for a final review before being dispatched.

PO dispatch: 

The PO is sent electronically to the vendor for fulfillment, via email or a direct integration like EDI or cXML. The system tracks the PO acknowledgment status and any changes or cancellations.

Receipt and invoice capture: 

When the goods are delivered or services performed, the requester or a receiver confirms receipt in the system, noting any discrepancies with the PO. Procurement flips the PO into an invoice and/or matches the PO to the vendor's paper or e-invoice.

Invoice approval and payment: 

Matched invoices flow to Accounts Payable, where they may go through additional approvals before being posted to the ERP and released for payment.

The exact process and workflow can be configured based on an organization's unique policies and requirements. 

But the general idea is that the requisition system automates the process from intake to payment, with pre-defined rules and digital audit trails governing each step along the way.

The benefits of requisition systems for the business

Requisition systems deliver significant advantages and efficiencies over manual procurement processes:

Greater spend control and compliance

With standardized digital forms, automated rule-based workflows, and real-time visibility, requisition systems make it much easier to control organizational spending. Procurement can ensure purchases are being made from approved vendors at contracted prices. Configurable approval hierarchies mitigate the risk of unauthorized or unnecessary spending.

Increased productivity and reduced cycle times

Automating manual steps like filling out paper req forms, physically tracking down signatures, and keying POs into financial systems frees up enormous time for employees, approvers, and the procurement team.

Improved spend visibility and data accuracy

With all purchasing activity flowing through a single platform, procurement gains real-time visibility into every dollar of spend. Leaders can easily track total spend, identify top categories and vendors, monitor budget consumption, and spot savings opportunities. Digital requisition data also ensures greater accuracy and completeness compared to error-prone manual data entry.

Hard and soft cost savings

Requisition systems deliver hard dollar savings by reducing maverick spending, increasing on-contract purchases, and preventing invoice errors. A Levvel Research study found that organizations can save an average of $15 per PO by using e-procurement software. There are also significant soft cost savings from improved productivity - Levvel estimates an efficiency gain of 30-50%.

Better risk management and compliance

Requisition systems create a digital audit trail of every purchase request, approval, and order. This is crucial for complying with Sarbanes-Oxley requirements, as well as internal purchasing and accounting controls. Capturing all spending in one place also makes it easier to identify potential fraudulent activity.

The challenges and downsides of requisition systems

While the benefits generally far outweigh the drawbacks, there are some potential downsides to requisition systems that organizations should be aware of:

Change management challenges

Moving from manual procurement to an automated system is a significant change that can encounter employee resistance. People may be hesitant to give up paper-based processes they're accustomed to. A strong change management plan that focuses on training, communication, and securing early wins is critical.

Integration issues

To achieve a truly seamless procure-to-pay process, the requisition system must integrate with the organization's ERP and accounting systems. This can require significant IT resources and a phased rollout approach. Challenges with master data management and process standardization can also arise during integration projects.

Reduced flexibility for some purchase types

Requisition systems are ideal for routine, recurring purchases of goods and services with clearly defined specifications. But they can be overly rigid for complex, strategic purchases that require more nuance and human touch. Purchases like marketing services or construction projects often require more back-and-forth with vendors to define requirements.

How to implement a requisition system: key steps

Implementing a requisition system is a significant undertaking, but one that pays major dividends. Here are some best practices to follow:

Define user requirements and process flows

Thoroughly document your organization's current procurement processes, approval hierarchies, and purchasing policies. Gather input from key stakeholder groups like Finance, IT, and Legal on their needs and requirements. Use these to develop a prioritized list of use cases and features for the new system.

Evaluate software vendors and implementation partners

Look for requisition system providers whose capabilities align closely with your business requirements. Consider factors like user experience, configurability, scalability, and security. Assess their implementation methodology and track record. Speak with references who have implemented the software in a similar environment.

Secure executive sponsorship and build a business case

Identify a senior executive sponsor who will champion the project and help secure necessary resources. Collaborate with the vendor to build a detailed business case that quantifies expected hard and soft savings in relation to software and implementation costs. Establish a strong ROI and payback period to justify the investment.

Plan a phased rollout

Attempting a "big bang" deployment of a requisition system across the entire organization is risky. Instead, plan a phased rollout focused on a subset of departments, locations, and/or purchase categories. Concentrate on a handful of high-value use cases and workflows. Establish clear success metrics to measure outcomes and make adjustments.

Invest in change management and training

Develop a comprehensive change management strategy that emphasizes the benefits of the new system for different user personas. Provide role-based training and quick reference guides. Identify "power users" within each function who can act as coaches and internal champions. Use metrics to monitor adoption and compliance, and implement gamification to drive desired behaviors.

Measure and Improve

Implementing a requisition system is not a "one and done" effort. Establish a dedicated procurement operations team to monitor system performance, track KPIs, and identify areas for improvement on an ongoing basis. Measure ROI and communicate success stories regularly. Keep a prioritized backlog of process and technology enhancements.

Integrating Requisition Systems with Other Procurement Tools

While requisition systems are a core component of the procurement tech stack, they're not the only tool modern procurement teams rely on. 

To achieve a truly integrated, end-to-end procurement process, it's important to understand how requisition systems fit into the broader ecosystem of procurement solutions.

