What's Wrong with E-Procurement?

By Susan Avery

October 27, 2015 at 7:05 AM

As Amy Fong of The Hackett Group sees it, the best way for procurement leaders to improve spend compliance is a good, easy requisitioner experience. Her philosophy is “to make it easy for people to do the right thing and hard to do the wrong thing. Companies that follow this thinking will be successful at achieving higher savings.” 

Fong, who is Senior Procurement Advisor and P2P Program Leader at The Hackett Group, was speaking at the webcast, “Fixing the Broken Promise of eProcurement,” hosted by Tradeshift, the global network and platform that connects buyers and suppliers. 

Its new corporate buying experience, Tradeshift® Buy, is an all-in-one integrated solution designed to provide an “easy way for suppliers to add and manage catalogs, employees to buy easily what they need while following procurement policies, and for procurement to add strategic value to the organization.” The webcast, which is available for viewing on demand, includes a live demonstration by Tradeshift Senior Director of Enterprise Products Thijs Stalenhoef.   

Strategic Objectives through the Eyes of E-Procurement

Using data from The Hackett Group’s Key Industry Study, Fong said in the webcast that procurement’s objectives are “to support the strategic and operational plans of the business as well as become more agile, able to respond more swiftly to changes in business demand.” With that, procurement also is looking to improve service to internal customers and its efficiency and productivity. 

 amy fong.jpg Fong defines e-procurement as a solution that provides self-service utility for buying goods and services, creating requisitions, viewing catalog content, finding suppliers, getting internal approval, managing against a budget and communicating a PO to a supplier. End-to-end e-procurement (procure-to-pay) does all this and connects to acceptance of supplier invoices and matching for approval. 

Top performers, The Hackett Group’s term for best-in-class, are buying about half of their indirect line items through e-catalogs. Fong pointed out that the gap, or opportunity, that exists between the top performers and the majority of procurement organizations; the majority buys about 20% of indirect line items through e-catalogs. 

Why Revisit E-Procurement Strategy?

In her work at The Hackett Group, Fong sees procurement organizations looking at their technology roadmaps and evaluating whether the plan is what they really need. She said that they are looking at cloud-based solutions and changing the infrastructure. They’re trying to reduce IT cost of ownership. At the same time, highly customized legacy systems are not meeting the needs of requisitioners. “Customers are used to Amazon,” she says. “We can’t do that in the business world.” 

In her presentation, Fong pointed out the benefits to having an e-procurement system: Lower costs to place an order, and better matching are two. Others include a reduction of maverick spend or capturing savings that would otherwise be non compliant. 

“Guided buying from approved supplier catalogs at prenegotiated prices drives compliance and spend visibility,” she said, adding that organizations lose about 6% of savings negotiated due to non compliance. “For some companies, this is millions of dollars. E-procurement users are getting about 20% increase in indirect spend compliance and that leads to 9% reduction in lost maverick spend numbers. It’s an important improvement. But there’s still opportunity.”

E-Procurement Challenges

E-procurement has its challenges, especially with ERP-based systems, Fong told webcast attendees. Organizations are seeing low user acceptance of current systems because items are difficult to find, information is out of date or confusing, the approval process is too long, and lack of understanding of when to use an e-procurement system. 

There are technology features that help eliminate some of these, she said. “Guided buying gives requisitioners a very clear path. If you need this, this is what you do. We can help you in a fairly low touch way to get you what you need.” 

Other challenges involve the systems, with users unable to remember all the passwords they need. They also may find the process complex if ordering for several departments. “It makes me want to pick up the phone and call the guy down the street rather than go into the system that has the contracts someone negotiated that give my company the best deal,” she said.  

Selecting an E-Procurement Provider

When selecting a new solution, Fong suggested focusing on the differentiators and take a process-centric approach. “Think of an activity you need to do and ask the supplier to share how to accomplish it in their solution. Think of exception cases and rank them based on likelihood. Think about what’s going to have the most value for your organization and the way your culture operates.” One differentiator: Search capabilities. 

Fong also recommended procurement leaders to pay attention to the implementation team. “The provider’s ability to get requisitioners and suppliers on board is really critical.” 

Going forward, she offered this advice: Simplification is the first step. Think of what’s really necessary like consolidating the supply base and items purchased. Think about onboarding. 

“I see onboarding underestimated in the process. You have to budget and plan and be realistic about expectations and resources required. Understand you are going to do it piece by piece and that you are going to continue on the path.”

View the webcast (that includes a live demo), Fixing the Broken Promise of e-Procurement

Read the My Purchasing Center article, Tradeshift Buy Does Away with Catalogs, Maverick Spend

 

 

 



Tags: purchasing indirect E-procurement Supply chain management Procurement Technology sourcing
Category: News Article

Susan Avery

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Susan Avery is Editor-in-Chief at My Purchasing Center. She writes articles, blogs and white papers and manages and creates other content for the online procurement and supply management publication. She produces and moderates roundtable discussions, podcasts, webcasts and video interviews. Susan has 30 years experience covering procurement and supply management for Purchasing magazine and Purchasing.com. 


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