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
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
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
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
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