Software special: procurement

There’s nothing like a good crisis to focus the minds of organisations. Now, more than ever, you need to control costs and manage cashflow, and procurement is one of the most critical business areas for attention.

A well-run procurement function with the necessary systems and processes in place can be used as a business lever to achieve both compliance and cost savings at the very least.

Procurement procedures have traditionally been admin intensive, manual processes involving a lot of paper. However, systems have moved on and can enable you to enhance procurement transactions and processes.

Early adopters tend to see e-procurement as an operational level activity and do not see it as a way to realise strategic benefits. A period of economic instability like we are seeing now provides a great opportunity for revisiting this and generating measurable benefits.

Form and function

Procurement is a larger concept than just purchasing. There are various software products designed to address procurement, but they all mainly focus on purchasing.

Some large vendors supply a platform that will give you all the procurement functionality that you need but at a huge cost. This is not just in terms of cash but also has enormous resource and business change implications.

What is needed is a suite of applications that the procurement function can pick and choose from to suit the company’s needs as they arise.

Previous research has shown that organisations will achieve varying levels of success as they try to improve agility and flexibility through the implementation of e-procurement technology. It is important that new technologies introduced into organisations are well-designed and that they actually support users in conducting their day-to-day tasks more effectively, thereby genuinely contributing towards organisational goals.

When embarking on a procurement technology project, the organisation needs to be prepared to replace traditional bureaucratic purchasing processes and hierarchical structures with flexible, decentralised processes and alliance-based structures. We know that technology alone is insufficient for the success of e-procurement implementation. It must be accompanied by a thorough analysis of processes, structure and organisational culture.

Traditionally, it has been difficult to put a single procurement system in place across the whole organisation. Non-finance users (especially buyers) are often reluctant to learn a ‘finance’ system that is not tied into their needs or ways of working, just in order to raise and track purchase orders.

Collaborative procurement, using everyday desktop tools is now possible and is more important than ever in a business environment where we need to remove all operational inefficiencies. The introduction of a dedicated procurement function to help put this into place could be a wise investment.

Your procurement ‘champion’ needs to focus on four key areas:

• Cost. This is not just about the cost of buying good and services ­ although this is very important ­ but it should also include the cost of the procurement function. Is the organisation getting value for money?
• Strategy. Is the procurement function being operated effectively and at an appropriate strategic level?
• Management. Is the procurement function well managed?
• Communication. What forms of communications are in place to and from the procurement function? Are reports and business intelligence adequate and readily available?

Everything at your fingertips

Procurement management data is essential for all companies looking at procurement as a way to drive operational efficiencies. Wouldn’t it be great if a procurement manager sat at his PC in the morning and had all the business information he needed at his fingertips and on one easy-to-read screen? Wouldn’t it be great if he then had the ability to run off reports to show where procurement work has been effective and where most effort is needed going forward?

Technology exists to do this and can help stop the costs associated with recording and processing purchasing transactions from spiralling out of control. For many organisations, key elements of the procurement process (for example, the early ‘buying’ stages of supplier selection and negotiation of terms) happen in separate systems.

This makes it difficult to ensure compliance, monitor supplier performance or get a clear, consistent view of the whole purchasing process and why particular purchasing decisions were made.

Procurement is much more than placing and tracking purchase orders. By extending the benefits of more streamlined and effective purchasing and requisitioning across your entire organisation (and beyond), procurement systems can deliver huge savings in time and administrative costs and the ability to measure supplier performance accurately ensuring that all elusive value for money. Fully integrated with your ERP or accounting system, they avoid islands of information and supplicated effort, vastly reducing the amount of manual entry and rekeying of data.

Tony Morris is lead consultant for the Agresso/CODA Procurement Centre of Excellence