Archive for the ‘eprocurement’ Category

« Older Entries

Public procurement: What can happen when there’s no call-off, no control and no invoice matching

March 25, 2010

For the past few months, the press in Sweden has reported about how Busslink – a public transportation contractor – has over invoiced SL for 733 extra busses. Busses that somehow have been lost on the road. A recent audit shows that “at least 733 busses lack traceable documentation”. No-one seems to know if they ever made it out on the roads, yet they have been invoiced all the less.

Now, one can suspect that no-one ever called off these busses from the contract and given the circumstances that usually call for extra busses to be on the roads in the first place: break downs, weather, traffic situations etc there might not be a simple solution to be able to manage this type of ad hoc situations.

Still, in theory, even the simplest call-off to create a PO solution would have done the trick. 20 years of e-procurement seems to have little impression on SLs view of public procurement.

Posted in E-invoice, eprocurement, Governance, Public procurement | Leave a Comment »

Successfully dealing with maveric spend

March 1, 2010

Jason Busch’s Analyzing comparative claims piece on Coupa‘s Ariba-bashing marketing campaign has caused quite a stir. And not without due reason. Jason has correctly pointed out a number of shady points in the Coupa campaign as well as clearly juxtapositioning the two competitors.

But there are a few areas where the correct analysis unfortunately gets in the way of pragmatically successful purchasing; namely how we define maveric spend and which path one needs to take when tackling this dilemma.

One of Coupa’s big differentiators is the iRequest and iBuy features. In brief it enables end users to browse online-stores to requisition items. The items are then submitted for approval and the actual purchase is carried out by a purchasing professional.

Commenting on this functionality Jason Busch writes:

“…however, in larger organizations, iRequest and iBuy defeat the purpose of rationalizing spend with specific suppliers to hit volume-discount thresholds. Going to non-contracted supplier sites through iRequest and iBuy may not constitute a maverick purchase in the purest sense, but it’s certainly close to one, given the lack of a contract, price sheet, and potential discount/rebate schedule.”

And whilst he is correct in his analysis, I’ve experienced first hand on numerous occasions how exactly this type of functionality and behavior has paved the way for successful e-procurement implementation as well as development.

When I started out with e-procurement back in the dark ages before the dot-com era our free-text requisitioning was the one killer app that successfully won over a reluctant user base.

  • First, it made it possible for end-users to still use their preferred suppliers
  • Second, the purchasing department could when possible steer the purchase towards contracts
  • Third, the purchasing department could analyze buying behavior and end-user preference to optimize the supplier network
  • Fourth, skillfully navigating the above criterion, the purchasing function was able to minimize maveric spend while transferring spend towards contract suppliers

To this day – the very company that I started my procurement path within is still applying these fundaments in successfully rolling out e-procurement to a global organization (~100 countries). It eases the change management process as well as enables e-procurement roll-out to locations that are off the map in many cases.

There is a big difference between uncontrolled maveric spend and allowing end-users to show their preferences while still retaining control. And lest not forget that in the latter case, there will be a pre-approved purchase order sent out to whatever supplier, a PO that can be matched against an invoice, minimizing administration.

Call it what you will – iBuy, iRequest, free-text requisitioning – to successfully roll-out procurement you need a procurement solution that goes well beyond traditional catalog e-procurement. Jason also points this out and gives a heads up to Vinimaya which I can only applaud; from what I’ve seen, they have some great stuff up their sleeves.

Posted in Change Management, eprocurement | 8 Comments »

The future of purchasing technology lies beyond the war of words between Coupa and Ariba

February 26, 2010

Over at Spend Matters (here and here), there’s a heated debate over Coupa’s recent marketing campaign and it’s claims to better Ariba in many areas. Now I’m not going to jump into that fray – I’ve spent too many years as a copy writer and music critic to bother with marketing claims and hyping the flavor of the month.

In my mind, the one thing that stands out in differentiating purchasing software is ease of use. End-users don’t care if they work for a multi-national, multi-billion dollar company or if they work for a local firm with single-digit FTEs. They are users of a system and by default they expect things to work easily, smoothly and efficiently. It’s as simple as that. Just because you work for a multi-national doesn’t mean you should expect that the tools you use should be complicated.

