Category Archives: Generation Procurement

One Step Closer To Invoice Automation…

How can smart coding functionality take invoice automation one step further…?

Depending on your organisation, the maturity of your invoice processing is likely varied even across your own internal workflows for different invoice types.

And like many others in your shoes, your goal is to get those things as automated as possible – regardless of invoice type – and shoot for 100 per cent invoice automation. The good news is full invoice automation is an attainable goal with innovation available in e-invoicing solutions today like smart coding.

What is smart coding?

Smart coding helps customers further automate their invoice processing of non-PO invoices, going a step further towards touchless invoice handling. With smart coding, invoices that are not automated by purchase order matching, payment plans (schedule, budget or self-billing), or automatic coding templates can now be automatically coded with minimal human interaction.

Why should you care about smart coding?

Smart coding speeds up invoice processing and improves productivity.

Traditionally, non-PO invoices are automated with business rules that are very laborious to manage. Finding a correct cost allocation is typically a challenging task for employees who are not familiar with bookkeeping rules, especially when there is no purchase order to copy information from. It requires the AP clerk to spend a lot of focus on this type of invoices – researching the origination of the invoice, reaching out to others in the business to ask questions and making an educated guess as to the best place to code the invoice. All of this takes time and often delays payment of non-PO invoices.

Smart coding automates those manual steps, so employees can easily code an invoice with a click of a button to automate more of the process. The solution leverages big data to analyse historical transactions, ultimately providing a highly reliable recommendation to the user that can also be complemented with business rules. Not only does this simplify the process for the user and save time in processing the invoice, it also reduces the need for the AP department to rectify erroneous coding lines at month-end.

How does full invoice automation prepare me for the future?

Everyone is talking about machine learning and AI – and invoice automation and e-procurement are certainly areas of application for these emerging technologies. But there a couple of things you must do today to ensure you’re ready when those technologies become the new norm. Use smart coding to help you:

  1. Automate as much as possible: Machine learning and AI are layered over systems, so you want to be as streamlined as possible in preparation for those applications. To do this, set your goals on a high level of automation. And this doesn’t just mean adding technology over clunky processes. As you mature your systems and strategy, make sure you’re re-engineering processes where necessary so workflows are optimized too.
  2. Get financial data: One major benefit of full automation is the central collection of all your financial data in one solution. Data is what feeds technologies of the future. Machine learning and AI are not effective in purchase to pay without a complete, ever increasing source of financial data. If you want to embrace machine learning applications, capture every possible piece of financial data in your purchase-to-pay system today.

Basware has the most advanced invoice automation solution in the world and we’re constantly improving it. Based on 30+ years in the industry, we’re rolling out features and functionality that continue to deliver the ultimate efficiency benefit to customers. With the largest open network, we have the unique ability to capture the most data across customers and combine that with third party data to deliver what customers need now and in the future.

6 Things To Consider Before You Buy Any Procurement Technology

Thinking of investing in some of the latest procurement technology? If you haven’t consulted market trends, got a third opinion and done all of your research, you might want to pull on the reins!

Buying procurement technology these days is a complicated business.

With ever more niche vendors entering the market and established providers offering increasingly sophisticated solutions, differentiating on face value alone can be as clear as mud. However, given that your decision will have an enterprise-wide impact, it’s crucial that you assess your options and make the most informed decision possible.

1. Separating Fact from Fiction

Of course, you will have the product marketing collateral from each provider such as datasheets and solution overviews.

However, you need to be aware of how much is marketing ‘fluff’ and how much is an accurate reflection of the solution’s capabilities.

To do this, you can turn to customer case studies and testimonials to understand what their experience of implementing and using the solution has been like. But remember, even that source of information comes with its own challenges and shortcomings. If the case study focuses on the customer’s functional use of the product, it may not offer you an accurate view of customer service levels or product performance, which are of course key considerations in making your decision.

This is where third party research and validation comes into play.

2. Look at market trends

Where do you go and how do you choose your sources of information?

The entire technology market is well served with analysts reporting trends, competencies and guidance on the good, the bad and the ugly of the industry. In searching for technology vendors that meet your requirements, this certainly helps sort the “wheat from the chaff”.

That said, the technology market is quite unique in that it experiences a rapid advance in product capabilities. With competition driving innovation, product sets evolve quickly and when you’re looking at R&D in technology sphere, one year is a long time. This means that its essential to ensure that the information you’re using, and basing your decision upon is up-to-date and reflective of the latest capabilities within the market.

3. Consult The Magic Quadrant

One of the world’s largest, most respected analyst organisations for technology research is Gartner. Each year or so, they produce the Magic Quadrant which is a culmination of research in a specific market, giving individuals a broad view of the relative positions of the market’s competitors. The Gartner Magic Quadrant research provides a graphical competitive positioning of four types of technology providers in fast-growing markets; Leaders, Visionaries, Niche Players and Challengers.

They produce this research for a range of technology sectors, including procurement sourcing applications, and it is a well-trusted source of information for assessing your options when you go to market.

Access the Latest Gartner Magic Quadrant for Strategic Sourcing Application Suites.

4. Make sure you’re using up-to-date analysis

Given the considerations around the pace of advancements in the eProcurement sector,  it is all the more important to ensure that you’re using the most current information available. In addition, because of the time between each report release, you’ll find that vendors that have been in a Leaders quadrant can fall from grace into lower quadrants/waves.

