By Dennis Bouley
Procurement is not as efficient as most business executives want it to be. The inefficiencies occur as a result of a number of variables that don’t always necessarily align: process, implementation, adoption of new technology and integration of data. Unfortunately, although most organizations set goals to become more efficient, they just don’t know how to get there.
The ways that companies manage their procurement function can vary greatly depending upon industry and regulatory environment. However, in many cases procurement is not a truly integrated part of the entire supply chain. In order to improve efficiency, procurement cannot be analyzed independently. The interrelated nature of procurement and the global supplier network means that shared responsibilities and joint use of applications need to be optimized.
The industry is beginning to change in terms of its acceptance of new technologies that help enable a migration towards higher efficiencies across a more integrated marketplace. According to Zia Zahari, Chief Technology Officer of Source-To-Pay software firm JAGGAER (www.JAGGAER.com), procurement departments are not as wary of technology as they were 10 years ago. “The new generation is very comfortable with technology in terms of operations, the advanced capability of web development, and use of the internet.”
According to Zahari, procurement professionals are looking for productivity tools that provide stability and speed of execution. “Across industries, cycle time and how quickly they can execute their jobs is very important. What is critical is how long it takes to locate the required goods and how fast one supplier can be compared to another,” he said.
A platform that permits easy integration of data presents numerous advantages in this evolving procurement scenario. In a traditional set up, separate buckets of key functions across the supply chain all need to be optimized independently. This is complex, time consuming and difficult to control from a procurement standpoint. These key buckets (like pricing or categorization, or product availability) all influence each other in a significant manner. “If you’re performing demand analysis and demand optimization, you know those variables will have a direct impact on the sourcing and pricing, which can, in turn, affect demand,” said Zahari.
“If faster decisions are the goal, then these important aspects of the supply chain need to be brought much closer together. Sourcing, on time management, understanding the supplier, supplier organization management, their teams and partners all of these need to get closer,” he said.
Data is now the key to success
Consider the example of a part that is available from multiple suppliers. The purchasing agent can see that one supplier is offering the part at a slightly lower price. If price was the only driver of that product, then everyone would buy that particular product because it’s a little cheaper. But if the purchaser had the capability of digging a little deeper, he or she might discover that the two suppliers have very different contractual terms and conditions. One supplier offers dynamic discounting and the other is not capable of offering the same arrangement. When all the variables are factored in, the purchasing agent could find out that the supplier with the slightly higher price is actually cheaper to do business with in the long run.
“Not having enough information available to you at the time you make the decision can result in a wrong decision. This is where the technology brings in a high value,” said Zahari. “Modern platform technologies available today are intelligent enough to automatically integrate key variables. Decisions can be based on clean data and this makes the purchasing agent more aware of how the supply chain is behaving in real-time,” he said.
“A platform design allows for a single point of data collection and data interpretation which enables procurement to enhance and augment purchasing decisions. This provides the business better quality in a timely fashion,” he concluded.
JAGGAER (www.JAGGAER.com) is a market-leading provider of SaaS-based Source-to-Pay (S2P) solutions. Headquartered in Morrisville, North Carolina, JAGGAER recently merged with Europe-based POOL4TOOL, the global leader in electronic optimization for direct procurement.
Dennis Bouley is Editorial Director of MyPurchasingCenter.com and special advisor to MediaSolve Group, a strategic B2B marketing services firm focused on helping companies and institutions leverage the web and social media to achieve business goals. He spent 18 years at Schneider Electric as Managing Editor of Global Publications, and was responsible for cross-division management of the corporation’s white paper and customer success story processes. Prior to that, he spent 10 years working for IBM managing both small and large accounts. He holds a Bachelor of Arts in Journalism from the University of Rhode Island and holds a Certificat Annuel from the Sorbonne in Paris, France.
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