PROACTIS Blog

No Room for Compromise: Best-in-Class eProcurement

Charlotte Sutton
Charlotte Sutton,
PROACTIS
If your drive to implement a comprehensive Spend Control strategy is urging you to reassess the eProcurement module that lurks unexploited in the depths of your existing ERP system, it might be time to think again.
Indirect spend control has the potential to deliver instant business-wide savings to the bottom line - as long as it embraces the complete procure-to-pay cycle. ERP systems will certainly address fragments of the cycle. But rooted in manufacturing and distribution, they lack the nimble, flexible and holistic capabilities required to manage the procurement environment of today's service-oriented business environments.

Pressure to take the ERP route
The pressure is certainly on to take the ERP route. After all, that's where the historic technology investment has been. Different voices will shout about what they consider to be the best options for quick-win solutions. Accounts Payable will demand point-solutions for example, eInvoicing to lower their in-tray. And IT will invariably want to rationalize existing systems suppliers.

But Accounts Payable is just one element of the complete expenditure cycle, and IT is hardly where most uncontrolled spending actually takes place. If you make spend control a slave to your choice of technology rather than a considered process redesign project, you could compromise a major opportunity to take complete control of the procure-to-pay cycle across your organization for the very first time, delivering total financial visibility and meeting the challenge of managing 'maverick' spend head-on.

Unexploited opportunities
This is an opportunity that a best-in-class eprocurement platform is designed to exploit in its own right, unlike modular and disparate ERP procurement systems, which might only monitor certain elements of the cycle and probably come late to the party and only then through acquisition to the ERP vendor's portfolio. Check when they last underwent a major technological enhancement and you will probably find that it's been several years.

The scale of this unexplored opportunity is enormous. Up to one third of large enterprises have yet to buy any kind of eProcurement system, and a quarter of them are not using any kind of eProcurement tools. As many as 60% of ERP customers eProcurement licenses have not yet been installed, and there could be a very good reason why the ERP option has lain dormant since the main system was implemented.

ERP: A legacy of dashed expectations
ERP implementations tend to create their own legacy of dashed expectations: longer-than-expected projects that exceed budget, relatively low satisfaction rates (13% according to one recent report, a lack of employee buy-in - ERP systems are notoriously finance-focused, owned and delivered by MIS and tricky for non-IT literate users to adopt, and a low ratio of benefits realized.

And while there is no doubt that ERP systems have extensive operational data gathering capabilities, their technology focus rarely allows them to use that data to enable a transparent and accurate view of the entire procure-to-pay process. If you take this route to spend control and allow technology to drive the project and replicate what you are already doing, you risk missing some of the key benefits you are setting out to deliver.

Compliance, which should be a major goal for any expenditure cycle management project, can only be encouraged and enforced if the eProcurement platform incorporates appropriate enterprise-wide spend controls, authorization rules and budgetary constraints, for example. And with the pressure on to deliver quick results, the risk of embarking on a potentially lengthy and complex ERP integration project throws the likely benefits of a best-in-class eProcurement system strategy into an exciting new light.

Where ERP systems tend to lack the workflow rules that enable a complete set of business benefits to be realized, purpose-built eProcurement systems use workflow to enforce electronic authorization, regardless of how complex the organization's spend control hierarchy might be. And if they are easy to use, 'maverick' spenders will buy in to the strategy more readily. Employee workarounds that you previously never had sight of until the order was received will be no longer.

What's more, as senior decision makers look to Procurement to deliver rapid cost savings, expectations of the chosen underlying system rise accordingly.

Managing working capital carefully
Managing working capital more carefully - and delivering savings to the bottom line - requires flexible payables automation so that spending cuts don't disrupt the business or its services. Spare capital can be put to work, financing early payment to suppliers - but only if the supplier data is properly captured and managed. This is meat and drink for the best-in-class eProcurement platform that has been designed from the ground up to encompass these degrees of complexity.

Many organizations have invested in technology to manage purchases after the event, but they rarely think about taking this to the next level. Take supplier or contract management, for example. There might be thousands of records in the ERP system database but the information they represent is untapped. How many of them are duplicated? What type of relationship do they represent? How could they be used to rationalize an authorized list of suppliers? Answer these questions and a vital link in the expenditure cycle will fall into place. By investing in a best-in-class system, an organization could itself establish best-in-class credentials for the way it manages its suppliers.

Financial controls that prevent the issue of duplicate invoices, automated invoice matching with orders, goods received and payment schedules, comprehensive reports that are delivered via the latest web technology and incorporate key pipeline data - so often missing from disparate and multiple types of ERP systems lurking in the depths of the organization - these are all deliverable by best-in-class platforms from the moment of implementation.

Why compromise with ERP?
When it comes to seizing the chance to take control of the complete expenditure cycle on this scale, why would you compromise? Particularly when it also constitutes a great opportunity to consolidate the way your existing ERP investment underpins the business. ERP alone can't cure a 'maverick' spend epidemic but an integrated best-in-class eProcurement/ERP partnership offers a potentially mighty solution that could bridge the considerable Spend Management gaps in a 'pure' ERP system.

Leverage existing ERP investments
Consider using the eProcurement system as a front-end requisition engine, feeding into your established ERP modules. These were never designed as intuitive interfaces and will always be anathema to casual users, who will habitually find ways to work around applications they don't understand and will consequently make themselves invisible to Finance. An eProcurement system will drive compliance and authorization.

Even as an interim solution, without the significant overheads of an ERP implementation, a best-in-class system can deliver immediate and significant cost savings. Once they are established as a mechanism for streamlining the complete expenditure cycle, proving them on the CAPEX front and delivering quick savings to gladden the heart of the most cynical CFO, many organizations decide to continue using them.

Best-in-class: ahead of the curve
Because best-in-class vendors are constantly refining and adding to their technological capability, new modules that enhance the value of the investment and lower the risk of driving through a Spend Management strategy emerge regularly, giving more choice in terms of scale, implementation and integration.

Let's face it best-in-class vendors, like PROACTIS, eat, sleep and breathe Spend Control and eProcurement. Can your organisation really compromise when it comes to the cost-containment agenda?