This is because to remain in the Leader segment is dependent on a vendor’s investment in product functionality and features, as well as their business vision to meet the needs and demands of the procurement marketplace. Customer satisfaction and referencing is also taken into consideration for the research, meaning a strong Leader position is indicative of a satisfied customer base.

5. Get a third (Party) opinion

There are a number of consulting and analyst organisations who conduct independent research of the technology space in order to provide a clearer, qualitative segmentation of the marketplace. By supplementing the information supplied by providers with this third party research, you can validate performance and delivery to build a more objective view of the market place. To get you started, here is a short list of publishers that you can turn to for information:

  • Spend Matters Network
    This leading network of procurement websites is a great source of current procurement insight. Their commentary and reporting examines the latest news, techniques, “secret” tools of the trade, technology, and its impact. Most of the content is free to access, but there is a Spend Matters Pro membership that will give you access to exclusive research and content.
  • Procurement Leaders Network
    Procurement Leaders™ is a global membership network, serving senior procurement and supply chain executives from major worldwide corporations, providing independent procurement intelligence, professional development and peer-to-peer networking. It has a broad range of research into various sectors, but you do need to be a member to access most of the content.
  • Supply Management
    Supply Management is the official publication of the Chartered Institute of Procurement & Supply and features the latest news, view and analysis for procurement and supply chain professionals worldwide. The website provides daily news and opinion and exclusive content, in addition to access to more than 15,000 articles.

6. Do your research

As the marketplace for procurement software and technology continues to grow, it can become a confusing place for those looking to choose a solution; you’ve niche providers who offer specific pieces of software and more established leaders offering integrated full-suite solutions. Each promises to deliver the most effective, powerful solution but how much of that is bluster and how much is grounded in truth? By all means utilise the product marketing information that a vendor provides, but scrutinise it too. Is what they say true?

Ensuring you conduct thorough third-party research and refer to existing customer testimonials is key to finding the answer to that question and key to you selecting the best solution for your organisation.

This article was written by Dan Quinn, SVP Jaggaer MENA.


Join JAGGAER In Munich next month for REV 2018 – two action-packed days, filled with the latest in eProcurement innovations, trends, and strategies designed to help you accelerate your spend management digital transformation.

Hear how your peers are leveraging highly engineered technology to deliver strategic procurement value to their organisations.

Spaces are limited so secure your place today and check out the incredible speaker line-up.

The Two Obvious Challenges Of Digital Transformation That Everyone Ignores

A digital transformation is set to take place in the coming years, and the Procurement world can expect substantial changes as a result. 

As Heraclitus once said, “the only thing that is constant is change.” Another thing that is equally true today is that digital is playing a central role in pushing organisations and individuals towards change.

Digital transforms everything, from B2B to B2C and beyond: what we consume and buy, how we consume and buy, and how we work. We are just starting to see some of these changes but what we are witnessing today is just the tip of the iceberg.  There is much more to come. Within the next few years, a digital revolution is set to take place, and the Procurement world can expect substantial changes as a result.

This is why Procurement needs to embrace “digital” and succeed in that transformation more than any other function. the function has been lagging behind and the current situation is far from ideal.

The adoption of any change is not something that should be taken for granted. John Kotter, in his international bestseller, Leading Change published in 1996, reports that 70 per cent of change initiatives in organizations and businesses fail. More recent sources reveal a similar situation. Despite years of experience in the project management field, projects continue to face the same issues and obstacles year after year:

Source: Project Management Institute: Pulse of the Profession 2018

History shows that Procurement is also not immune to recurring challenges,  especially when it comes to the Procurement technology that has been around for years. However, adoption (by teams, by stakeholders, by suppliers) is not a reality for most organizations. Analysts and research firms have all reached the same conclusion. For example, many reports show that the adoption of eSourcing by “best-in-class” companies has stagnated at 60 – 70 per cent since 2007.

So, considering its past record of poorly managing digital initiatives and the growing need to respond to ever more frequent and profound changes (both representing threats and opportunities), Procurement must urgently learn from the past and find new ways to transform and move forward. Although one article cannot cover every aspect of such a vast issue even taking the time to consider the few simple and pragmatic points presented here can already difference between success and failure.

Challenge #1: Understanding the many facets of “digital”

“Executives increasingly use the term “transformation” as shorthand for “digital transformation.” But the ongoing digital revolution does not itself constitute a transformation—it is a means to an end, and you must define what that end should be.” What Everyone Gets Wrong About Change Management, Harvard Business Review

The most common mistake that organisations make is to look at technology as the solution to all their problems and to think of it it as an end in itself (when it is just a means to an end). A second pitfall is that, many organisations tend to use new technology “to mechanize old ways of doing business. They leave the existing processes intact and use computers simply to speed them up.” By doing this they are actually missing out on the real value and transformative impact of some of the latest technologies. When implemented strategically and intelligently, new technology which can enable organisations to do things that were previously impossible.

