Achieve rapid returns through procurement evolution
By Ilija Ugrinic, UK Market Director at Proactis
As with all business processes, procurement is constantly evolving. And the success of this rests on a foundation of smart digital strategy. Like traditional business strategy, digital is about making wise investment choices to maximise competitive advantage, growth, profit, and value - and then implementing effectively.
The Procurement process in particular, which combines sourcing, supplier management and contract management, is a delicate balancing act.
On the one hand, you need to ensure your organisation gets the best value from the goods and services you buy from qualified suppliers and approved contracts, obtained using the most appropriate types of sourcing events. On the other hand, decisions must be weighed against a range of important factors, such as whether the supplier is compliant and meeting performance standards and has the most up-to-date credentials.
Where to start looking?
Consider where you are today. Are you starting from a manual point? This is fine as it’s a starting point. Have you adopted purchase ordering via an ERP system? This is also good because you're starting on a journey of automation.
A helpful way to assess the success or otherwise of your current procurement strategy is to benchmark your processes according to 'maturity' levels, but regardless of where you stand in terms of developing your organisation’s vision for spend management, you almost certainly have things you know you can do to improve effectiveness.
- Increase procurement capacity.
- Build more procurement talent.
- Standardise on procurement best practices.
- Improve transparency and repeatability.
Let's consider three examples.
- Within sourcing, the business of running events is a good indicator of maturity. Some organisations handle these on an ad-hoc basis. Departments may be in the driving seat, with little involvement from Procurement. The processes used each time may be inconsistent and have little transparency. In contrast, an advanced level of maturity would require an open sourcing event process that follows standardised electronic processes and involves collaboration between teams.
- In the area of supplier management, communications can be an area that devours resources. There's a big difference in maturity levels between enterprises that struggle daily with mail, email and phone — and those that use a suitable network.
- With contract management, one area where maturity varies can be the integration of contracts with Procure-to-Pay (P2P) processes. When organisations are struggling in this area, buyers cannot see approved contracts easily. However, when P2P integration is achieved, purchasers will make use of pre-negotiated agreements set up by the Procurement function to capture savings.
These are just a couple of examples of how understanding where you are can help you map out what you need to do next, and when. And it’s not just about putting in some technology and hoping it’s a “magic bullet” that makes you better overnight. You are only as good as your inherent processes, and technology is simply the enabler to that cycle.
When Procurement is managed in a highly manual and ad-hoc fashion, the results will be extremely costly in terms of lost time and money. But things can be turned around with the right approach: Basic improvements will make a big difference, a more structured approach will help you to turn the corner, while an integrated and highly automated strategy will improve performance radically.