First step to spend management
With the evidence gathered, the first step is to establish a baseline in which an organisation identify the existing spend management position and measure performance against internal targets and industry standards. The needs of the organisation and set goals and strategy for achieving them must be defined, without embarking on a monolithic re-engineering project that is costly and time consuming.
This requires a clear idea of the organisation's global structure, including local behaviours that it makes sense to preserve, and elements that are ripe for collaboration and cost saving throughout the organisation. For example, it might be appropriate to decentralise Accounts Payable or Procurement spanning across multiple sites and/or divisions in the same geographic area and deliver them as shared services across the Group.
Whether the model is based on a set of common processes or the principles of shared service, it will require a supporting system that enables spend and procurement management across territories. Language independence means it will be equally accessible to every user, allowing the mixing and matching of local and global suppliers, thus enabling an appropriate level of local autonomy, integrating easily with the variety of underlying ERP and business systems and accommodating local tax and currency regulations.
Fragmented ERP systems
COOs might believe that this is already available within existing ERP infrastructures. But closer inspection will probably reveal that globally, this is highly fragmented with territories and countries all running their own systems and favouring different ERP and financial system brands. Further complications will almost certainly include various charts of accounts and different business processes - all the consequence of growth through acquisition.
The problem is that most eProcurement systems and ERP modules are developed to address the needs of the ideal - a single financial organisation with one set of ledgers. And the reality could hardly be more different.
In addition, many of these systems cover a broad function scope and offer a degree of integration across their different applications. Yet this breadth often leads to a lack of focus on issues such as bringing 'maverick' spend under control, giving visibility of the cost pipeline and delivering economies of scale.
This is where infinitely configurable, best-in-class spend management and procurement solutions offer advantages and should be considered in an international initiative.
Resistance from territory managers
Once a system choice has been made, there may still be resistance from Territory Managers who see it as a threat to their autonomy. Just because the Board is convinced about a rapid global return on investment, it doesn't follow that everybody else will fall into line, particularly when they are concerned about protecting their own Profit and Loss (PNL).
They might see pressure to deploy the ERP procurement module as using a sledgehammer to crack a nut and, even whilst they are paying their share of the system's cost, they would rather pursue a different solution that is less likely to impact on their established methods of remuneration.