Procurement teams rely on a multitude of frameworks to source and supply needed goods, services, and raw materials.
A direct purchasing system (DPS) is a contemporary mode of procurement that has been adopted by numerous enterprises.
Explained simply, a direct purchasing system is an automated system that vendors can access at any time.
This ‘free market’ concept makes it possible for buyers to have immediate access to a group of pre-qualified vendors.
Direct purchasing systems are not standard. There are different DPS according to what is being sourced. Therefore, you can find direct purchasing systems for raw materials, services, and for goods.
In a typical direct purchasing system, you can peruse over suppliers and narrow down your search according to price points, location, and respective contract values.
Procurement teams can make use of DPS to create a curated list of vendors that they will either request proposals from or invite to a reverse auction. These aren’t all the benefits for vendors though. Here are additional ones.
Advantages of Being on a Direct Purchasing System for Vendors
1. Suppliers don’t have to submit multiple proposals
Filling out requests for proposals can become tedious for vendors. That’s why when working on a direct purchasing system, life is easier. This is because they no longer have to provide evidence of capability every time they wish to compete for a contract.
2. Supplier approval process is typically faster
As a supplier, there is nothing as tiresome as having to wait for approvals. Thankfully, direct purchasing systems have done away with legacy frameworks with their slow, often-times manual approval processes.
With a modern DPS solution, suppliers can know within a relatively shorter time frame whether they’ve made it onto the next bidding stage or not.
3. DPS improve chances for smaller vendors
A lot of enterprises often have strict criteria that disqualify small-to-medium vendors who might be able to compete with the bigger suppliers. However, a direct purchasing system can act as a leveling ground improving accessibility for SMBs.
The important thing here is the fact that a DPS can give an upcoming vendor a shot at landing a contract that might have been impossible to bid for before.
4. Individual tender awarded fairly quickly
Another advantage afforded vendors by direct purchasing systems is the relatively quicker awarding of contracts and tenders.
Because a DPS solution makes it possible to streamline various stages in the procurement life cycle, procurement teams can select vendors faster and get to contract management quicker.
5. A DPS system is almost always open to new vendors
Direct purchasing systems don’t have a cutoff point. Carrying capacity is limitless so there will always be room for new suppliers. This means that potential vendors can register themselves and have a chance at winning the contracts on offer.
6. Vendors can enter themselves into multiple categories
A direct purchase system can complement the growth of vendors. When suppliers start to offer more services, they can apply to be added into more categories within the DPS. So, as vendors grow and expand so too do their opportunities on the direct purchasing system.
Advantages of Buying Through a Direct Purchasing System for Buyers
What do buyers have to look forward to when purchasing through a DPS? What are the associated benefits? Let’s explore.
1. A DPS is equipped with generic service specifications buyers can tailor
A direct purchasing system is established on general service specifications. This allows buyers to tailor the specifications of what they want so they can match with the most appropriate vendors. This is an extremely convenient feature within the DPS.
2. A DPS fosters healthy competition allowing buyers to get fair prices
Buyers are concerned about keeping purchasing prices low. DPS solutions are designed to encourage healthy competition between vendors. The fact that there are no strict specifications means local suppliers are able to register and join the direct purchasing system at any time.
3. Buyers can invite their current providers and have them compete against other suppliers
Another fantastic benefit provided to buyers purchasing through the DPS is that they can request their current service and goods providers to also apply to join the DPS. Why?
Because not only does it force these service providers to become more competitive but it also motivates them to improve their service offerings if they hope to remain clients of the buyers. This is a great way to boost the supplier management relationship.
Learn more about What is Supplier Relationship Management (SRM)?
4. Suppliers are constantly being spot-checked ensuring that only serious vendors remain
For vendors, being on the direct purchasing system is like having a mirror constantly held up in front of them. There are numerous quality control and spot checks that take place throughout the life cycle of the DPS. This gives buyers peace of mind knowing that the suppliers that they see within the DPS have been vetted rigorously and will be able to meet their needs.
The Bottom Line
A direct purchasing system can be a game-changer for a procurement team that’s resource-poor or pressed for time. It can eliminate several steps within the vendor sourcing life cycle and speed up the search for a qualified supplier streamlining the procurement process.
If you’re looking for reliable, robust, and innovative purchasing management solutions look no further than ProcurePort. Our software is trusted and used by enterprises and organizations such as UNOPS, HUD.GOV, and conEdison.
To discuss procurement software with a consultant or to schedule a demo of our solutions, contact us today.