Part One of this two-part series on procurement maturity looked at how procurement is (and likely always will be at some level) linked to savings, even as our perspective on those savings changes. But the scope of procurement’s role has expanded. Technology and data are accelerating procurement along the value continuum and expanding our contributions beyond the bottom line. In Part Two, we look at how procurement professionals can leverage tools to increase our organizational effectiveness — and influence.
Stage three: Leveraging the Capabilities of Available Tools for Savings
Leadership teams must 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 to leverage information on behalf of improved efficiency and increased value. That said, not all solutions are created equal. Only source-to-pay platforms that enable advanced integrated functionality such as embedded analytics and contract management allow procurement to grow beyond basic approaches to generating savings.
Just as our definition of savings is open to re-evaluation, so too are the expectations of enterprise procurement solutions. Beyond being the “right way” to work, they must also outperform manual alternatives and be comparable in usability to consumer applications (read more about Determine’s platform approach to solution design here). 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 easy it is for distributed buyers to get what they need quickly enough that they are not tempted to circumvent the process.
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 we know about products, services and suppliers, the more qualified options we can bring to light.
Savings should always be looked at as a measure of efficiency. Any means of increasing that efficiency rate 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 each category of spend, the associated suppliers and how both affect the ability of the enterprise to operate.
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 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 (in part) to emerging technology, savings continues to be the most common measure of our contributions to organizational effectiveness. We are — and always will be — a function with a bottom-line focus. The difference today, is that we no longer need to see that as a limiting factor.
As we apply new approaches, we must still be able to capture and express our contributions in terms of efficiency improvement. The challenges of the present cement procurement’s need for a solid technology foundation — one that allows us to access information, streamline transactions and maintain visibility during and 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, schedule a personalized demonstration of our modular, integrated Procurement Solution on the Determine Cloud Platform, or contact us with your questions anytime.