Spend Analysis: 

Spend analysis tools aggregate, cleanse, and classify an organization's spend data to provide visibility into spending patterns, supplier performance, and savings opportunities. When you integrate spend analysis with the requisition system, organizations can drive more intelligent, data-driven purchasing decisions. Requesters can receive guided buying recommendations based on past spending data, while approvers can make more informed authorization decisions.

eSourcing: 

eSourcing solutions automate the strategic sourcing process, from supplier discovery and RFx management to auction hosting and bid analysis. Integrating an eSourcing tool with the requisition system allows organizations to easily route sourcing event awards into catalog content and preferred vendor lists in the requisition system. This helps drive greater adoption of strategically sourced contracts.

Contract Management: 

Contract lifecycle management (CLM) solutions help organizations create, execute, and monitor procurement contracts and agreements. Integrating the CLM system with the requisition system ensures that all purchasing activity is tied to an approved, active contract. The requisition system can automatically pull in contracted pricing and terms to ensure compliance.

Supplier Information Management: 

Supplier information management (SIM) solutions serve as a central repository for all supplier data, documentation, and performance information. Integrating the SIM system with the requisition tool ensures that requesters have access to up-to-date supplier catalogs and performance ratings when making purchasing decisions.

Accounts Payable Automation: 

Accounts Payable (AP) automation solutions digitize and streamline invoice processing, approval, and payment. A tight integration between the requisition system and the AP system is critical for an efficient procure-to-pay process. The requisition system should automatically flip POs into invoices and match them with receipts, so that AP can process payments quickly and accurately.

Avoiding Mistakes in Requisition Processes

Implementing a requisition system is a major step forward in digitizing procurement, but the system is only as good as the processes and policies that support it. Organizations can stumble in their adoption of req systems by making some common mistakes:

Undefined or overly complex approval rules: 

One of the biggest benefits of a requisition system is the ability to automate approval workflows. But this falls apart if approval policies are ill-defined or too complex. Organizations should take the time to clearly document their approval hierarchies and spend thresholds, and resist the urge to create too many specialized rules that create confusion for end-users.

Inadequate requestor training: 

A requisition system fundamentally changes how employees request purchases. If organizations don't adequately train requesters on the new process and tool, adoption will suffer. Procurement should work with HR to develop engaging, role-based training content and quick reference guides. Gamification and metrics-driven competitions can help drive adoption.

Failure to clean up master data: 

A requisition system is only as good as the data that feeds it. If vendor master records, item masters, and chart of accounts data are inaccurate or duplicative, it will undermine the effectiveness of the tool. Organizations should invest the time to clean and standardize their master data before implementing a req system.

Not establishing KPIs and monitoring adoption: 

Organizations often underestimate the amount of change management required to successfully roll out a requisition system. It's critical to establish clear KPIs around system adoption, compliance, and performance, and to regularly monitor these metrics. Procurement should work with Finance to incorporate req system metrics into regular business reviews.

Implementing in a silo: 

A requisition system doesn't operate in isolation. It needs to integrate with an organization's ERP, accounting, and other business systems to be truly effective. Trying to implement a req system without involving key stakeholders from IT, Finance, and Accounting is a recipe for failure. Procurement needs to collaborate closely with these functions to design integrated processes and systems.

Lack of supplier enablement: 

Requisition systems deliver the most value when they connect seamlessly to supplier catalogs and systems. But this requires enabling suppliers to integrate their product content and accept POs electronically. Organizations should develop a supplier enablement strategy in parallel with their req system rollout. This may include supplier training, compliance incentives, and technical support.

How Spendflo Can Help with Setting up Requisition System

At Spendflo, we help organizations streamline their purchasing processes and gain better control over their spend.

Here's how we can help you set up a requisition system:

• Our team of experts will work with you to understand your unique procurement needs and design a customized requisition workflow that aligns with your policies and approval hierarchies.
• We'll implement our cloud-based requisition system and integrate it seamlessly with your existing ERP and financial systems, minimizing disruption to your operations.
• We provide comprehensive training and support to ensure your employees adopt the new system quickly and effectively.

Curious? Talk to us now!

FAQs about Requisition Systems

1. What is the difference between a requisition system and a purchase order system? 

A requisition system manages the internal approval process before a purchase order is created, while a purchase order system focuses on managing the purchase order after it has been approved.

2. How long does it take to implement a requisition system? 

The implementation timeline varies based on the complexity of your organization's procurement processes and the extent of system integrations required. Typically, implementation can take anywhere from a few weeks to several months.

3. Can a requisition system integrate with my existing ERP system? 

Yes, most modern requisition systems can integrate with popular ERP systems like SAP, Oracle, and Microsoft Dynamics. This integration allows for seamless data flow and reduces manual data entry.

4. How much does a requisition system cost? 

The cost of a requisition system varies based on factors like the number of users, the complexity of the workflow, and the level of customization required. Most providers offer subscription-based pricing, with costs ranging from a few thousand to tens of thousands of dollars per year.

5. What are the key benefits of using a requisition system? 

The main benefits of using a requisition system include:

• Increased spend visibility and control
• Improved compliance with purchasing policies
• Reduced manual work and increased efficiency
• Faster requisition-to-order cycle times
• Better data accuracy and reporting

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