Enrich White Paper How to Achieve Maximum Value From Your Procurement Technology

7/24/2019 Enrich White Paper How to Achieve Maximum Value From Your Procurement Technology

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2014 Enrich LLC. All rights reserved.

How to achieve Maximum Value

From Your Procurement Technology


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Procurement software has helped many organizations achieve significant results in

the performance of strategic goals, including compliance and process

improvements. It can also provide additional value through price improvements or

value engineering. However, the software can only do so much: many organizationsfail to achieve significant value improvements after implementation because they

are not using their software to its fullest potential. Our white paper will help you

determine the best methods to achieve maximum value from your procurement

software.

Executive Summary


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Procurement software is a critical component in an organizations efforts to reach

strategic goals around compliance, process improvements or cost savings.

Before implementing a procurement software solution, it is important to review

your existing processes to identify potential areas of improvement. This will help

you maximize the results you get from your software and prepare you to

respond to executive leadership when they ask, Are you achieving maximum

value?

There are four key stages to achieving maximum value.

1. Find the Money

2. Get the Money

3. Keep the Money

4. Manage Risk

It is important to review each stage to determine the effectiveness of your

software installation and internal processes, so that you do achieve maximum

results.

Introduction

Stage 1: Find the Money

The first step is discovering the full extent of your organizations spending

otherwise known as Spend Visibility. Liken it to imagining your organizations total

spend as an iceberg. You can easily see the tip of the iceberg, but there is a huge

mass below the surface that is not immediately exposed. When you analyze your

organizations spending, relevant detail can belost in the Chart of Accounts (CoA)

especially if your organization has many CoAs.

To find the money, start by reviewing a years worth of data to determine what

your organization spends its money on, who with, how often and how much. This

is not as easy as it sounds. It involves the development of a unique taxonomy(specific to your organization) to enable you to categorize and classify your costs.

In many organizations, finance departments have deployed iProcurement systems

to manage requisitioning, ordering and invoice reconciliations.

Consequently, their taxonomies resemble the CoA rather than what is required by

the purchasing department. It is important to create a taxonomy that addresses

the needs of all interested departments.

If the object of gaining visibility is to smash-and-grab the cash, this will probably

be a one-time manual process managed by an analyst using horrendous

spreadsheets. If, however, the procurement function is more strategic, the value

of spend visibility will be understood along with the value of the repeatability of

the process.


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Continuous spend visibility allows leadership to make strategic judgement calls on

what the organization will spend its money on (for example,

the move from paper to digital in marketing, or from internal hosting to cloud

applications in IT). Continuous spend visibility places procurement and the

business in full command of its spend.

With ful l and accu rate

spend vis ib i l i ty ,

Procurement departments

can engage bus iness

leaders o n th e basis of fact,

agree on prior i t ies and

pursue sourc ing

prog rammes that wi l l

del iver the best value for

the organisat ion.

With full and accurate spend visibility, Procurementdepartments can engage business leaders on the

basis of fact, agree on priorities and pursue

sourcing programs that will deliver the best value

for the organization. Because of that visibility,

they can monitor spending more closely and

ensure that their anticipated benefits are being

realized.

Oracles Procurement & Spend Analytics software

can provide your business with clear visibility of

spend, enabling your leadership team to make strategic

judgement calls on tranches of spend, engage

foundation of facts, and build and prioritize sourcing

offer complete support to help your team get the full

organizations spending.

with stakeholders on a

programs. Enrich can

picture of your

Stage 2: Get the Money

This will be achieved in the sourcing exercise. It may well be the result of a

programme that has moved from Request for Information (RFI) to Request for

Proposal (RFP) to Request for Quotation (RFQ), and could include eAuction.

Simply following a defined sourcing process does not automatically guarantee the

results you seek from the items or services you purchase. To get the best results,

you must first clarify precise specifications for the items you are sourcing. The right

purchase should exactly meet your needs, and you shouldnt spend too much on

additional unnecessary features or sacrifice critical components to save money.