“Ideally, [the] investment will lead to digitally automated processes, even beyond the transactional purchase-to-pay, with only limited manual support required. Such digital tools and processes will additionally support business process outsourcing and shared-services centers, further boosting efficiency. Ultimately, however, the benefits will arise not simply from reducing costs, but also from freeing up highly qualified procurement resources from mundane, repetitive tasks so they can focus on delivering value to the business.” Procurement 4.0: Are you ready for the digital revolution?, PwC

This poor understanding of what technology can do and what organisations can do with technology  is painfully evident in the misuse of words like digitisation, digitalisation, and digital transformation. These terms are often used interchangeably when they actually mean very different things:

  • Digitisation is the conversion from analog to digital. Atoms become bits (e.g. digitisation of data). You cannot digitise people.
  • Digitalisation is the process of using digital technology and the impact it has (e.g. digitalisation of a process). It is what most digital projects in Procurement are actually about.
  • Digital transformation is a digital-first approach that encompasses all aspects of business, not just Procurement (which is why ”the digital transformation of Procurement” is an abuse of language; a good one to make though). It leads to the creation of entirely new markets, customers, and businesses (people, capabilities, processes, operating models,…).

So, before defining what technological approach to take, the first step is to determine and identify the business value that needs to be captured or improved as a result of a digital project.

Challenge #2: Transformation and people

Many organisations make another serious mistake when looking at digital initiatives. They approach them in the same way they would approach simple IT/technical projects, when these projects really need to be about transforming business. n. This tendency also explains another set of common mistakes that result from forgetting the human aspects of these projects.

“In the most basic sense, people have been the missing variable in the digital transformation equation. Instead of the prior decade’s obsession with business-IT alignment, enterprises must now pursue a more balanced approach to digital transformation that’s equal parts business, experience, and technology.” 2017 Global Digital IQ Survey, PwC

Absence of (or weak) meaning

”If you don’t know where you are going, any road will get you there.” —Lewis Carroll

A surprising but persistent issue in digital projects is the lack of real business/use cases that detail “why”  the change is a necessary one (goal, purpose, vision). This lack of purpose makes it almost impossible to create the proper conditions for a successful change, to motivate people, and to drive adoption.

An organisation that does not know where it is going will have difficulties defining some of the critical aspects of digital projects. For example:

  • deliverables that include, among other things, the requirements for the solution to be implemented (poor requirement management is one of the most common issues),
  • scope (which categories, which suppliers, which geographical locations, which processes…),
  • roll-out and deployment plans (what, where, when, how).

Rushing in without planning

Being too quick to take action and not allocating enough time to planning is another frequent mistake. Most people have a natural tendency to “do” and many prefer to skip the important planning steps and tend to dive right into new projects without taking time to think. Organizations are also under pressure to get results fast, and can be over eager to “make things happen” putting even more pressure on project teams to deliver. What is interesting is that preparation and patience are important and valued in many other areas of procurement. For example, Procurement practitioners know that 90 per cent of the success in negotiations comes from good preparation, but for some reason many forget to apply that same approach when it comes to the implementation of a digital Procurement solution.

Focus on deployment while adoption is left for later

”We’ve spent an awful lot of money on technology, but I still see people working in the old way,” complained the CFO of a large hospitality company.  The result is often widely deployed internal applications that no one actually uses effectively.” Convincing Employees to Use New Technology, Harvard Business Review

When an organisation launches a project to deploy a new solution, there is an implicit understanding that the system will also be used. But, this is yet another typical mistake. Assuming that, because a system is in place, people will use it is ignoring the fact that most people are creatures of habit. To draw a parallel to savings, the difference between a deployed solution and an adopted solution is like the difference between negotiated and realised savings. Adoption will not happen automatically. To achieve true adoption, specific action needs to be taken to get people onboard and these steps need to be defined and accounted for from the start (resources, budget, time).

Another way is possible and needed!

“Insanity: doing the same thing over and over again and expecting different results.” –Albert Einstein

The use of digital technology in Procurement is not a new topic. However, the way Procurement organisations approach such projects has to change. Experience shows that results are not at their best; Procurement technology is still far from being widely adopted and there are still many areas that will need to improve before teams can actually benefit from past initiatives.

More importantly, “digital” means much more than using a piece of software. It is a critical capability and characteristic in a world that is becoming more and more complex and is characterized by VUCA (Volatility, Uncertainty, Complexity, and Ambiguity). Only digitally-enabled Procurement organisations will thrive in our modern world because they will be able to transform apparent threats into opportunities and deliver more and better business value to the rest of the organisation.

How Digital Transformation Will Shake Things Up In Procurement

Some of the gains brought about by digital transformation will be immediate – including its impact on that all-important bottom line…

Throughout the past few years, many organisations have undertaken a strategy of digital transformation.

These transformations step-change many processes for businesses in order to take advantage of embedding faster, more collaborative and more analytical ways of working to better understand and serve both the business and customers to gain competitive advantage.

By leveraging this, businesses across the globe can enhance their productivity, their agility and in turn, their profitability. Indeed, digital transformation offers the potential to significantly reduce inefficiencies across the entire supply chain.

Let’s take e-commerce as an example. By improving the efficiency of a supply chain beyond brick-and-mortar retailers, wholesalers and manufacturers, it’s possible to collectively obtain a larger profit than each working in silos. By boosting the supply chain at every touchpoint, companies can reduce the overall cost as well as the opportunity loss, and crucially achieve a greater customer satisfaction rate.

On average, 60 per cent of an organisation’s costs are made up of spend on third-party suppliers of materials, goods and services. In turn, these suppliers have suppliers of their own, and so on and so forth. Essentially, everything that an organisation owns or buys is impacted by procurement teams, which means we as a function stand to benefit enormously from digital transformation.