Bizconnect’s recent poll shows just this (albeit that their research might be a bit shifty):

43 percent of the respondents said the most important feature they look for when evaluating new purchasing software is ease of use.

So what exactly is ease of use.

Well, today many purchasing software developers look at what Google is doing in the domain, or the major internet webshops. I would say that strategy is rather reactive. In an increasingly mobile (in all senses of the word) world – anything developed with a laptop or stationary computer in mind is going to be second-tier by the time they’re closing in on their release date. If your not convinced, check out this blog-post at Google Mobile; Smarter Shopping with Google Moblie to see where internet commerce is heading.

With smart phone sales boosting the entire mobile phone market in 2009, up by 23.8 percent year over year according to Gartner it’s a no brainer to see where development budgets should be going in the future.

Smartphone sales to end users continued their strong growth in the fourth quarter of 2009, totalling 53.8 million units, up 41.1 per cent from the same period in 2008. In 2009, smartphone sales reached 172.4 million units, a 23.8 per cent increase from 2008. More at Gartner.

It’s a fair guess that many a smart phone ended up in the pockets of business managers looking for ways to better manage their daily work (whilst keeping a front of success and innovation). Smart phones are ease of use. Mobile, simple, efficient and always online.

No matter where the war of words between Coupa, Ariba and the numerous commentators end up – purchasing software providers that do not support smart phones in the near future will not be seen as front runners or purveyors of ease-of-use. They’ll just be more of the same old that we are struggling to leave behind.

Posted in eprocurement, Marketing, News, procure-to-pay cycle, Software as a Service, Technology, Vendor, Web 2.0 | 5 Comments »

Overcoming the differences between private and public sector procurement

October 22, 2009

Over the past few years many of my colleagues and I have been on a mission bolster the notion that mindset is the key issue that separates the laggards from the top performers in the purchasing field. And this is particularly evident when it comes to understanding why public procurement so often lags behind its private counterparts.

In a recent McKinsey Quarterly article; McKinsey on Government; the gaps in performance is significantly larger in the softer dimensions – mindset, talent management and aspirations – than in the areas most often promoted by purchasing solution vendors – tools, processes and strategy. While many research organizations often stop when they’ve realized their findings, McKinsey in this instance offers a rather pragmatic explanation of why public and private procurement professionals differ in these key areas:

Two important reasons [for these differences] are that, first, the members of the [public sector] purchasing staff are typically not on a career track as attractive as that of civil servants, which makes it difficult to attract and retain the best people. Second, a culture that rewards zero errors—for instance, one dedicated to “protecting the minister”—tends to favor preserving existing processes and mandates and offers limited incentives to aim for anything more ambitious.

Unfortunately, McKinsey leaves the subject of mindset and aspirations and returns to the more familiar hunting grounds of tools implementation and purchasing process streamlining; a track that is already being centrally driven in the EU through the PEPPOL initiative. And although better processes and widespread tools adoption surely will close some of the gaps between public and private sector procurement, these gaps will always remain if the softer dimensions mentioned above are not properly dealt with.

Posted in Change Management, eprocurement, Procurement, Public procurement, Strategy | 1 Comment »

Unbloating IM&S catalogs

August 17, 2009

Bloated gadgets aside, this recent Economist column entitled “When Less Is More” got me thinking in more than one direction.

Especially the poignant and precise quote from Antoine de Saint Exupéry which sums up the argument: “Perfection is achieved, not when there is nothing more to add, but when there is nothing left to take away.”

In my mind this is something that all purchasers in the indirect area should take to their hearts. It perfectly sums up why there is no need for unmanaged 5 million SKU catalogs that need to be browsed using a 25 000 node UNSPSC tree and – ultimately – forces the end user to become a maverick.

Next time you’re looking over your indirect contracts – don’t try to find stuff that is missing, try to weed away the stuff that (nearly) no one is buying.

Posted in Change Management, eprocurement, IM&S, procure-to-pay cycle, Procurement, Supplier Management, Supplier Performance | Leave a Comment »

Sure signs of summer: fraud invoices

May 27, 2009

A few weeks ago Ernst & Young unveiled a study entitled “Corruption or compliance: the 10th global fraud survey” in which Ernst & Young’s Fraud Investigation & Dispute Practice Service assess the level of understanding of anti-corruption practices and how these are abided by (or bypassed) in business.

