08 May 2013 Fundamentally, why would you implement e-procurement?
There are lots of reasons to do e-procurement but most of the stated reasons are not the real reason at all. Indeed, most of the reasons stated for implementing e-procurement are impossible to deliver. But there is one very good reason to implement e-procurement and oddly, the functionality that delivers it is usually not available from the e-procurement vendors.
Three reasons to implement e-procurement.
1. e-procurement enforces compliance to contract
Contracts with suppliers deliver much more than the headline savings that sourcing people are often credited with. Yes, they define a price but they also define standards of service and quality of goods. They help to minimize supply chain risk and provide a means to review performance. Procurement professionals deliver a huge amount of value and all of that is wasted if the organization buys outside of those contracts. e-procurement ensures that buyers and requesters only have access to approved suppliers.
In your dreams. While there are telephones people will buy off contract. Where there is emergency requirements that the e-procurement system cannot accommodate, there will be maverick spend and when the catalogs are out of date, the compliant process will be ignored.
Compliance is an important deliverable but in the real world, it doesn’t work for many categories of spend, for many circumstances and for many corporate cultures.
2. e-procurement reduces the cost of the purchasing process
Done properly, yes it does. But actually, it’s the associated business process improvements across the purchase to pay spectrum that deliver most of the savings and while I would certainly advocate the use of technology to achieve efficiencies, the size of the saving that can be attributed to the technology is almost always overstated. Yes e-procurement delivers process savings but from the CPOs point of view – who cares? Much greater savings can be delivered with a sound strategic sourcing program.
3. e-procurement empowers requestors leaving the purchasing professionals to concentrate on more added value activities than operational purchasing.
This is not something that happens in real life. Sure, if people can use a self service tool to order stationery then someone’s life is made easier but show me an organization that uses purchase to pay technology that doesn’t have a team of operations P2P people. The process still needs hand holding and all that has happened over the years is that purchasing operational people have been replaced with P2P operational people.
These aren’t bad reasons to implement e-procurement and they are, by and large, the main reasons why businesses have invested in e-procurement. But there is another fundamental reason why a CPO wants to see a technology enabled purchasing system and that’s insight. Insight on what is being purchased, by whom and when.
“Well of course” I hear you say – “obviously the e-procurement system delivers spend reports.” But it’s not reports that the CPO wants – it’s the intelligent interpretation of data he wants that allows him to make decisions.
Be honest. If you are someone that knows anything about your organization’s e-procurement platform, are the reports it produces data or insight? Most of you, if you really are honest, will say data. Oh yes, you may well have a separate spend analysis tool that will do some lovely analytics but your e-procurement system doesn’t. The main reason for using a purchasing technology is to allow the CPO to make better decisions and it’s the one thing that e-procurement systems don’t deliver.
Today, we’re going to see the launch of an impressive addition to Basware’s Alusta platform. Basware, like Hubwoo, are sleeping giants – they’d admit it themselves that they don’t make enough noise about their success. They’re arguable the biggest independent P2P network out there (now that SAP have “embraced” Ariba) and they have just won some massive new business in the USA.
The new addition to the platform is an analytical engine. Native to Alusta and available on desktop as well as tablet, the suite of reports it delivers is much more than the icing on the cake of an already comprehensive P2P platform – it delivers what is in my view, the value that e-procurement delivers – insight on spend.
Basware Analytics has to be seen to be appreciated. The data visualization techniques that have been used to create reports are as attractive as they are functional and I can easily envisage CPOs as well as cost center owners spending a great deal of time using the tools available to develop deeper and deeper insights into their business.
With the launch of Basware Analytics, together with a major facelift for their purchasing product, Basware have managed to keep their offering fresh and contemporary but more than that, they’re delivering what all e-procurement products should have been delivering years ago – insight.
Pete Loughlin can be found on twitter @peteloughlin