The opportunity for procurement

Far from the persistent fear-mongering that digital transformation will be the death of procurement; this is an incredible opportunity for the function.

Digital transformation is making it easier than ever before for procurement teams to effectively play a significant role in optimising business and its supply chain, while delivering tangible cost savings.

According to The Hackett Group’s recent study, digital transformation reduces strategic sourcing costs and cycle times by 30 per cent and reduces data-collection errors, utimately leading to cost savings.

Automation also helps category managers obtain deeper spend reductions in specific areas and identify fresh opportunities for savings. It helps organisations identify sources of additional value, i.e., through its third-party suppliers, and retain it within the organisation. This translates into further value-add for the business.

Doing more with less

With a better supply chain, determined through strategic procurement technologies, organisations can reap the benefits, from manufacturing to processing.

To return to the e-commerce example; an enhanced supply chain allows for the physical delivery of a product at higher quality and with faster delivery times. This is especially valuable in this instance; as consumer demands continue to increase, businesses are aided through digital platforms that cater to the “right here, right now” mindset — a demand driven supply chain.

Procurement technology

Technology enables productivity and this means that technology enables us to do a lot more with less. If technology is at the heart of productivity, then procurement is the lungs of it.

Because of this, there has been a great deal of innovation in procurement technologies that drive value in both public and private sectors.

In particular, these digital innovations increase transparency and productivity while engaging healthy competition; they foster an environment where  innovation can propser.  Strategic procurement tools provide organisations with an opportunity to streamline processes and increase efficiency that add value to their businesses.

Automation is at the heart of the digital imperative. Digital innovation comes in all shapes and sizes, and those that are proven to impact the bottom-line such as those that increase the productivity of an entire supply chain have the greatest influence in positively contributing towards the growing economy. Forward thinking organisations that make strategic IT investments considerably strengthen their business outlook by opening up the opportunity for greater output at a lower cost.

This article was written by Dan Quinn, SVP Jaggaer MENA.

JAGGAER’s REV International 2018 takes place in Munich on 25th-26th June. You’ll have the chance to listen to a number of industry experts and procurement thought leaders as they share their best practices and the latest in procurement innovation. Register here. 

3 Ways To Take The Pain Out of Contract Management

Managing supplier contracts is one of the most fundamental and, arguably, simple tasks undertaken by procurement teams. But for many it’s also a major source of anxiety. So why does procurement find it so difficult to successfully manage supplier contracts?

 

Given the ever-improving technology landscape and growing popularity of cloud-based SaaS solutions, one would assume that effective contract management is now commonplace among procurement professionals. Almost a hygiene factor, surely? Not in our experience.

The key challenge is maintaining contract repositories with rigour and to the high standards required. But even where organisations have well-embedded enterprise resource planning systems, this alone does not guarantee that contracts are being successfully managed.

This is rarely about a lack of willingness to improve the process – in fact, most teams are hugely concerned about it, with the majority actively looking for better ways to manage contracts.

Why so hard?

Supplier contracts provide a detailed overview of the pipeline of current and upcoming projects within an organisation. Without this line of sight, the procurement function is likely to be on the backfoot when projects end and contracts terminate. This is of particular concern in areas such as telecoms and software, where significant penalties are charged when contracts automatically roll over.`

Much of the problem lies with how contracts are filed, stored and updated – often in multiple systems or, even worse, in individual desk drawers across many different departments depending on who ‘owns’ them. As a result, procurement can potentially have zero visibility over many contracts, creating significant risks if suppliers are not being managed effectively throughout the contract lifecycle.

Given that up to 70% of spend is repeated year on year, failing to have visibility over contract expirations and extensions in sufficient time to fully leverage all the strategic sourcing levers available means vital savings opportunities are likely to slide under the radar.

Easy as 1, 2, 3

A well-maintained and up-to-date contract repository can provide a complete overview of all contracts in operation – from those in a supplier cluster, e.g. a central supplier contract with several sub-contracts to those that function company-wide.

The key is integrating contract management into everyday processes so that it becomes part of what procurement teams do rather than an afterthought. Three quick steps to achieving this are to:

  1. Make your team accountable – Include contract KPIs in your procurement team’s objectives. All buyers and category managers should be responsible for ensuring that they hold signed supplier contracts for the categories they work on. It should be their responsibility to gather them from other departments, even though they are not the ‘owners’, and to upload them into a contract management solution.
  2. Capitalise on the results – Procurement leaders should routinely review their teams’ compliance with keeping contract management solutions up to date and actively use the output to drive better category planning and organise quarterly workloads.
  3. Choose the right technology solution – Using a standalone contract management solution is helpful, but on its own it can get neglected very quickly. Select an integrated procurement technology solution that links contract management with other modules such as spend analytics and supplier performance management. An integrated solution that connects different modules together provides more insightful output that can inform better decision-making, e.g. linking spend analytics with contract management allows procurement teams to track supplier contract compliance and ‘spend under management’ – key indicators to how well procurement is doing within the wider organisation.

The way forward

Embedding contract management best practices into the procurement function and then incentivising the team to keep the repository up to date is crucial. Centralising information storage and assigning responsibility for maintaining it takes the guesswork out of who manages which contract within a large business – vitally important when managing multiple contracts.