Says David L. Stulb, global leader of the Fraud Investigation & Dispute Services:

“Executives in some companies today may still believe that paying bribes is good business; it “works”. But the risk of such action has certainly increased markedly in recent years.”

The report also concludes that corruptive behavior intensifies in times of turmoil – which anyone working with purchasing cannot have missed. Turmoil leads to confusion which leads to lack of transparency, which is further amplified by the effects of the downturn economy on staffing redundancies which in other cases could have been able to offload the workload to ensure full visibility into the processes.

So what measures can purchasing take to battle these unwanted behaviors?

A clearly defined and communicated purchasing policy is certainly a good start, usage of sourcing tools that ensures transparency and full visibility is also vital as are comprehensive purchasing processes.

On a more transactive level; a no PO/no pay policy in combination with widespread e-procurement adoption is a key lever that can secure that smaller corruption and fraud offenses such as fake invoices never see the light of day.

Posted in E-invoice, eprocurement, Governance, Organization, procure-to-pay cycle, Sourcing, Supply Chain Management | Leave a Comment »

Doing better by standing by your contracts

May 25, 2009

If everyone paid on time, it would give an enormous boost to local, national and regional economies. Not only would 270 billion Euro (*) per annum in written-off receivables be saved, but Europe’s firms could also save at least 25 billion Euro by not having to chase slow payers. Chasing debtors consumes time and money. Apart from breaking a contract, bad debt also helps to drive up the price of goods and services. Research shows that if companies did not have to allocate costs to get pain or have to write off sums of money, they could lower prices, increase investments and improve margins.
* 2,4% of GDP EU27

Last week Intrum Justitia released their annual European Payment Index report where they expose some of the shadier parts of a downturn economy:

  • Delay in getting payment beyond the agreed term has stretched from 17 days in 2009 to 19 days in 2009 (on average)
  • Written-off percentage has increased from 1,9 percent in 2007 to 2 percent in 2008 to 2,4 percent in 2009

Furthermore the report notes that 7 of 10 respondents believe that settlement risks will increase further during the coming 12 months. Bad news for smaller suppliers no doubt, especially in times of hard to get credit. Still from a procurement angle the report offers some really good incentives to get initiatives rolling:

  • 1 in 3 state administrative inefficiency as a reason for late payment
  • 1 in 4 claim disputes regarding goods and services delivered

”Administrative inefficiencies” is of course just another way of saying that there is a need to automate the procure-to-pay process. And the claims dispute angle is as strong an argument internally as it is externally. Supplier want to get paid on time instead of spending time disputing what was ordered and how much it costs.

Posted in Business, eprocurement, procure-to-pay cycle, Procurement | Leave a Comment »

Using managed sourcing to tackle project based spend

May 8, 2009

A few weeks ago I listened in on a webinar where The Hackett Group explored some of their recent research relating to lost spend (Hackett: By Controlling Project-Based Indirect Spending Companies Can Net Significant Savings ). Many purchasing focused news feeds have already picked up the press release and just a few days ago both Purchasing.com  and Spend Matters added their comments on the problems of project based spend.

Jason Busch of Spend Matters neatly outlined some practical ways of dealing with this type of spend based on hand on experience:

  • First, if project-based spending categories fall outside of a core area of internal category knowledge, bring in the consultants. In fact, this is a great place to leverage either large-firm or boutique experts to achieve savings.
  • Second, focus on helping procurement serve as a bridge connecting all of the different stakeholders in the project — internal design engineers, third-party architectural/engineering/project management firms, primes, etc.
  • And third, offer to aggregate and take control of raw material and commodity spend on behalf of both internal and outside stakeholders with various management roles in the project.

I would say that this is a typical case for exploring the possibilities of Managed Sourcing since not all of the categories considered in the research is “just” project based. Take for an example Marketing Spend related to Trade Shows and Events; most companies that indulge in this type of activities do it more than once a year – and they typically want the same message to be delivered, so even if there are geographic challenges to be dealt with, the core suppliers of the event are often one and the same (or belonging to a network).

When applying the consultant/managed sourcing approach it is important to ensure that the assignment also includes implementing the contract and supplier follow-up. Often consulting assignments end with the consultant just delivering the contract to be signed – while this may be enough in some cases, for much IM&S spend the real savings are reaped after contract implementation and unless you have a strong e-procurement program in place with strict policies the savings may not materialize if the contract is not monitored and promoted and the supplier relationship not developed over time.