These specifications should be prescriptive, precise and clearly define the desiredoutputs or outcomes for the item or service. This will allow potential suppliers to

demonstrate their expertise and ability to meet your requirements. It will also

benefit your organisation to stay abreast of competitors activity and industry

trends. This will allow you to make wise sourcing decisions.

Procurement departments that have little or no spend visibility often find

themselves putting out fires in order to keep up with business demands. This leads

to spontaneous and reactive tendering in unrealistic timeframes. In these

situations, the sourcing activity is run purely to obtain a price, and very little

procurement wisdom is involvedif any. These activities do not add value but arerun to demonstrate compliance with policy. The antidote? Early engagement of

procurement in the concept definition stage, so that a meaningful and valuable

sourcing process can be defined and run.


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Whether procurement is simple or more complex will ultimately determine how

the process will be defined and managed. Once the process is underway, the

teams and egos (on all sides) must be closely managed to ensure that the process

is not damaged by individual agendas. Careful, up-front planning of the process is

paramount, especially if you are using sourcing software. It is also critical to

clearly define each stage for the suppliers who are engaged in your process.

It is useful to have the business stakeholders define the Heads of Terms at an

early stage to ensure that these goals are achievable. These should be

incorporated into the process and ultimately appear in the contract. This

approach prevents internal departments from coming up with unrealistic

demands at the eleventh hour that could derail the process.

Skilled procurement professionals will understand how to carefully manage

preferred bidder status and award of business subject to contract scenarios. If

you do not pay extra attention to these areas, the benefits your program canachieve will evaporate in the period between award and contract.

Large national and multi-national corporations notoriously march backwards from

the buyer as the implementation date approaches. This leads the buyer to accept

anything in order to get a contract in place before implementation of supply. The

period between award and contract is a minefield that must be well managed. If it

is not, buyers can see their excellent results evaporate and the contract will not

actually achieve the anticipated results (that may have already been declared to

Finance). Have you seen this happen in your organisation?

Depending on the complexity of the products or services being procured, a signed

contract might not mark the end of the process. A Business Process Outsourcing

(BPO) scenario involves an HR process, transition and transformation with trigger

points. But in a simple services agreement, there is not always a formal process to

gain visibility of a new contract. In some cases, contracts are agreed to but never

drawn on, because the business was unaware of it.

Oracles Sourcing software provides a structured platform where buyers and

others can build events that align with your defined process. The application can

manage a process from RFI through eAuction and on to contract at the click of a

button. This speed to contract is a critical component of the process, as it

neutralises the minefield in the period between award and contract. It also helps

expand the bandwidth of the procurement team so that they can source more

spend more quickly. When integrated with iProcurement, Sourcing provides your

team with the ability to rapidly source from requisitions. Many organisations

dont take full advantage of this functionality and Enrich can help you master

the process.


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There are many definitions of riskenough to generate an industry in itself. Here,

we are focused on the management of risk as a value component of Procurement

software. Once youve implemented a successful programme and are starting tosee results, you can hold on to your success by wisely managing the risk

associated with the procurement process.

Stage 3: Keep the Money

In order to retain anticipated cost savings, your organisation must be sure that

contracts and their renewals are presented in a timely fashion. How do you do this

effectively?

Many organisations find that this process regularly breaks down if a formal

process exists at all. Consequently, Finance departments are left bewildered as to

where the declared benefit has gone. Procurement departments that fail to

cement this process will be short lived in their existence.

iProcurement sometimes struggles to find an owner among the finance,

procurement and IT departments. A lack of ownership, combined with a lack of

understanding of system administration and a vague or incomplete taxonomy,

leaves many organisations with poor or meaningless reporting on the back end.

In some companies, strategic buyers even disclaim ownership of the very systemthey should be using to present their contracts to the business.

Unless th e contract is

wel l wri t ten and wel l

recorded in a system o f

truth, i t wi l l be openseason fo r the suppl iers.

In some companies, strategic buyers even disclaim ownership of the very system

they should be using to present their contracts to the business.

