Post one of this two-part series looked at how procurement is (and may always be) linked to savings, even as the definition and measure of those savings has changed. But Procurement’s role – and influence – has expanded. Technology and data are accelerating procurement along the value continuum, and changing what it can bring to an enterprise beyond the bottom line. In this post we look at how procurement professionals can leverage tools to increase their organizational effectiveness — and clout.
Stage three: Leveraging the Capabilities of Available Tools for Savings
Executive leadership teams recognize that getting the desired return from procurement requires more than investing in the right team and skills; the organization also needs to put the right set of tools in place. Any expansion of Procurement’s approach to managing spend will put those tools to the test.
Every aspect of procurement technology — from spend analysis through supplier management solutions — creates a unique opportunity for procurement professionals to leverage information to improve efficiency. But not all solutions are created equal. Only source-to-pay platforms that enable advanced integrated functionality such as analytics and supplier performance management allow Procurement to grow beyond basic approaches to generating savings.
Just as the definition of savings remains in flux, so too do the expectations of all enterprise procurement solutions. Beyond being the “right way” to work, they must also perform better than manual alternatives and be comparable in usability to consumer applications. (Click here to read more about Determine’s platform approach to solution design.) The ability of any procurement solution — and the team using it — to have an impact beyond the boundaries of procurement will be determined by how well businesses can optimize their overall performance, free from the strictures of existing processes.
Stage four: Tapping into the Information Advantage
Having savings generation as Procurement’s primary motivation can translate to a wide range of choices in terms of execution. The more Procurement knows about products, services and suppliers, the more qualified options come to light.
Savings — preferably expressed as a percentage — should always be looked at as a measure of efficiency. Any means of increasing that efficiency should be considered part of procurement’s purview. We can rationalize demand, leverage volume and make sure our pricing models match our suppliers’ cost models as closely as possible. Being able to take a broader approach to generating savings requires us to know more about categories of spend, the associated suppliers and how both affect the ability of the enterprise to operate. For Determine customer AOL, that meant becoming a strategic business partner across business units, leveraging data visibility to improve processes and thus achieve massive savings.
Another way of looking at the impact of savings is through the elimination of waste — cutting areas where the enterprise is spending money but not realizing sufficient value in return. For this, Procurement must gather information on the current material and service usage and how they support internal processes. Procurement’s analytical capabilities open the door to purely internal savings through the adjustment of wasteful processes before doing the same with supply partners who are in a position to make further recommendations.
Although Procurement’s scope and capabilities are expanding significantly thanks to technology, savings continues to be the primary measure of our contribution to organizational effectiveness. We are — and always will be — a function with a bottom-line focus. As we apply new approaches, we must still be able to capture and express our contributions in terms of efficiency improvement. The challenge of the present cements Procurement’s need for a solid technology foundation — one that allows us to access information, streamline transactions and maintain visibility after the fact — now and into the future.
* Spend management is increasingly complex. If you want to learn just how much more valuable and effective your company’s P2P process can be, request a demo to see the possibilities. Or contact us with your questions anytime.