Once this is in place the procurement function can then use the combined data to define company-wide procurement initiatives spanning numerous projects, managing risks and spend in a way that would not have been possible before. Now that’s not so hard is it?

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Late, Late For An Important Date? Why Time Isn’t On Public Procurement’s Side

Time is fleeting and never more so when a contract deadline is looming large. How can public sector procurement professionals use their time more effectively?

In the second in a series of articles on the challenges facing public sector procurement, we examine the issue of time and why it must be managed better.

Before we begin, I have a riddle for you:

This thing all things devours;

Birds, beasts, trees, flowers;

Gnaws iron, bites steel;

Grinds hard stones to meal;

Slays kings, ruins town,

And beats high mountain down

Extract from ‘The Hobbit’ by J.R.R. Tolkien, 1937

Those of you familiar with the great J.R.R. Tolkien will recognise this as one of Gollum’s riddle to Bilbo Baggins in ‘The Hobbit’. The answer? Time, of course.

Time is the one thing none of us can avoid and all wish we had more of. How many times have you wished you had an extra hour before a work deadline? And that’s before we even consider more time at the weekend, or an extra hour in bed!

For public sector procurement professionals, it frequently feels like time is not on our side. An increasing volume of ‘Business as Usual’ work, combined with new ‘one-off’ projects, means it can feel like a juggling act to meet all the relevant deadlines.

In the public sector, these deadlines can sometimes mean the difference between the delivery or not of critical goods or services across a city.

It often feels like we’re like the White Rabbit from Alice in Wonderland, constantly running late for an important date. And the more time pressure builds, the more likely it is that mistakes will be made, costing even more time in the long run.

Typos in letters, ambiguity in specifications and issues with evaluation or award criteria – they all have the power to send us back to the drawing board. Getting it right first time is critical as the more time spent doing tendering, the less time there is to actually manage contracts.

When it comes to creating the value and savings required in the public sector, contract management is key. After all, you can agree savings in a pre-contract phase, but without effective contract management, organisations will typically lose 50 per cent of this value in the first year of the contract.

And that is why we need to manage our time more effectively.

More Haste, Less Speed

Before looking at how time might be managed more effectively, it’s worth examining why procurement in the public sector can be so time consuming.

Public sector procurement is a very bureaucratic, very legalistic, very risky – for both buyers and suppliers – and, ultimately, very slow process.

For procurement exercises above the EU Procurement thresholds, and requiring advertising through OJEU (Official Journal of the European Union), it’s not unusual for the process to take up to nine months (and frequently even longer) from identification of need to the award of a contract.

And while that may seem like a complete anachronism to those of you in the private sector (and believe me, it did when I first started in the public sector), there are good reasons for this. The process is aimed at promoting competition and procedural conformity, not necessarily value for money, though this is what most public procurement professionals are aiming for.

Greater competition allows for more open and transparent tendering and contracts, where SMEs, local suppliers and parties that may not ordinarily have access to these markets can get involved. A wider supply base may lead to new ideas, innovations and process improvements while at the same time potentially being a boon to the local economy.

The bulk of this time is taken creating a set of fully auditable documents for any procurement exercise above these thresholds. This includes a sourcing strategy, outlining key decisions and the reasons for them, detailed tender documents, including specifications, selection and award criteria, and a fully tracked evaluation process.

The type of route to market will, of course, be determined by the product, service or public works being procured. The detail of all of these routes is too much to go into here, but you can find a lot of useful information on ‘The Procurement Journey’, if you want to understand the end-to-end process.

There is limited scope for reducing the time taken to complete these processes, so where can time be saved to allow for more contract management? This is where good planning comes in.

Proactive Procurement

Procurement could be accused of operating in a reactive manner and it’s no different in the public sector. However, this can often be attributed to the nature of procurement’s place in the organisation and the changing nature of how organisations operate and procure goods and services.

The increasing number of ‘one-off’ projects, on top of the ‘Business as Usual’ work, can make even the best procurement functions feel like there is a never-ending volume of tenders to complete (referred to as the “tender sausage machine” where I work).

Moving from a reactive to proactive approach can help in this and crucially buy more time for that all important contract management. There are three suggestions below to help make this work, but it’s important to understand the caveats on these at the same time.

Making this a reality takes not only input from procurement, but from all its stakeholders and end users across the organisation. Procurement needs to be seen as a key strategic function and help mould the strategic direction that underpins procurement requirements.

That said, there’s still plenty scope for procurement to make changes and help things run that bit smoother.

  1. Proper Planning Prevents Poor Performance

This is very simple to say, but very hard to do. Get all your contract details in one place, including the dates of when they need to be retendered or procured and plan accordingly. Have quality project plans available to help understand when the procurement process needs to start and the key dates involved. Most importantly, share these dates with your stakeholders and then stick to them.

  1. Don’t “Boil the Ocean”

Once you know the procurement requirements, assess the market to see if other organisations or Local Authorities are doing the same or have been there before. Ask for documentation – my experience is that people are only too willing to share if they know it will be reciprocated in the future.

Also check out organisations like Scotland Excel, Yorkshire Purchasing Organisation (YPO) and Crown Commercial Services (CCS) for frameworks. If the framework is applicable, that’s half the work done for you and a major time saver.

