Companies are turning increasingly to organizations like Amazon when it comes to implementing user-centric systems to help them reach out to the edges of their own organizations and rein in maverick spenders. That’s according to Claritum, leader in cloud based e-procurement platform technology.
Now, for the first time, B2C (business-to-consumer) has over-taken software modelling when it comes to bolting on the front end to make systems easy for users to use and, therefore, helping companies increase compliance when it comes to ordering and invoicing systems.
B2B companies (business-to-business) are usually renowned for their complex, although highly functional, systems which although essential when it comes to actually running enterprise-wide systems, have failed to capture end users’ imaginations (and reduce their will to live while trying to find out how to use such systems) and, therefore, such systems have “allowed” a higher degree of non-compliance than management would like to see. But this isn’t just a question of niceties. Failure to capture as many end users (and include purchasers and marketing services agencies, print services providers and manufacturers in this) as possible is costing companies a lot of money. Some estimates range as high as $2tn per annum which represents the 1% – 3% companies are known to spend on low cost, frequently purchased items (what we call “complex categories”) these include items which are generally low cost such as pencils and business cards, up to frequently ordered items including apparel and workwear or brochures.
Ideally, the e-procurement system will aim to capture 80% of invoiced items although, when analyzed, many companies fall far short of this figure (ask me if you’d like a recommendation for a free, 30 minute “Savings Review” – no opt in required 🙂 – and in complete confidence, to see what savings your organization could be making) – it’s worth doing: typically, these savings – according to “Procurement Leaders” the highly respected industry watchers – amount to as much as 30% to 40% which is quite staggering as a percentage of $2tn annually).
In an ideal world, an e-procurement system will:
Keep off-catalog requisitions to a bare minimum, to minimize the need for manual intervention. In fact, this should only happen when an item cannot be sourced from an approved supplier catalog. While users technically “comply” by using the system, sometimes they end up placing off-catalog orders more than one third of the time – sometimes just because the search function is too cumbersome to use (and you won’t find Amazon throwing away business like that!)
Help users to actually select the right product; if descriptions, images or other specifications are not accurately tallied to the requested item, it can result in an increased cost to the business – either because the selected product fails to perform or the user has to re-order – all costly and time-consuming mistakes for the business on both sides.
Minimize the potential for over-charging: this can be the result of discrepancies between catalog and contract pricing, or additional artwork required to reconcile the inevitable discrepancies that occur on the back-end when the invoice doesn’t match the purchase order and receiving report when accounts payable performs a 3-way match.
Reduce the risk of work inefficiencies and integrity of spend data for analysis and reporting being compromised if requisitions are not correctly categorized and coded.
Make users fully aware of corporate buying policies and spending so that they comply with established policies, procedures and any industry Regulations.
Lastly, the Procurement function needs sufficient visibility with regard to any purchase requisitions to defer or deny spending requests, even compliant requests, to make sure they meet company financial management targets.
Creating a system that seems familiar and as easy as shopping for a book or a holiday is a clever move, it is both warm and cuddly to the end user, and embraces them in a way that fills them with confidence and one that they like, encouraging them to go shopping via this method even more and that is the way to get compliance levels up.
With compliance being the most commonly cited reason for implementing an e-procurement system because of the significant savings to be made, starting with front end usability rather than back end functionality or, at least affording it equal importance, seems the most sensible place to start.
For print services providers and marketing services agencies acting as a ‘Gateway’, an e-procurement review is both prudent and sensible. An e-procurement system can help to make savings an protect valuable profit margins and improve customer service levels, with the ROI being achievable in around 8 months (as a rule of thumb).