The seven pillars of procurement wisdom: #1 culture and technology
Large global organisations seeking to master the complexities of procurement – and realise the hard-won savings specified in contracts – should start by thinking afresh about their culture and technology… The start of a new series: The Seven Pillars of Procurement Wisdom
Successful procurement is buying the right goods, at the right cost, at the right moment. In reality, especially in large, global corporations, that ideal can sometimes seem as attainable as the Holy Grail.
Complexities hinder change
The structure – or lack of – of procurement departments is often a roadblock. Too often, legacy mindsets, local relationships, bureaucratic inertia and the sheer complexity of doing business hinder attempts to transform procurement. That said, the software doesn’t always help. Too many organisations have invested in software that isn’t fit for purpose and have to adapt their daily working practices to mitigate its limitations. In such circumstances, is it any wonder that many frustrated managers go ‘maverick’ with their spending?
It’s often at this point that someone – and the odds are that it will be someone from the finance department – will pop their head round the door and say something like: “Why did we do all that negotiation that was going to save us millions, when we’re still buying the same old stuff from the wrong suppliers?”
The procurement department has no right answer to that question. That’s why Paul Blake, product marketing lead at GEP, says organisations must think differently about procurement. “Traditionally, the focus has been on the contract, but that is not an end in itself. For companies to realise savings, they must close the gap between sourcing and purchasing.”
Reducing operating costs
Saving on small things like stationery might sound trivial – although in some businesses that could reduce operating costs by hundreds of thousands of dollars – but the principle applies to every category of spend. Eliminating maverick spending entirely may not be feasible – or politically desirable – but minimising it is essential if you are to genuinely transform procurement.
Business guru Tom Peters may have advocated that businesses must learn to thrive on chaos – but that dictum should never apply to procurement.
To do this, organisations need to have an open-minded discussion about the kind of procurement technology they invest in. Some companies suffer from a kind of mission creep, where technology becomes an end in itself. The focus here should not be on the latest gizmos, upgrades and features (many of which may be of little everyday use to the business) but on the core business needs.
Asking the right questions
The ROI on new technology will be much clearer if the purchasing process starts with a few basic questions:
– What really drives value in our business?
– Which markets do we want to be in in five years’ time?
– How do we encourage adoption?
Blake says: “In our view, there are three elements to a successful system. First, it is genuinely cloud-native – there are many arguments about this but, simply put, this helps with scalability, security, robustness and innovation.
Second, it is genuinely mobile-native – ie it is built for mobile devices rather, say, something that works on an iPad browser.
Third, it needs to be unified, effectively one product instead of a suite of modules, so the system can be seen in one place, workflows and processes are natural, organic and efficient and, because procurement departments are busy enough without worrying about these issues, companies aren’t distracted by concerns over data integration, software APIs and interfaces.”
The right platform
In principle, the fundamental requirement for such technologies is that the right software on the right platform will help procurement professionals generate more value, more quickly – and, just as importantly, encourage buy-in from the rest of the business.
Technology is not the answer for every challenge facing procurement departments at large corporations – culture will always have its say – but it is impossible for companies to buy the right goods at the right cost at the right time without it.
With SMART by GEP® procurement software platform you can create a contract with one click and turn that into a catalogue, which stakeholders can buy from, with another click. With all the functionality in one space, you can track spending and savings. So if, for example, one unit is buying lots of stationery on expenses, you can tell the department head how much money they would save if they bought from the catalogue.