Deloitte has recently claimed that eProcurement offers the kind of innovation that will drive industry forward and into the next generation of commerce by 2020. And, lots of different businesses from a wide variety of sectors are already benefiting from the wide range of advantages it offers, such as improved control over spending, reduced time spent on manual tasks and overall cost savings.
We recently surveyed 200 procurement professionals to understand more about how those who have already adopted the technology are benefiting from it in their organisations. And, the results showed that it’s not just them who are benefiting from the digitisation of their procurement processes but the wider business is too.
However, one key question that our survey asked was whether organisations are using eProcurement for tactical ‘quick wins’ or for longer term organisational gains. The survey results showed that eProcurement is actually delivering on three types of benefit - tactical, opportunistic and strategic, and reveals that a multi-dimensional approach is being adopted in most cases. So what exactly are the different types of benefit and what do they mean for business?
32% of the benefits our sample had realised through eProcurement were deemed ‘opportunistic’. These include quick, short-term gains, such as eAuction based price negotiations in competitive spend categories, leading to immediate savings on supplier costs.
eAuctions provide a unique method of buying and selling goods that can be mutually beneficial to suppliers and buyers alike. This eProcurement function takes advantage of multiple auction styles (English, Dutch or Japanese models) over an online platform where buyers can compete for the best deal on relevant goods and the supplier can make a quick, easy sale. Alternatively, reverse auctions allow several sellers to contend for the opportunity to win a large order from one buyer.
However, feedback from our survey suggests that the opportunistic gains from eProcurement go far beyond bagging a bargain. Procurement professionals are also taking advantage of the technology by grouping spend with the same supplier to achieve further cost reductions per item based on greater purchasing power. They are also using it to help reduce maverick spend to ensure that approved goods are bought at agreed prices with approved suppliers and via the appropriate channels so that spend can be recorded.
Opportunistic eProcurement goals are important because not only do they help deliver some quick wins to demonstrate the benefits of the technology to the business, they can often pave the way to further investment in the technology. These opportunistic benefits can be highly effective in demonstrating to the senior management team what an even greater focus on this area will deliver in terms of ROI, and potentially leading to greater profit margins. We’ve often helped clients use a single category auction to save money which then justifies purchase of a full eProcurement suite of tools – including eSourcing, P2P, eInvoicing and contract management.
An equal 32% of eProcurement benefits were considered ‘tactical’. These are generally the ‘bread and butter’ things that impact the procurement function and wider organisation on a day by day basis.
We’re talking quicker, more compliant processes, the ability to make faster decisions, and improve productivity, in addition to slicker supplier on-boarding processes and a reduction in invoicing errors. These tactical benefits account for the everyday tasks that should be fairly straight-forward but which, when performed manually, seem to take up a lot of time.
Other examples of how eProcurement streamlines everyday activities include its ability to automate tendering and contract management processes. These are simple buying processes based on custom templates and use approved workflows to minimise requisitioning and approval timescales, resulting in dramatically shorter purchasing cycles. By automating contract management, organisations can mitigate against supplier risk and have quick and instantaneous access to all supplier contracts.
Users found that time reductions in these areas often reduced supplier issues by dramatically eliminating the risk of invoice processing errors which could lead to the late payment of suppliers. The knock of effect is that less supplier issues means that they are able to deliver to schedule and timescales for planned projects do not need to be changed.
With an automated tender a procurement team can source materials that have previously been bought and replicate the order in a bid to find the lowest price.
These tactical goals are really the bedrock of an eProcurement implementation, reducing unnecessary process overheads and creating more visibility of what’s being spent and with whom. It’s actually quite surprising in some ways that tactical benefits didn’t make up a larger part of the landscape.
That brings us to the third area of strategic benefits which at 36% was the largest share. These are gains that are much more focused on supporting an organisation’s future direction, contributing more directly to the success of the business.
Having established the immediate benefits that eProcurement offers businesses of all sizes, from cost savings on functional spend categories to reduced labour costs, organisations are equally looking to make bolder moves or accelerate existing plans.
It’s really refreshing to see that eProcurement is so intrinsically linked to broader strategy; examples might include overall risk management, more accurate business forecasting, aligning the supply base to a new growth strategy or instilling an ethical code of practice and transparency throughout the supply chain.
Considering the pressure on profit margins in many business sectors it’s not surprising that businesses lacking in formal procurement processes are struggling to compete. Perhaps this is one reason why eProcurement seems to be taking an increasingly strategic position in many organisations.
No matter if your reason for adopting this technology is for opportunistic, tactical or strategic gain, or even all three, one thing’s for sure; it appears that eProcurement can assist professionals and organisations in multiple ways, whether the aim is to save money fast, create process efficiencies or indeed give the CPO a strategic seat at the top table.
Daniel Ball, Director at Wax Digital
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