TweetIn the facebook age, when the digital natives – those who don’t remember a time before the internet – are emerging as the new generation of business leaders, thinkers and politicians, it can be easy to forget how today’s business technology evolved. And it’s easy to dismiss it. But knowing a little more than best practice and understanding why we do stuff the way we do is enlightening and helps inform us about the future evolution of business technology. continue reading…

TweetI despair sometimes. There’s been a couple of threads in the purchasing and supply chain media recently that seek to justify the role of procurement. There was Peter Smith’s recent spirited defence, (here), of the procurement profession in response to David Cameron’s naive attack calling purchasing professionals the “enemies of enterprise”. And then there was the article in Supply Management “CFO focus on savings ‘does procurement a huge disservice” which high-lighted some research by Ardent Partners revealing a misperception of the role of procurement by most CFOs: continue reading…

TweetEvery generation thinks they invented sex. continue reading…

TweetIt’s true, it sits close to the very end of the lack-of-glamour spectrum within the dusty and poorly lit back office of most organisations. The business end of the organisation on the other hand – sales and marketing or product development perhaps – that’s where the glamour is – they really know what business is about and they know how to spend the organisation’s money. They certainly don’t need procurement to tell them.

Perception is reality and anything that can help improve the perception of procurement will really help procurement embed their worth within a business. And that’s why I think rebates are great. What do you mean “where’s the connection?”

Mark Perera wrote a piece recently in the Procurement Intelligence Unit blog asking “How do you measure procurement’s value? Income?” He goes on, by using Oxygen Finance’s model as an illustration, to explain some of the benefits of using rebates as an alternative to discounts from suppliers. I think that the benefits go further.

The poor perception of procurement is a real problem. If the business has no respect for procurement, they’ll continue to use their own suppliers and it doesn’t matter what great discount procurement have negotiated, if they’re not used, no value gets delivered and the perception really does become a reality – procurement delivers no value. If on the other hand procurement is delivering revenue and the business targeted on its procurement related revenue contribution – that sends a much stronger message than waving the P2P stick and shouting about compliance. The “I-can-get-a-better-price-myself” objection disappears because the business knows that the price paid is retail and the whole image of procurement is transformed.

Rebates won’t work every time but they can be a very effective way of evangelising the benefits of procurement and changing the purception of the procurement function from boring to, well, less boring. Let’s not get too carried away!

TweetWhat gets measured gets managed. It’s a slightly tired truism but it’s very relevant to Purchase to Pay and, sadly, often overlooked.

Most P2P (Purchase to Pay) projects are justified as a means to reduce cost. They introduce efficient processes that allows  purchasing payment and accounting functions to operate with fewer people. They create more responsive and agile purchasing environments and utilize leading edge technology to create synergy with suppliers. It is relatively rare that  P2P program is initiated in order to increase visibility of spend and deliver spend analysis capability. On the contrary, it is lack of visibility of spend that make the business case for P2P difficult to develop. If you don’t know how much you spend, with whom or how often you buy stuff, this makes it difficult to quantify the benefits of implementing P2P – and it’s a difficult sell to suggest that you need P2P in order to create the visibility you need to understand the benefits. It requires a leap of faith for a CFO to buy in to this type of justification.

Spend Analysis

Visibility, and the tools to understand what you see and interpret it, is crucial and with the prospect of a double dip recession, there is no time for complacency. A business will not exceed if it doesn’t know it’s competition. It won’t succeed if it doesn’t understand the changing needs of its customers. It won’t succeed if it doesn’t know how much capital it requires and it certainly won’t succeed if it doesn’t know how much it spends, with whom – and if it fails to understand, manage and mitigate the supplier risks in a recessionary and liquidity constrained stage of the economic cycle, it might as well give up now.

In a recent post by Jason Busch in Spend Matters he puts it very succinctly:

Make sure your spend analysis and P2P (including invoice automation) capabilities are fully in place and ramped up as soon as possible. If you don’t have visibility (both historic and forecast) into what you’re spending and who you’re doing business with, it’s not only impossible to act nimbly and take action when it comes to identifying at-risk suppliers, it’s also challenging to develop accurate forecasts into your current and future payment obligations — which directly impacts broader margin, EPS and financial forecasts