As time goes by and personnel on both sides of

the buyer/supplier relationship come and go, the

essence of a contract is often lost. New players

will bring fresh interpretations that favour one

side or the otherand were not originally

intended. Unless the contract is well written and

well recorded in a system of truth, it will be open

season for the suppliers.

iProcurement enables the fusion of people, process and system. There are some

simple success factors that must be delivered: good taxonomy, appropriate

support/help desk, adequate training and timely and good content. iProcurement

helps generate these key results by providing access to contracts and applying

controls (approvals) and rigour (process) in the Requisition-to-Pay process. Theapplication also provides a definitive record of transactions for reporting

purposes. When integrated with Oracle Sourcing, iProcurement enables the rapid

sourcing of requisitioned requirements.

Stage 4: Manage Risk


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When Procurement has

in-depth kn owledge of

how the business works

and has clear vis ib i l i ty

of sp end, the team can

easi ly sp ot p ecul iar

act iv i ty and trends .

When Procurement has in-depth knowledge of

how the business works and has clear visibility

of spend, the team can easily spot peculiar

activity and trends. When a process is followed

properly, purchase orders can thwart fraudulent

activity. Credit limits on supplier accounts willprevent circumvention of control without

reference/approval. These are just some of the

ways your software solution can help manage risk.

maverick spend is endemic, this control is non-

Keep in mind: where

worse than having to stand by while forensic accountants attempt to unravel

how a fraud was perpetratedso make sure that you are taking advantage of

the full capabilities of your software.

existent. There is nothing

To achieve maximum

value from yo urprocu rement software, you

mu st f i rst achieve com plete

fusion o f people, proc ess

and technology.

Are You Achieving Value?

When you are considering whether your

organisation is getting the most return on its

investment in procurement software, think in

terms of a procurement system landscape. Your

technology should deliver the necessary capabilities

of spend visibility, sourcing, retention To achieve

procurement software, you must first achieve

maximum value from your

complete fusion of people, process

technology. Using un-integrated, standalone solutions will fracture the

management of an end-to-end process and severely hinder your results.

Consider this scenario: when an organisation acquires a major asset such as an

aircraft, an ERP system, or production plant with machinery, the company

reviews the necessary maintenance and operational programmes with their

attendant costs to ensure operational efficiency and other gains. When you

consider the external spend of your business as an asset, think about the

amount of internal spend leveraged to manage and maintain it. Is this process

efficient and effective? If not, enlist the experts at Enrich to help you improve

your processes.

Enrich can help you achieve maximum value with a Health Check. After weve

gained a complete understanding of your business goals and key initiatives, our

team will work with your internal resources to identify areas where your

software is being underutilised, optimise your configuration to ensure accurate

and efficient data transfer, and train staff on essential functionality. We will

determine where you are, identify quick easy wins and provide a detailed

roadmap to build your procurement system landscape.


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Chennai600113, India.

Phone: +91 44 3910 3536


To discuss any of the issues or schedule your health check, contact your local Enrich:

Author: Padraic Phelan, Consulting Director, Enrich

Padraic Phelan, Consulting Director at Enrich, has held a series

of high profile purchasing and commercial directorships,

including the Director of Purchasing at TUI AG, one of the

worlds largest travel organisations, and Director of Purchasing

(and subsequently Commercial Director) of The City Universityin London. During these tenures, Padraic was responsible for

global procurement systems and the processes behind the

technology, including the management of P2P processes for

over six years. Padraic offers a unique perspective on the

challenges facing both private and public sector organisations

in an increasingly global environment, and helps these

businesses add value to their bottom line.

Enrich offers an entire suite of Procurement Solutions and Procurement

Concierge Services to help our clients succeed; from spend analytics,

opportunity assessments and sourcing, to contract management, catalogue

management, iProcurement, tail spend management and working capital initiatives.

We offer a range of deployment options to suit our clients specific needs including;

Cloud, On Premise or Hybrid and provide a one-stop shop for implementation and/or

managed services to help clients squeeze the maximum value from their Oracle Solution.

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Enrich White Paper How to Achieve Maximum Value From Your Procurement Technology

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