e-procurement is a waste of money

e-procurement is a waste of money

Posted by Pete Loughlin in e-Procurement, e-Procurement Software, P2P Europe, Public Sector Procurement, Purchase to Pay, Purchase to Pay Process 15 Oct 2012

Ever since I read Hell’s Angels by Hunter S Thompson, I’ve always found the image of bikers compellingly attractive. And so I’ve not spared any cash when it comes to getting my own image right. When I’m wearing my black Rukka Merlin jacket with matching water-proof Gore-Tex, armored leather jeans and my Schuberth C3 Pro helmet with built in antennae, even though I say it myself, I look the business. All I need now is a bike.

I remember from my teenage years, as I suspect will many others, the sad soul with the helmet and no bike. Pursuing the biker dream with not enough money for the full package, he missed the point. Having a helmet doesn’t make you a little bit of a biker. It makes you a little bit of an idiot. Making only a partial investment isn’t always an incremental step towards a complete solution. Often it’s a waste of money. And that’s what e-procurement is if it’s implemented in isolation – a complete waste of money.

Purchasing Insight logoI’m joking of course about the biker gear but I’m not joking about e-procurement.

I was speaking recently to Ian Burdon about e-procurement Scotland – an exemplar of the use of e-procurement. He was explaining to me how Scottish government procurement was transformed. Detailed analysis of spend revealed opportunities to create synergies between different organizations buying and collaboration with suppliers generated savings previously unattainable. Hearing him describe how the transformation project worked, it sounded more like a strategic sourcing program than an e-procurement implementation. And that’s because that’s what it was – and more. It seems to me that the reason why the Scottish government is such a good example of how to implement e-procurement is that it wasn’t an e-procurement implementation. It was, and is, a great example of holistic purchase to pay.

E-procurement doesn’t deliver any savings. Neither does negotiating better pricing or payment terms. Spend analysis does nothing for a business. None of these things deliver any benefit on their own. E-procurement requires quality data and proper processes and trained users. Saving can only be delivered from renegotiated terms if users comply with purchasing policy and spend analysis is only of use if it is interpreted and acted upon properly. This is pretty basic stuff but businesses still treat e-procurement as some kind of panacea – a quick fix – or perhaps an incremental step towards procurement best practice. It isn’t. It’s a crucial component of procurement best practice but without the other crucial components – the people components, the process components and the strategy component, it is quite ineffective.

Pete Loughlin can be found on twitter @peteloughlin

  • Ian Burdon October 15, 2012 at 10:25 am /

    Essentially I agree, although I might nuance things differently.

    I have said many times that getting “e” procurement right means getting procurement right. One of the key values of the “e” tools is locking changes into place and making them repeatable and sustainable. It is why I have largely kept an amused silence in the face of the extensive marketing in recent times of eInvoicing as the current panacea and also -in part at least- why I made the comments here a few months back about PEPPOL.

  • Ellen Leith October 15, 2012 at 1:35 pm /

    I think it’s easy to lose sight of the fact that no two organisations are the same. There aren’t any panaceas to be had – either in e-invoicing or e-procurement. We’re never going to get to a stage where all Finance, Procurement and P2P departments are the same, so necessarily everyone’s approach will be different.

    Most important of all is to keep the end-game in sight. What do you want your department to look like at the end of your “e” implementation program? And work backwards from there, weaving in current practices and people along the way. It needn’t take forever – but I’m a firm believer in process and taking the team with you. It’s much less painful and more likely to work – frustrations just need to be shouldered.

    And Ian – yes, e-Invoicing has its pitfalls too. I was speaking to a Head of P2P at a large airline last week who has implemented a new solution – with limited success because the supplier onboarding was less than effective…

    Pete….disappointed about the leathers..! hehe

  • Rosemary October 29, 2012 at 10:21 am /

    I believe, sustainable “e” procurement depends very much on sustainable buyer supplier relationship. much as I am aware that buyer supplier relationship is sustainably limited, I also believe that “e” procurement sustainability is very much limited. with that, I would say getting procurement right means getting “e” procurement right, thus “e” procurement depends on startegic procurement and not visa verse. Like what Pete said in the first article “e” procurement on it’s own is quite inefective, it needs other components of management.

  • ezequiel November 25, 2012 at 2:38 pm /

    Yes, I rather improve my cycling, buy the bike a bit later, and get the helmet for free

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