Category Archives: Procurement Innovation

You Don’t Need a Genie to Fulfill Your Wish!

Nor do you need the CFO to give you a big fat check either! If you want more automation in your supply chain, and according to the recent A.T. Kearney Indirect Procurement Study titled “Higher Visibility, Greater Expectations”, most of you do, all you have to do is call up one of a few dozen e-Procurement providers with a (new) SaaS offering and tell them you’re ready. Not only can you start for a small monthly fee, but the savings will pay for the system many times over.

And if you don’t know what system is right for you, just re-read SI’s recent series that provides A Hitchhiker’s Guide to e-Procurement. It will assist your organization in determining what is really important, what functionality the organization should be looking for, and how the solution compares to other solutions in the marketplace.

Stop waiting, and start buying. Considering you can pay by the drink, quit any time, and take your data with you … in the worst case, you select a system that only enables part of the efficiencies that are available, but that allows you to determine the full extent of the efficiencies the organization could reach with a system more in tune with the best practices the organization identifies as appropriate for adoption. In this case, you simply cancel the monthly contract and migrate to the new system, and triple the organization’s savings.

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A Hitchhiker’s Guide to e-Procurement: Summary

Mostly Harmless, Part XXV

EIPP, P2P, e-Purchasing, and e-Procurement. What does it all mean?

This series provided a basic introduction to the world of e-Procurement. Each of the phases was discussed and key requirements were highlighted. In addition, the series also overviewed some of the primary challenges associated with each phase, some best practices to overcome those challenges, and some of the benefits the organization could also expect to see. While it was not intended to be complete, it is a great start for anyone embarking on an e-Procurement journey.

In addition, it also provided some great advice on how to compute the total cost of ownership of a system under consideration, how to analyze the efficacy of a solution relative to the organization’s procurement model, how to determine it’s appeal from both public and private sector viewpoints, and how to differentiate a system from EIPP, P2P, and e-Purchasing imitators.

A true e-Procurement solution is a very rich and powerful solution that will automate the tactical back-office process from start to finish, greatly decreasing the resources that must be assigned to tactical tasks, and associated processing costs. Considering that many studies have found that an e-Procurement solution can reduce the cost of invoice processing by as much as 98%, and that a manually processed invoice costs an average organization between 50 and 120 dollars, the transactional savings alone can be enormous. But these savings can be dwarfed when maverick spend is greatly reduced and new opportunities for savings are identified from the centralized warehouse of organizational purchases. An ROI of 5 or more is not out of the question if the right solution is selected and utilized properly.

So if an organization does not have a good e-Procurement solution, it should get one today. There are over a dozen providers in the space with good solutions (and many have been reviewed in the vendor post archives), and at least one of them should be the right fit. For more information on e-Procurement, there’s also the e-SourcingWiki Paper, which, in addition to a brief overview of the cycle and core capabilities, also overviews some important features of e-Procurement solutions in addition to more challenges, best practices, and benefits. In addition, it also has a brief glossary of standard procurement terms. (And, for even more information, one can always check out the Procurement Innovation archives here on Sourcing Innovation.)

That’s all for now, folks. Feel free to flip back through the series and read it again.

Back to the Beginning

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A Hitchhiker’s Guide to e-Procurement: Terminology

Mostly Harmless, Part XXIV

The first post of the series indicated that this brief guide will define what e-Procurement is, isn’t, and how it relates, or fails to relate, to e-Purchasing, EIPP, P2P, and e-Sourcing. Now that the basics of e-Procurement have been covered, this post will address the terminology before the series concludes.

EIPP stands for Electronic Invoice Presentation and Payment. It is not the same as e-Procurement because any system capable of accepting invoices, processing invoices, and queueing them up for payments can be labelled an EIPP system. Such a system does not need to support requisitions, purchase orders, or analysis, all key steps of the e-Procurement process.

