According to Valueneer’s Global Procurement and SCM Study (Nov17), 80% of procurement organisations are still using email to place orders with suppliers. In Asia it’s even higher at 96%.
It’s easy to understand why. Email is ubiquitous, everyone has an email account. Employees who need to make a purchase can easily search online to find the right supplier or product. Any questions can be fired back and forth with suppliers or co-workers to check before the order is placed. Simple.
However, email has a number of downsides.
Businesses that use email for purchasing lack visibility of their spending. As all correspondence between buyer and seller is conducted via email, details such as specification, delivery details, price, contract terms and approvals are buried within an employees email account. There is no central record of any correspondence, negotiation, implied terms or agreements.
One Claritum client, who shall remain nameless, was struggling with employees who did not wish to switch from manually emailing suppliers to Claritum’s cloud based procurement platform. The employees saw email as quick and easy, but they complained constantly about end of month reporting, which could take 3 or 4 days to compile. The data they needed was buried in email trails and had to be re-keyed in order to present to management. Where-as, with Claritum, reporting is at a click of a button.
Again, emails greatest strength is also its greatest weakness. Anyone can send and receive an email and typically there a few, if any, controls over content. So businesses that use email to place orders, often don’t have a compliant procurement process in place. The checks and balances need to ensure approvals, adherence to best practice, or audibility simply are not in place.
In another real life example of how email can hurt your purchasing process, a UK public sector client needed to review its expenditure across a range of categories. Consultants came in, extracted AP data from finance, compared it to PO’s generated by the ERP and gathered supplier sales information. Nothing added up. So the (very expensive) consulting firm delved into email correspondence to try to identify the problem. After weeks of effort and thousands of emails, it was evident that products were being over specified, order quantities were being inflated, deliveries were not arriving and a host of other problems were identified. Serious malpractice was made easier as the perpetrators relied on the lack of control that email affords.
We were recently challenged by a buyer who believed that email was quicker than using a cloud based procurement platform such as Claritum. We arranged a race. He typed an email and sent it to 3 of his favourite suppliers. One of whom responded within a few minutes, the others later the same day. “There!” said the buyer, “I have got 3 prices quicker than your e-procurement tool”. I asked about specification approvals, how he’d shortlisted and selected suppliers, had he checked if there were any pre-negotiated contracts in place, stock left from previous orders or pricing against previous orders, how much time it took to get approvals, ensure supplier compliance and report on savings. We also showed that the items he had specified were available with pre-negotiated discounts, so the buyer would have prices in real time. Oh, and one of his suppliers was not approved to supply the organisation. So email, doesn’t deliver the efficiencies that an procurement platform does.
Providing cost savings is usually a key deliverable for most procurement organisations. But is probably less of a driver for employees, who simply want a convenient way to order products. Again, email does not lend itself to capturing or recording savings for the organisation. Therefore procurement’s contribution to profits and perceived value to the organisation is not evident.
With the right procurement tools, capturing savings is built in to best practice workflow. The right system can verify specifications, compare bidders, capture variance from lowest bidder and track delivery shortfalls. Reporting shows the realised savings as well as potential savings. Where-as email does not.
So, for the 80% of procurement organisations that still use email for their buying, the good news is….
…there is a better way.