If the purchasing function is overloaded or lack the proper category skills in the sourcing phases, chances are that they will also be lagging when it comes to implementing and monitoring the contract. So if you’re looking into tackling these lost categories – make sure that your partners support you as deep into your purchasing process as necessary.

Posted in Business, eprocurement, Governance, Negotiation, Sourcing, Strategy | 1 Comment »

How far should one go to implement full procure to pay automation

April 15, 2009

As I rode my bike (a deep red metallic Pinarello Treviso from 1984 with the group set removed and replaced by a pair of Campagnolo track hubs) to work this morning I passed a queue of cars slowly making their way along Strandvägen being held up by one of the royal horse carriages. Marveling at the historic advances of transportation – horse, bicycle, automobile – it got me thinking about how far one can take automation.

Many have championed the full automation of the procure-to-pay cycle; yet few have actually been able to show any real and substantial benchmarks that go beyond the pre-implementation business case.

Last year, I had the privilege of working alongside some of the senior purchasing executives as they prepared their presentations for the IBX Purchasing Executive Summit. One interesting findings that was presented was that it was very hard to create a business case for full automation of the procure-to-pay cycle. Instead, a hybrid model that included scanning, workflows, automated matching as well as a shared service center in a low cost location to process some of the invoices manually was presented as the best cost alternative. The streamlined process cost was in the low double digits with retained quality and while expanding on the subject in the presentation, the switching costs were ruled to high to go further into full automation even though it was technologically possible.

I think there is a great lesson to be learned from this; while technology might dazzle us with its might, one should not forget the human alternative as it may still be able to do the job faster and at a lower cost (be it to process invoices or as in my case – get me to work quickly and in style).

Posted in E-invoice, eprocurement, Outsourcing, procure-to-pay cycle, Procurement | Leave a Comment »

To kill a maverick bird

February 24, 2009

A German purchasing newsletter (einkaufs-manager –  in German) recently had a few hot tips for preventing maverick buying in the company. Could be so simple – just propagate a new policy: No order leaves the company without sign-off from the purchasing department.

While this certainly is a very hands-on approach which in itself does stop maverick buying dead in its tracks, one question remains: Does a purchaser really need to see and sign off every order? We are talking about signing off orders on everything here – everything from material to furniture to pens to post-it notes. One could imagine a professional purchaser can use his or her time in more valuable and strategic ways for the company than by signing off an order for another pack of pens or paperclips.

Instead standardized products and even non-standardized services and products can and should be called-off by the requisitioner in a spend-centric purchasing system. Either from purchaser-approved (and negotiated) catalogues or via vendor forms from purchaser-approved vendors. The purchaser can use the saved time to do actual strategic work such as vendor development and frame contract negotiations. The operative work should be limited to handling the raw purchase requisitions (which are usually without vendor assignment).

The newsletter had another tip, which was a variant of what has become known as the “No PO – No Pay” doctrine: Simply tell all your vendors that any invoice based on an order which has not been signed off by a purchaser (see above) will be rejected. The tip closes with the rather up-beat remark that the vendor then can go and altercate with the requisitioner about the issue. While this, again, certainly kills maverick buying to a certain degree it may have some unwanted side-effects such as driving your vendors mad at you (as they usually have delivered already). It may even be a new vendor which had no knowledge about this policy in the first place. In addition the company loses valuable time since the requisitioner needs to send the ordered items back, haggle with the vendor and generally clean up the mess. It’s also open to debate if the purchaser actually wants the vendors to talk directly to individual requisitioners in the company. And last but not least it’s probably not what a good vendor-buyer relationship needs in times like these.

Instead the rule should be altered slightly so that every invoice needs to be based upon an order from the aforementioned spend-centric purchasing system (the PO would be easily identifiable by an order number). Since all the catalogues and vendors in the system are pre-approved by the purchaser and even the purchaser requisitions result in an order from the system the maverick buying is practically eliminated without the rather harsh side-effects mentioned above.

Posted in Change Management, eprocurement, Organization, Procurement | 3 Comments »

« Older Entries
Follow

Get every new post delivered to your Inbox.