Assessing procurement automation solutions and service providers often includes a comparison of features and functions. Weighting generally being given to those systems that have more features.
This article questions whether the answer to automation is to support a wealth of feature “widgets” or whether automation should focus on the core business processes. Ensuring that simplicity is the primary goal.
If the software industry has one fault it is the tendency to add new features on an ongoing basis. Making menus and processes more complex in order to add these new capabilities. Often with no ability to tailor interfaces and menus to specific users.
We have all had experience of the introduction of new IT systems that frankly make processes more complex. Missing somewhere along the line the original objective of making the process more efficient.b
2018 ProcureCon Benchmarking Report:
“When the respondents assess the biggest benefits to be gained from digital procurement technology, ‘cost reduction’ ranks number four, and the top place goes to ‘increasing efficiency’, before ‘innovation’ and ‘enabling growth’.”
2: Crazy World of Procurement
There are few functions within an organisation that can claim to have such a wide-ranging impact on business than that of Procurement.
The financial consequence of procurement actions, as well as the supply chain implications of these actions, make Procurement pivotal to the business's financial and operational performance.
Plus, the sheer variety of sectors that procurement comes into contact with makes it a challenging environment. Procurement is predominantly outwards focused; you collaborate with individuals from various sectors, backgrounds and cultures.
Whether you're dealing with difficult suppliers, managing supply chain risk, seeking to diversify, addressing environmental concerns, or working through a company merger, there are always plenty of challenges.
Procurement people need to have strong presentation and analytical skills and be able to communicate their ideas to a variety of stakeholders. Plus, if you are a little crazy it helps to deal with the day to day challenges!
3: Automation in this Crazy World
By its very nature, the function of Procurement is difficult to automate in entirety. In fact, in attempting to automate the whole process many systems fail to achieve even the basic goal of efficient operation.
The more aspects you try to address, in one monolithic system, the more complexity gets built into the solution. Plus, you are missing the point in trying to automate Procurement!
The focus should not be on the Procurement function itself. The focus should be on the organisational user. The key goal of any procurement automation is to make it easy for users within an organisation to make purchases and interact with approved suppliers. Why? Because this frees up Procurement resources to focus on how they can impact P&L and raise the social profile of the organisation.
Yes, you want to enable supplier interaction, establish a supply chain process, address CSR and ensure compliance in the automation process. However, if the user is not able to easily leverage what you have set up guess what – they will find an easier way to do what they need to do. Effectively bypassing all the weird and wonderful features and functions you have implemented to ensure your Procurement function works well. Plus, probably making any analysis of data from the systems inaccurate or distorted by these “off piste” user actions and potentially putting at risk the organisations CSR image.
There are many figures quoted for implementing eProcurement. Ranging from US$1m to US$15m. Malpractice or poor management in the development and implementation of the eProcurement system often being the main factor in these larger numbers.
Staying focused on the user and efficiency of the process from a user perspective, in our view, will keep costs down and ensure that there are clear and measurable results associated with the automation. With this approach, you can have a significant impact on your organisation for substantively less than $1m.
Plus, if the user is more efficient and the process more effective, this will free up valuable Procurement resources to focus on supplier relationships, risk mitigation and changes that impact the P&L of the company.
Potential Domains to Automate would Include:
These include processing purchase orders, purchase requisitions, goods received and invoicing processes. These are the foundation blocks of any automation system.
This typically includes maintaining supplier information, contracts, pricing and catalogues. As well as the current status of a supplier in terms of approval levels and scope of supply.
Buying manages the end-to-end procurement process between the users and their suppliers. This includes ordering goods, ad hoc activities, advanced planning, scheduling, and group buying.
Where tender's are needed the process needs to be automated.
Invoicing and Payment
To manage payments, receipts, authorisation and matching of invoices to orders at goods receipt. There is a strong linkage to accounting systems of this specific function
Seamlessly connecting to supplier’s systems for example. Though, connectivity includes to other internal and external systems as needed.
There will be a workflow process that reflects the internal processes of the organisation. Aligning the system to key business processes.
All companies need detailed information to manage their bottom line. Automation to provide MIS information is essential and the ability to analyse, simplify and present this information in different ways for different groups essential.
4: Single or Multiple eProcurement Platforms?
Often the assumption is that you are better to work with one vendor and one system to automate a process. The challenge with Procurement is that there are many processes and interactions. Making a single system selection difficult and often leading to compromises.
Essential, in our view, is that there is only one source of data. Any automation should ensure that the user and supplier data is held in one place for all systems: there can be only one master data record and authentication point or there will be chaos.
Beyond the data, though, the number of systems should reflect the need to achieve efficiency and user adoption. Integration costs may be incurred. However, if the benefit is to simplify the whole process from the user point of view, then using best of breed solutions should be the priority.
The other factor encouraging the use of multiple systems is the availability of cloud-based services that allow organisations to readily access systems on an on-demand basis. Placing some of the more complex indirect spend categories into cloud-based systems may allow an organisation to focus their other system/s on core capabilities and basic processes.
Cloud-based systems have a number of advantages:
- reduces the duplication of investment costs for multiple on-site servers and management.
- low entry investment and ongoing investment.
- speed of deployment and roll out across an organisation.
- not locked into a single supplier who may exploit their monopoly position.
- resiliency from issues with a single platform provider.
- keeping up to date. Innovation and future enhancements to the platform are available to all users.
- on demand procurement. Flexibility based on demand.
- access speeds across a global deployment.
- reliability and security a given: critical and significant investments for cloud service infrastructure providers.
- Access services anytime anywhere.
- mergers and acquisitions. Easier to deploy systems across groups.
- environmental impact. Shared computing resources have less environmental impact.
The key, whether insourcing or outsourcing your procurement automation, is to ensure that you are enabling the end users to get exactly what they need quickly, simply, and in compliance with procurement policy. Without them having to understand the intricacies of that policy.
Procurement should not be concerned with the buying and receiving transactions. These need to be automated, simplified and the primary concern of the departments with the need for these products or services.
To achieve maximum impact for the business, users should be the primary focus of any procurement automation. Why not take the first step towards enabling your organisation to make purchases and contact Claritum.
6: Further Reading
- 7 ways to transform eProcurement adoption (Article)
- 5 steps for procurement to impact on financial results (White Paper Download)