  1. Kick-off Means Buy In

A kick-off meeting is a good way to get all the appropriate people in the room to discuss the requirements of the contracts and make sure that all the vital details are captured. Getting this done up front not only means you are better prepared, but you also get buy in from stakeholders who feel involved and will be better placed to help push the project along.

These suggestions by no means cover everything that can and probably should be done to make the procurement process more efficient. However, from the point of view of marginal gains, making these adjustments should help increase procurement efficiency and free up time to manage the contracts you’ve put so much effort into creating in the first place.

Procurement Operating Models Explained

Centralised? Centre-led? What’s the difference, and how do I know which operating model is best for my organisation?

Starting a new job can be both stressful and exhilarating. The people are different, the location is strange and the way they work is peculiar to that enterprise. There may be a seven-level procurement organisation chart or a loose, undocumented reporting structure to be navigated.  What is also daunting is the “in-speak”, the specific terminology which may be like a foreign language to you.   Let’s clear up some misconceptions about ways that procurement can be organised, and try and demystify some of the jargon.

 An operating model is just the way the procurement function is set up to work.  Most companies start up being decentralised, unstructured and even disorganised until the workload grows.  As the functions expand and mature, there needs to be some form of formalising and centralising of the activities to consolidate the spend. Only then can we expect to make savings and reduce our risk exposure.

Centralised or centre-led?

Centralised procurement does have its benefits. It means more control over suppliers and contracts and it helps drive supplier diversity and corporate social responsibility (CSR) initiatives.  The risk is mitigated and skills development is made easier, expanding capabilities.  However, it can become a very bureaucratic and expensive cost centre. Too much data and not enough information can cause loss of focus and poor service to stakeholders.  People at the centre do not always understand regional and local supply markets and consumption patterns.  If “central” means the US and the region is Papua New Guinea, there may be cultural challenges too. As procurement organisations move on and mature, over time, many of them become centre-led, taking some time to decentralise personnel and day-to-day operations.

Image: www.zycus.com

Wherever your organisation is on this curve, it is helpful to know what it means to be where.  There is no one best structure. The way your organisation works is influenced by the external supply market, the end-users needs and the overall company strategy. You just have to ride the wave.

 Centre-led procurement organisations concentrate on defining strategy and policy for both their direct and indirect procurement.  Corporate spend can be fully leveraged on strategic commodities and services which are well-suited for centralised sourcing.  Non-strategic categories not suited to centralised sourcing can be handled by the individual business units or regions.

Centre-led procurement uses a category management structure which supports the rollout of sourcing and contracting plans to business unit and regional level.  The type of set-up is often called a hybrid model.

Category management means the bundling of third-party spend into buckets to extract more value.  The main aim behind category management is to aggregate the internal demand and achieve economies of scale by contracting the best suppliers at the lowest price.  In its best form, it involves an active category manager to roll out category plans, strategic sourcing and supplier management initiatives.

In a centre-led organisation, a global category manager would set the strategy for the category group, e.g. transport logistics, and for the sub-categories (also sometimes called commodities) within that group:  road, rail and air transport, freight forwarding, port activities and courier services.  At regional or divisional level, the category plans are followed and executed locally to achieve the best results for the organisation.  This is the ideal but it is rarely implemented in full. Some categories are really challenging. Marketing services, technology and professional fees come to mind.

Cross-functional teams (CFTs)

To be effective, a category needs to be managed using one or more cross-functional teams.  A cross-functional team comprises representatives of key divisions and business units that work together, with procurement, to achieve the best results for the organisation in that category or commodity. Although extensively used in strategic sourcing, CFTs are being used increasingly and successfully across process improvement, product development, quality assurance and the assessment of suppliers.

The benefits are well-documented:  a more robust outcome, transfer of skills and learnings, improved internal cooperation and sustainable relationships.

Global organisations that run virtual CFTs have special challenges.  With the application of innovative methods and up-to-date online technology, it is now easier and more effective.

Whatever the operating model or the make-up of the CFT, the satisfaction of stakeholders and end users is paramount.  A stakeholder is anyone that has a vested interest in the outcome of your project or action.  He or she could be any one of these:

  • An internal departmental executives, manager or end-user
  • Another procurement team member
  • A co-opted subject matter expert
  • A supplier or a subcontractor
  • A member of the media or a regulatory body

Stakeholders are capable of influencing the success or failure of a project.

 The model is not cast in stone

As a procurement organisation matures, it is likely that executives will revise and adjust a hybrid or centre-led structure so that it stays aligned to corporate objectives and continues to deliver value.  The best model is always the one that delivers results through open lines of two-way communication and uses processes that are flexible enough to take into account regional and cultural differences.

Procurement In 7 Memes

They say a picture tells a thousand words. How about a procurement meme?

Okay, millennials. Strap yourselves in, because I’m going to attempt to meme. Is meme even a verb? Perhaps not, but that isn’t going to stop me.

For older readers who don’t really know (or care) what memes are, don’t worry – I’ve got you covered. Whether it’s Bad Luck Brian, Kermit Sipping Tea, or King Leonidas screaming “SPARTA”, I’ll attempt to add a bit of context around the meme before applying a Procurement gripe to each.

