Definition Why should I use a back office order system

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Definition Why should I use a back office order system Powered By Docstoc
					                   Title:   Back office ordering – Overview of a solution
         Identification:    Technical overview
              Version:      V.1
         Date of Issue:     June 2003
        Current Status:     Approved
          Prepared By:      Strand 4, Kirklees Metropolitan Council and iMPOWER

A back office order system is an ordering application included within the back office systems of an

Similar terms

        ERP procurement module
        ‘Bolt-on’ procurement
        Stand alone procurement module
        Procurement module
        In-house procurement
        E-procurement

A back office order system can be:
     A module of an enterprise resource planning (ERP) system
     An additional module offered with a Financial system product
     An ordering system that sits within an organisation’s IT infrastructure, possibly integrated with its financials
     A stand alone ordering system that it is not necessary to integrate.

A back office ordering system may be similar to an e-marketplace in that it enables users to create electronic
purchase orders. Some systems may also include catalogues of suppliers’ products. Most systems will include
workflow functionality to control levels of spend by individual and direct electronic orders to the appropriate
manager for approval.

Back office ordering systems do not provide the facility for suppliers to access the system in the way that e-
marketplaces do, but rather focus on buyer-side control and recording of purchase orders and delivery

Why should I use a back office order system?
Business Benefits

        Savings from process automation and streamlining approval process and raising orders
        Improved control of spending and reduction in maverick spending
        Improved management information, reporting and analysis capabilities
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       Potential for reduced end-user training costs if the module has a familiar user interface (if same vendor as
        other back office systems)
       Automation of three way matching process for orders, invoices and delivery notes
       May be included free of charge if included as part of new Finance system

The main benefit of implementing a back office ordering system is to replace paper-based requisitioning
processes, which are labour intensive, take a long time to complete and are prone to errors.

A back office ordering system may allow users to record orders by inputting purchase order details electronically.
This may include selecting products from electronic catalogues or inputting product codes. Users can also receipt
orders electronically in the system against the original electronic purchase order.
 Systems may include automated workflow enabling electronic approval of purchase orders before they are sent to
a supplier.

By holding all order data electronically in one place organisations can report on spending and have good visibility
of who has been spending on what with which suppliers.

By mandating the use of an order system and limiting the suppliers available to include only those contracted by
the buying organisation, an organisation can achieve better contract compliance giving it better value-for-money
from those contracts.

How is a back office order system used?
Back office order systems may be offered as add-on modules to existing ERP or back office financial systems.
They may also be offered as stand-alone procurement applications which may be integrated with finance systems.

The steps involved in using a typical back office ordering system for making purchases are:

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                                                             1. Buyer accesses the procurement application from their PC
                        1. Access ordering application          desktop
                                                             2. Buyer selects the required product from the catalogue or enters
                                                                product code
                                                             3. If authorisation is required, the order is routed to the appropriate
                                                                approver who accesses the order via their PC to approve
                         2. Select product from
                                catalogue                    4. Once the order is approved it is printed and either posted or
                                                                faxed to the supplier, or the buyer may phone the order to the
                                                                supplier. In some cases it may be possible to forward the order
                                                                electronically via e-mail or use XML based messaging
                                                             5. Once the goods are delivered the buyer can receipt the goods on
                         3. Send order for approval
                                                                the procurement system on their desktop
                                                             6. With integration to finance systems the electronic purchase order,
                                                                delivery receipt and invoice details can be matched before
            Fax      email                                      payment is sent to the supplier
                        4. Send order to supplier

                        5. Receipt delivery of
         Receiving         ordered goods

                                                         Where an order system has catalogue functionality, these can be
   Back Office System
                        6. Three way matching
                                                         uploaded into the system with the supplier supplying updates to the prices
                       performed by the system           when necessary. Some back office order systems provide punch-out
                                                         functionality, which allows access to selected suppliers’ online catalogues
via the Internet.

Key things to look out for and think about
Typical Features

Some of the most common features of a back office ordering system include:

         Electronic order creation and receipting
         Free text order specification
         Workflow for order authorisation
         Spend analysis
         Business rules engine for user and ledger profiling
         Electronic catalogues, including punch-out functionality
         Management information and audit trail

If the system does not support punch-out functionality the buyer may consider asking the suppliers to create and
maintain their catalogues for the use on the buyer’s system.

Some systems do not extend the electronic order process further than creating an order and a commitment in the
accounting module. In that case, the order needs to be printed and sent by post or fax.

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Integration Opportunities

Back office ordering systems can offer integration opportunities with other back office systems. These may include
integration into the financials or HR modules to manage individual employee’s spending limits. This is valuable to
enable commitment accounting facilities whereby when an electronic order is approved a commitment is made in
the finance system. Integration with finance can also enable control of budgets by department or cost centre.

Effort and Cost
The effort and cost of implementing and operating a back office ordering system will vary depending on the vendor
solution, the complexity and level of integration offered. The annual licensing costs for the larger ERP vendor
products tend to be quite high. Implementation can require expensive consulting services.

Since most of the back office ordering systems are installed on the buyer’s servers and not hosted there are costs
associated with on-going maintenance and regular upgrades.

It should be noted that any integration with other back office systems will require custom programming. Even were
the back office order system is from the same vendor as existing finance systems, integration will take effort and
may be costly.

                   This document was produced on behalf of Kirklees Metropolitan Council by:
                             iMPOWER, 40a Dover Street, London, W1S 4NW

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