P2P stands for Procure-to-Pay. By definition, such a system only needs to support core purchase order functionality, which lets the supplier know that goods and services are desired, invoice functionality, which lets the buyer know that the supplier has shipped and/or delivered the goods and payment is expected, and payment approval, which lets AP know it can queue a payment against an approved invoice. Like EIPP, such a system does not need to support requisitioning and the associated approval process, does not need to support goods receipt, and does not need to support analysis or tax reclamation. It may or may not include catalog support.

e-Sourcing stands for the electronic implementation of the strategic sourcing cycle, which starts with spend analysis, moves onto RFX and/or e-Auctions, then to optional decision optimization, and concludes with an award and contract. Such a solution does not need to contain any e-Procurement functionality whatsoever.

Then, there’s e-Purchasing , the doctor‘s personal pet peeve, as it has no well defined meaning outside of the UK public sector, where it is a hybrid of the core e-Negotiation technology of the e-Sourcing process, namely RFX and/or e-Auction, and the core capabilities of the e-Procurement cycle, namely requisitioning, approvals, purchase orders and SOWs, invoices, and e-Payments. When used by a vendor, it could refer to any combination of e-Procurement and e-Sourcing technology and such a solution should be reviewed with care.

Of course, many vendors will misuse all of these terms as well as e-Procurement, so one will have to review any shortlisted solutions with extreme care, but this is what the terms mean and why none are synonymous with e-Procurement.

Next Post: Summary

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A Hitchhiker’s Guide to e-Procurement: Sectors

Mostly Harmless, Part XXIII

Enterprises generally fall into two categories: public or private. While the basic requirements for e-Procurement are unchanged whether the installation is intended for the public or private sector, each sector has its own standards for procurement and the system must support the standards, and quirks, of the sector in order to ensure adoption and success.

Since most of the posts to date have implicitly assumed that the application is going to be deployed in the private sector, this post will primarily discuss the public sector and some of the sector specific procurement processes that should have an impact on system selection.

In the public sector, most purchase orders for goods and / or services over a certain value are the result of a public competition. This means that once a requisition is approved for new products or services above a certain value, which can not be assigned to a standing offer or contract, the next step in the process is an RFX or e-Auction. As a result, the e-Procurement system will either need to contain RFX and / or e-Auction functionality, or integrate with such a system. The integration can be as simple as XML file export (of the details of the approved requisition that needs to go do bid) and import (of the details of the winning bidder and submitted pricing), but the workflow has to support the process and integration.

Also, as alluded to in the previous paragraph, new purchases below a certain threshold can be made against standing offers / contracts as long as the appropriate policies are followed. Some organizations will allow a buyer to use the standing contract of their choice (provided a certain dollar threshold is not exceeded in any calendar year), others will dictate round-robin selection in an effort to insure fair allocation of funds, and another group of organizations will use a hybrid policy and allow buyers to select the supplier from a set of preferred standing offers or offers that have not received their “fair” share of business.

Another area of increased complexity is approvals. In the private sector, the rules are usually cut and dry. For example, under 1K for approved products, the employee only, under 10K where all goods that can be bought on contract are bought on contract, the supervisor, under 100K, the VP, and the CPO’s approval is only required if the purchase is over 100K. In the public sector, there are approvals based on value, based on contract vs. standing offer vs. one-time buy, repeating payments, type of good or service (engineering will have to sign off on machine parts, HR on temp labor, etc.), MWBE percentages (as contracts over a certain value may be required to have MWBE components), environmental sign-offs (if the buy is for products or services with a significant environmental impact or products or services for which there are environmental standards), etc. Where it is quite uncommon for a requisition to require more than three approvals in the private sector, many requisitions can easily require six or more approvals in the public sector.

Payments are a little bit trickier too. Not only must they be processed according to standard terms and conditions, but they generally must be made on regular payment dates, and may be withheld indefinitely at any time due to orders from higher ups, which is common when governments have not approved their budgets for a year by a given deadline. Plus, many government departments are tax exempt (as it doesn’t make much sense for a government to tax itself) from local, state, and federal taxes, and the taxation rules need to be powerful and flexible.

Finally, the reporting requirements in the public sector are much more onerous than in the private sector. If the tool does not contain a modern analysis and reporting package that can meet all of the requirements of all of the departments and divisions and associated reporting requirements, it will need the ability to do a full export of all data required to produce those reports in a third party analysis or BI tool.

Next Post: Terminology

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