In Part II we noted that there’s no single right answer or easy answer here as it’s very situational. And even though some consultants will always tell you to start with Sourcing and others with Procurement, they’re obviously not always right. Sometimes both are right, but usually neither are right. Because sometimes you start with Supplier Management. Other times you start with Contract Management.
But, in fact, absolutely speaking, neither are right. You start with analytics and strategic situational analysis based on analytics to figure out whether the problem is:
- you can’t do enough sourcing events
- your events are generating limited returns
- you can’t find the right suppliers
- you have to (quickly) ensure compliance with a newly introduced regulation
- your over-spend, and need for audit recovery, is too high
- your maverick spend is too high
- you need to get your services spend under control
- you are unsure of where your best opportunities lie
- your suppliers are under performing on quality and related metrics
- your deliveries are regularly late
- your (internal) customers are unable to get the information they need when they need it
- Finance is taking regular hissy fits about lack of timely cash flow insights
More specifically, you start with analytics on:
- (spend vs) contracts
- cashflow and discounts
- event throughput
- performance metrics
- inventory and logistics
Only then can you understand how the organization is performing and where it’s biggest problems lie. An analysis of spend might find that maverick spend is high, but the estimated overspend is at most 4%, but poor payment processes are actually costing the organization 4% interest (because it signed contracts with late payment penalties) as well as a 2% savings opportunity as a result of lost early payment discount opportunities (which it can afford as the majority of its customers pay on time). In this situation, while the organization might be tempted to get an e-Sourcing or catalog application to help reduce maverick spend, it should actually start with an I2P system to get invoices and payments under control. And so on.
Remembering that big bang implementation efforts always result in a very destructive big bang, do the analysis and start with the right platform application. Then, add one by one based on problem severity until you finally have a full end-to-end S2P platform implemented and utilized on a daily basis, which could be 18 to 36 months in the future, no matter how fast that SaaS vendor can flip the switch.