In this series we have been discussing how Procurement is in vogue but that the only reason it is in vogue is because organizations need cost reductions and/or greater profit, and Procurement is currently seen as the ultimate path to profit. As a result, Procurement technology providers, GPOs, and consultancies — particularly those consultancies with a track record — are getting a lot of interest, and in the cases of some technology players in particular, a lot of money.

But not all companies are getting the returns they expect from their S2P platform, and it’s not always the fault of the provider — it’s often the fault of the data. Bad data. Dirty data. Data that causes you to miss over billings and duplicate billings, opportunities for volume consolidation, opportunities to spot new trends, and so on.

But how do you get that data under control? Especially when most systems allow any user to enter any data they want in description fields, not populate key SKU or cost center fields, and so on.

The traditional answer has been process, but process has continually failed, especially when organization’s have tried to scale it.

So what is the right answer? It’s hard to say, but it becomes less important if the opportunity for creating bad data is minimized. So how do you do that? You minimize the need for the end user to enter data in the first place.

This means you need a P2P system that not only minimizes the need for end users to enter data, but makes it easy for the admins to correct any oversights that would result in the end user entering data.

So what are the requirements for such a P2P system?

It depends on not only what you are buying but how you are buying it — for whatever procurement functions you support, they must be designed to minimize, if not eliminate, data entry. For example, if the organization has a lot of MRO and back-office purchases, the catalog must be complete, easy to maintain, and guide the buyer to the needed product, not an e-Form or RFX. If the organization needs a lot of services, then there should be well defined e-Forms for requesting standardized services which have all the requisite details, codes, and descriptions. If the organization needs specially configured products (like cars, computers, etc.), there should be standardized requests to preferred suppliers or standardized RFXs. And so on. The less user entered data, the better.

Moreover, it’s not just buyer users who create user error, its supplier users as well. So such a system must minimize the data required by the supplier. Once the supplier receives a PO, they should be able to simply and easily flip acknowledgements, shipping receipts by checking the boxes (and only overriding quantities if needed), invoices (from POs or shipping receipts), payment receipts, etc. with button clicks. The less, the better.

Anything that can be standardized and entered once should be standardized and entered once. And anything that isn’t standardized should go through a review queue to see if additional standard products, services, forms, etc. can be added to minimize future data entry requirements. The goal is single entry, and the use of correct single entries, as much as possible.

Only when data is under control can savings be identified, and realized. And only then will you have captured the flag.

As per our previous post, Procurement is in vogue. But, as we bluntly stated, only because organizations need cost reductions and/or greater profit, and Procurement is currently seen as the ultimate path to profit. As a result, Procurement technology providers, GPOs, and consultancies — particularly those consultancies with a track record — are getting a lot of interest, and in the cases of some technology players in particular, a lot of money.

And the money is deserved if those providers deliver the ROI they promise. But the ROI only materializes in the right circumstance when the solution is properly applied, but this is the kicker. Right circumstance, proper application. And this is easier said then done. Because the proper application of the solution needs to be applied from the start of the, strategically chosen, sourcing project to the final procurement of the final product or service deliverable.

Because, as we indicated in our last post, sourcing only singles out the savings opportunities, which should be negotiated and put into a contract, it doesn’t realize them. That’s the job of Procurement.

But Procurement can’t do it’s job without good, clean, relatively complete, data. But that’s something it rarely has. Procurement usually has bad, incomplete, scattered data which is often more misleading than not having data at all and going on a whim.

Typical POs consist of just buyer SKUs, typical invoices contain either (different) supplier SKUs or short descriptions, what gets entered into the AP system is usually a buyer’s shorthand for this, and then when it comes time to m-way analysis or spend analysis, it’s almost impossible. The data is bad, incomplete, and, simply put, dirty.

And, as a result, m-way matches fail, over-billings don’t get detected, overspend happens, and the strategically negotiated savings don’t get realized. Plus, as more and more data gets mis-classified, opportunities for spend consolidation don’t get identified since the true spend on a product, category, or supplier is never known.

But over-billings and lack of spend consolidation or strategic sourcing opportunities is just the beginning. The bad data can lead to poor procurement decisions when the wrong data is in the catalog (and an off-contract item is chosen when such a purchase should have been prevented), when not enough data leads to the selection of poor service providers who deliver inferior services, and when insufficient specifications result in large project, and thus cost, overruns.

There’s a reason why many organizations are still losing 0.30 to 0.40 on every dollar of negotiated savings, and it’s not (just) bad Procurement, it’s (bad) Procurement data. So if you want to capture the flag, you need to get your data in order.

But how do you do that? We’ll tackle this topic tomorrow.

Procurement is in vogue, but only because organizations need cost reductions and/or greater profit, and Procurement is currently seen as the ultimate path to profit. As a result, Procurement technology providers, GPOs, and consultancies — particularly those consultancies with a track record — are getting a lot of interest, and in the cases of some technology players in particular, a lot of money.

But do they deserve that money? Maybe, maybe not. It all comes down to the ROI delivered. Much of the technology out there is capable of delivering a good, if not great, ROI in the right circumstance when properly applied, but this is the kicker. Right circumstance, properly applied.

An e-Auction won’t save a penny applied to a category for the third time in a supplier’s market during inflationary times. In fact, it will likely result in a cost increase. An RFX will do nothing if the perceived value thereof in the recipient suppliers is not worth the cost of response. An optimization will do nothing if there is not enough data or the model is not properly constructed. An e-Catalog will be useless if the contracted product is not contained at the right price. And so on.

Moreover, the proper application of each technology product purchased requires the proper data. RFXs need appropriate supplier contract data to be delivered, proper questionnaires to collect the data, and proper cost models to collect the data, the application will never be properly applied. This goes double for optimization.

But this is only the start of the data debacle in many organizations that prevent procurement pursuits from delivering the sought after savings. Bad data doesn’t just stagnate sourcing, it also prevents proper procurement. Sourcing only singles out the savings opportunities, which should be negotiated and put into a contract, it doesn’t realize them. That’s the job of Procurement.

And that’s where you have to capture the flag!