Today’s guest post is from Mark Usher of Treya Partners and originally appeared on the 1 Procurement Place blog on July 31, 2008. It is reprinted with kind permission.

Those of you who follow the public sector space may know that the State of Georgia recently selected SciQuest’s e-procurement tool. State agency employees in Georgia who need to buy anything from pens to asphalt will shop in SciQuest’s web-hosted electronic catalogs which will be populated with pre-priced goods and services from the State’s existing supplier agreements. This decision by the State of Georgia is notable for two reasons – (i) it is another example of an organization electing to carry out its purchasing transactions in a best-of-breed e-procurement tool as opposed to the purchasing module its existing ERP system (numerous Fortune 500 companies have gone the EP route following sunk ERP investments and the State of Georgia already has PeopleSoft) and (ii) it is also an example of another state government that is moving ahead strongly with a strategic procurement initiative (other states moving to transform their procurement function include Virginia and Indiana to name just two).

The shunning of ERP’s historically much-maligned inbuilt purchasing functionality in favor of e-procurement is a trend that I would expect to continue both in the private and public sectors. Not so much due to application functionality (a gap that that I would say doesn’t really exist anymore since the ERP vendors have refined the workflow in their own e-procurement modules) but due to the fundamentally different way that the best-in-breed providers and ERP vendors handle catalog content. All of the e-procurement providers utilize web-hosted catalogs pre-populated with many of the vendors and products that most buying organization will need (and with the capability to have the organization’s specific contract pricing built in). And if a customer has vendors that are not already in the pre-populated catalog it is a simple task for the e-procurement provider to request product and pricing from those vendors and load them into their web catalog. With an ERP provider’s e-procurement solution, however, you are most likely going to have to build your catalogs behind your firewall, involving considerably much more time and expense. And now that the best-in-breed e-procurement providers all integrate so perfectly with ERP (e.g. with accounts payable to enable payment reconciliation), why would you ever go the ERP purchasing route? I wouldn’t.

As regards Georgia’s general procurement transformation initiative, expect to see a lot more of this from state governments in the next 2-5 years. State governments have long presented a massive challenge for creating value from procurement due to their extreme decentralization. Often hundreds of state agencies within a state making their own procurement decisions and developing their own price agreements with suppliers. To complicate matters even more, agencies usually have their own financial and purchasing systems meaning there is no centralized store of data from which to build a consolidated picture of total state spend by category, supplier and agency – key information for identifying and developing aggressively discounted price agreements with suppliers. Rounding out the challenges for states in the this area are a lack of a strong mission/vision/strategy for a center-led approach to procurement and a shortage of strategic sourcing skills among current state procurement staff.

As regards my state procurement crystal ball I would expect to see (or would HOPE to see) state governments address the following five areas:

• Develop and broadly communicate a center-led strategy for procurement in the state with the centerpiece being a strategically focused, “center of excellence”-based central procurement group
• Conducting a best practice spend analysis to develop a consolidated cross-state picture of spend by agency, supplier and agency
• Based on the spend analysis, develop and implement a sourcing roadmap with the objective of maximizing the amount of state spend under cross-agency (“state-wide”) leveraged price agreements
• Upskill the central procurement group with the required training in best practice strategic sourcing methods (or hire where needed)
• Implement a state e-procurement system with web-hosted electronic catalogs to drive maximum spend through the new price agreements

Thanks Mark!

Today’s guest post is from Ron Southard of Safe Sourcing and originally appeared on the Safe Sourcing Blog on July 29, 2008. It is reprinted with kind permission.

Sometimes the detail gets lost in translation, so for those of you that are following on a daily basis here is a simple list. These are certainly not all of the benefits that retail can drive from the use of e-procurement tools, but it is a good starting point.

Since this is not Late Night with David Letterman, our list is not ranked in order of importance although many might argue that not much is more important than improved earnings.

1. Guaranteed to improve net earnings
2. Guaranteed to improve safety
3. Guaranteed to improve Corporate Social Responsibility
4. Guaranteed new sources of supply
5. Retail has less spend assigned than any other industry
6. Streamlines the procurement process
7. Holds suppliers accountable to your standards
8. Improves quality
9. Coast avoidance in a volatile market
10. Creates a competitive environment
11. Drives reliable market pricing
12. Maintains a reliable history for future comparison
13. Educates suppliers as to how retailers wish to procure products
14. Supplier training eliminates questions
15. Improved and consistent product specifications
16. Improved negotiation
17. Improve carbon footprint
18. Simple award of business process
19. Frees up time for other tasks
20. Works for procurement of all product categories

This author is not sure why a derivative of this list could not become the mission statement for any procurement department.

I look for ward to your comments, which may also be posted here (login required).

Thanks Ron!