It's clear that e-procurement delivers significant bottom-line benefits, including cost reductions, process efficiencies, spending controls and compliance. As such, it pays for procurers to spend money on technology because such investments will boost efficiencies, which in turn will enable companies to direct resources to more strategic initiatives, where they can derive even more value, according to CIO Magazine.

"Companies that do it right spend more on technology in the short term, but less on overall operations in the long run," says the business publication.

Knowing this, however, does not create an automatic fix. While technology over the past decade has evolved and played a more significant part in purchasing than years prior, amazingly it remains common for procurement departments to have poorly implemented systems, limited technology or no technology whatsoever. Critical modules often are missing or are simply inadequate — a serious cause for concern when one considers the role that technology can play in spending and building a strategic sourcing program.

So how can buyers ensure they are getting the most from their IT? An adequate, fully integrated approach is necessary.

According to A.T. Kearney Procurement Solutions, buyers wanting a proper purchasing approach should invest in three platforms:

• Sourcing tools, which include tools for e–auctions, electronic requests for information (e-RFI), requests for proposal (RFP) and requests for quotation (RFQ). Ultimately, these provide the framework agreements that offer the best prices.

• Order capture tools, which both allow purchase order requests for goods and services to be represented electronically and route spend to the framework agreements that have been established with suppliers.

• Support tools, which include applications such as contract databases, supplier relationship management (SRM) tools, knowledge management tools and spend databases. These help measure the volume of spend being routed to preferred suppliers, track performance metrics associated with key suppliers and provide an electronic repository for contracts.

Procurement (and sourcing, too) involves developing system and collaborative approaches to products-and-services sourcing — using volume, supplier relationships and technology to dramatically reduce external spend while improving quality and supplier performance. Yet examples of a truly integrated approach are rare. While buyers have invested heavily in support tools, investment in sourcing and order capture tools has remained low, the company gleaned from its 2004 Assessment of Excellence in Procurement survey.

Companies must not only look at the big picture, but must also understand it. Procurement technology must be interactive with all people involved in the purchasing process. Workshops involving process mapping and system descriptions usually are a good start; they also should be continued as the technology evolves or as more is added. This brings better understanding of the way in which the procurement group interacts with support services.

Further collaboration could also be of benefit in liaisons with users of other applications from the provider of your procurement technology across your organization. This can incur quicker problem solving, as some procurement-tech providers respond slowly to their users' suggestions for improved or added features. As such, jointly raising issues with another user in your organization may get you a faster response. Alternatively, collaborating with users from other companies that are experiencing similar problems could be of great benefit.

Procurement groups and technology providers must collaborate and work closely with each other. Only then will e-procurement's potential value be realized. After all, technology is only as effective as the people who design it, build it and USE it.

Remember, technology for technology's sake is the wrong way to go. And shunning technology, too, is all wrong. Technology is a strategic business resource that, when used effectively, is a key enabler and an enhancer of organizational performance. Business strategies and technology strategies should be aligned — integrated — and pursued in a sustainable and supportive way.

Source

E-Procurement: Are You Properly Equipped?
by Hadyn Jones
A.T. Kearney Procurement Solutions*, Oct. 6, 2005
(*Originally appeared in Supply Management)

Reference

The Price of Procurement
CIO Magazine, April 15, 2005