1. Boromir Demurs

Rivendell; Middle Earth. The mood is tense. Gandalf has brought together a motley crew of humans, elves, dwarves and hobbits to discuss how best to destroy the One Ring, which has to that point proven impervious to both magical and physical force. A solution is put forward – take the ring to the enemy realm of Mordor and throw it into the volcanic fires of Mount Doom. At this point, the human warrior Boromir makes his most famous speech of the film, beginning with the words “One does not simply walk into Mordor…”

Since The Fellowship of the Ring, Boromir (Sean Bean) has become a meme, trotted out as a retort whenever someone suggests something that’s impractical, unrealistic, or simply a bad idea.

Here’s my procurement take:

Amirite? (Am I right?) This is Procurement 101 stuff – a company that selects its suppliers based solely on the cheapest quote will inevitably run into risk and quality issues. And besides, if that’s the strategy, then you might as well set up an e-auction system that automatically selects the cheapest bidder, then dispense with the procurement function altogether. Which brings us to…

2. Bad Luck Brian

Poor Brian. This high-schooler in his plaid vest and braces never gets a break. The meme generally follows the formula “[Brian does something positive … something terrible happens”]. For example:

“Spends all night studying … sleeps through exam”

“Only Facebook friend is mum …. cyberbullied”

“Wins a free cruise … on the Titanic”

From a procurement viewpoint:

Procurement professionals LOVE robotic process automation. Think of all those humans doing repetitive tasks at your organisation that could just as well be done by a robot. It’s a cost-saving no-brainer, right? Bring in the bots! Great idea – until it happens to you.

3. American Chopper Argument

Stills of row between father and son from the reality show American Chopper have recently become internet hits. The meme format lends itself well to any internet argument – whether it’s a discussion about the best pizza toppings, or a protracted “debate” in an academic journal.

For my text, I’ve taken an excellent debate from the Procurious Discussion section about reporting on Cost Avoidance. Check it out:


4. More American Chopper

I could do this all day … here’s another debate from the Discussion section, this time on Decentralised vs Centre-Led Procurement:


5. Distracted Boyfriend

This has to be my favourite meme of all due to its simplicity. A man walking down the street turns to leer after a woman walking past while his girlfriend stares at him with an appalled look on her face.

In procurement land:

We’re about more than cost savings!! Really!

I’ve heard this sad story again and again. Procurement professionals are eager to show their organisations that they’re more than a one-trick pony. We talk about how we can improve operational efficiency, bring in CSR & social procurement initiatives such as fighting modern slavery, and even generate top-line growth, but it’s incredibly disheartening when the boss (usually a CFO) only cares about one thing… cost savings.

 

6. Leonidas Goes Nuts

The film 300, a retelling of the Battle of Thermopylae in the Persian Wars, contains a gem of a scene where the Spartan King Leonidas loses his patience after being threatened and insulted by a Persian envoy. The envoy, suddenly in fear of his life, says “This is madness” before Leonidas responds with: “This is SPARTA” – and kicks him down a well. It’s an intense moment, as the Spartans know that the murder of the envoy makes war inevitable.

I’m really not advocating the murder of suppliers, but there are moments when you do have to remind them of the terms of a contract.

 

7. Kermit The Frog looks smug

This meme is particularly useful if you want to be facetious. Kermit the frog, calmly sipping a glass of Lipton tea, has lent himself to many a captioned meme ending with the phrase “… but that’s none of my business”.

As procurement professionals continue to wage their endless struggle against maverick spend, we inevitably have a lot of “I told you so” moments when an unapproved supplier turns out to be a disaster. Along comes Kermit…


Tail Spend: Are You Counting Your Losses?

Nobody said controlling tail spend was easy. But those “insignificant” purchases soon add up…

MattiaATH/Shutterstock.com

For 35 per cent of procurement teams, tail spend – those small, ‘insignificant’ purchases that soon add up – is one of their top nuisance areas, according to research by Spend Matters.

And it’s no wonder, with a disproportionate amount of your procurement managers’ time being taken up with a small percentage of spend, staying in control of tail spend is challenging at best.

Whether it’s spot buys, commercial credit cards, non-PO invoices, expenses or rogue spending, tail spend often only makes up around 5-10 per cent of indirect spend – but comes with the overhead of managing 80-90 per cent of the total supplier count.

Controlling your tail spend isn’t necessarily easy, but it does represent a significant opportunity to cut costs and improve your processes. The key is finding something that can help.

Cost cutting and process improvement

Reducing costs is a priority in all corners of the business, but it’s right at the top of the agenda for most procurement teams. This year, 78 per cent of CPOs surveyed by Deloitte named cost reduction as their top priority going forward.

Tail spend puts the money you save through careful strategic purchasing at risk, but with research by The Hackett Group indicating that businesses save an average of 7.1% through better management of tail spend, there’s an opportunity to be had here.

To make the most of it, procurement teams should consider joining other departments in their business in digital transformation – looking to technology to help you find smarter, more streamlined and more cost-efficient ways to manage tail spend.

According to Forrester, 38 per cent of procurement managers are already handling over half of their purchases online, with estimates putting that percentage at 55 per cent by 2020. This shift is largely due to convenience: 38 per cent cite the ability to buy using online portals 24/7 as key, while 22 per cent agree that transactions are faster and easier. (There’s also the bonus of lower prices through online procurement channels.)

Digital purchasing also offers procurement managers more insight into what’s being bought, how much is being spent, and where employees are buying from. With this unprecedented level of visibility, your procurement team can take greater control of spending – particularly when it comes to tail spend.

In an independent research study commissioned by Amazon Business, 53 per cent of respondents were already using less formal, flexible procurement methods – and 59 per cent said they expected their companies to use more flexible spending processes in the next two years.

With flexible purchasing channels, your procurement team won’t just save money; they’ll also be able to spend less time micro-managing tail spend, and more time on strategic objectives. However, convenience can’t come at the cost of control. The challenge now is finding the right approach and technology that meets both needs to build these flexible processes.

Combining consumer ease with business buying

Some procurement teams are borrowing from the business-to-consumer space to change their procedures. Using the principle of guided selling, where buyers are presented with a specific selection to purchase from, they’re bringing their employees a ‘guided buying’ experience.

Guided buying connects the procurement team with other employees more directly, so they can understand exactly what kind of resources, equipment and services the organisation needs. The employees then get access to a digital catalog, which is shaped by both personalisation for the employee and the preferences of the business.

The opportunity for cost-saving here is two-fold. The company gets to outline restrictions and preferred sources for purchasing, which helps prevent tail spend from unauthorised sources, and the platform can give them increased visibility – allowing for analytics to monitor their outlay.

The most important thing for procurement teams is to be able to tighten tail spending management without making major, disruptive changes to how people work. That relies on choosing the right platform, that matches the needs and priorities of the business, and can be adopted at scale.

Introducing Amazon Business

With the Amazon Business marketplace, you can give your employees a consumer-like experience while saving your procurement team hours of supplier management time – and get visibility into your tail spend.

It gives your buyers a broad selection (approved by your organisation) that integrates with your existing procurement apps, gives you rich analytics and reporting capabilities, and can offer prices up to 9 per cent lower than average. Amazon Business can help you lower the admin burden of managing tail spend and give your team increased visibility and control.

If you’re serious about getting tighter control on your tail spend, we’d recommend digging deeper. You can learn more about the challenges and – most importantly – the opportunities in Fix the Tail to Propel Procurement: Attacking the Tail Spend Problem in B2B, a collaborative white paper by Spend Matters and Amazon Business.

How To Avoid Transaction Automation Landmines

When it comes to implementing transaction automation, managing the trade-off between the speed of execution and the granularity of data is a challenge…

NikoNomad/Shutterstock.com

There are many factors that require careful consideration to bring about effective cognitive solutions.

It’s akin to conducting a group of musicians – it might be possible (easy even!) to attain a pleasant sound from a solo instrument… 

But, if expertly managed,  you could accomplish a symphony from the entire orchestra! 

This week, our podcast series will guide you through the five steps required to conduct a dazzling cognitive symphony. 

On Day 3 of Conducting a Cognitive Symphony Anna Madarasz, Analytics & Cognitive Lead , IBM Global Procurement discusses the importance of appropriately applied transaction automation, striking a balance between speed of execution and granularity of data and how to avoid landmines.

The importance of transaction automation

Marco Romano, Procurement Chief Analytics Officer, Global Procurement, Transformation Technology, IBM discusses  taxonomy in his white paper, “Transaction automation is a business necessity.

“We all want to spend less time doing repetitive lower-value work and use our skills to provide higher-value services to the business. However, as with many good things, badly applied transaction automation results in poor data and ultimately lost productivity and analytics effectiveness down the road.”

Transaction automation landmines

Procurement organisations are usually very well intentioned when it comes to the implementation of transaction automation but that’s not to say the process is without its challenges. We asked Anna to describe some of the landmines she’s seen procurement professionals hit.

Catalogs or other automation processes that allow the editing of item description and price can make the life of the client and the buyers easier.

As companies  see the positive effect of this they are likely to have a higher percentage of their transactions and spend going through catalogs.

The risk with this, as Anna points out, is  setting yourself unrealistic targets, “there is always a logical threshold, over which it is a risk to apply automation. Of course, you will not implement a catalog line if you  only have two purchase orders of the same nature in a year.

“With wrongly defined targets, a catalog isn’t going to decide action and then, of course, you spend more time on creating and maintaining your catalogs than creating your purchase orders.

Bulk Purchases

Anna also advises avoiding the catalog lines that allow bulk purchases.

“Many times it is really not easy to identify the purchase in a fixed line. Let’s say you are buying server configurations [or] storage configurations. Those are made up of multiple parts, so you  have hardware, software and services elements in it.

“A configuration can be made up of 50, 100 lines. If you allow your clients and your buyers to raise purchase orders simply as a one line item, this server [could cost] one million US dollars!”

“Of course, it’s a really sensitive balance because you also want to avoid the workload of raising incredibly granular purchase orders, so it is really your call at what level you would like to analyse [a given category.]”

“If this is a category which is your main area of focus, then try to go granular, try to get the data. If it’s not, then it’s your call if you are allowing these bulk purchases.”

The trade off

“There is always going to be a trade-off between speed of execution and granularity of data” says Marco

“Finding the right balance again takes us back to developing an understanding of what data we need to achieve our desired cognitive and analytics state. There is no doubt that teaming with the right technology and innovation provider, and selecting the right tools, is critical to that balance”

Striving to conduct a cognitive symphony but in need of some expert guidance? Our podcast series runs throughout this week and will have your orchestrating cognitive success in no time! Register here.