Category Archives: Procurement Innovation

The Evolution of Purchasing


Today’s guest post is from Lisa Nyce, Senior Project Analyst for Source One Management Services, LLC. Source One is a leading provider of sourcing consultancy and category management services.

Over the years, purchasing has become more strategy-oriented, rather than transactional. Purchasing professionals have evolved from the processing of traditional purchase orders and similar responsibilities to involvement in higher value and higher impact ROI projects. Technological advances enable purchasing professionals to offer so much more to an organization today. So sit back, buckle up, and get ready to navigate through a number of drastic transformations – we’ll show you how to become a more involved player by taking advantage of a shifting technological landscape.

Procurement pros have a growing number of tools in their arsenal to help make their lives easier and their projects more successful:

  • Spend Analysis Software – Get a better understanding of the Total Cost of Ownership (TCO) of goods and services. To get the most out of any software, the backing of the supporting department and program is essential. For example, with supplier relationship management software, a thorough strategy containing performance management and risk mitigation plans allows a software solution to serve with a full-circle advantage.
  • Cost Savings Tracking – identify cost savings opportunities and aid in the verification of implementation. Aside from the straight-forward benefit of tracking immediate cost savings, these tools can be used to remain competitive by ensuring that these savings are sustained over time and supplier rates remain locked at negotiated levels.
  • Supplier Report Cards – Ensure that expectations are being understood and met by both suppliers and internal stakeholders. These serve as an asset as new technology is presented and suppliers are scorecarded for future endeavors. As the technological landscape shifts, suppliers who don’t “keep up with the times” can be eliminated.
  • Stronger Legal Controls – minimize the need to involve a legal department or outside counsel when engaging in contractual negotiations. As heavily-regulated industries see a new or adapted regulatory climate, these legal controls assist in preventing penalties or a stigma attached to a brand as a result of internal or third-party noncompliance.

Purchasing has been incorporated into the more inclusive Supply Chain operation – it is no longer just a function of buying what is needed at the right time, at the right price with the right quality. Supply Chain activities encompass Strategic Sourcing, Supplier Relationship Management (SRM), Logistics, Planning and Quality. All of these new factors make purchasing a strategic function and the key to being able to meet or exceed the customer’s expectations.

New options abound for management and procurement professionals alike

Organizations have reduced the number of individuals required to get work done. Thirty years ago a typical Purchasing Department could include a Purchasing Manager, Buyers, expediters and clerks. That amount of manpower is simply not needed today. Electronic efficiencies have virtually eliminated clerical positions, and due to more efficient MRP systems, transactions are completed in less time allowing more time to source strategically, build stronger relationships with suppliers, and engage more with customers and stakeholders. Furthermore, employers today have many more options for staffing.

There are permanent, temporary, contract-to-hire, and various staffing options specific to the procurement industry. Procurement consulting is a viable option for companies wanting to obtain subject matter expertise on a particular spend category.

Likewise, supply chain professionals have access to a wider range of educational options to up their game: Logistics, Planning, Procurement, Supplier relations to name just a few. Not only are degrees available in Supply Chain but certifications from accredited institutions and groups are also available to a much greater extent.

The evolution of the Purchasing function has developed and will continue to do so. The change is necessary for organizations to continue to prosper. To stay ahead of the curve, remember to always monitor developments and consider what areas of improvement are possible – this will pave the way to not only personal gains but also further changes in the industry.

Thanks, Lisa.

Source-to-Settle – The Sourcing and Procurement Kettle

Source-to-Settle is the end-to-end integration of sourcing and procurement, starting with spend analysis and ending at spend analysis. It is the integrated workflow that starts with sourcing event identification, proceeds through e-Negotiation and Award, and ends with the creation of a purchase order, the receipt of goods and an invoice, and the e-payment for goods received and includes everything in between.

There’s a lot involved in the source-to-settle process, and often a lot more than can be found in most sourcing and procurement modules and stand-alone best-of-breed suites. As indicated in our last post, there is the need for accuracy — to insure that savings are not lost and the right categories are identified. There is also the need for compliance — with insurance and regulatory requirements, with contracts and pricing, and, most importantly with SOX. And results only come from efficiency and performance — which requires integrated, streamlined processes, supplier performance management, and collaboration.

It’s a tall order, but an organization that doesn’t keep PACE never realizes the value that results when there’s one integrated workflow, one complete spend repository for spend analysis, and one, 100% accurate, view of the truth.

For deeper insight into how an end-to-end integrated Source-to-Settle solution can allow your organization to keep PACE and deliver value beyond what you may have thought possible, download Sourcing Innovation’s latest white-paper on how An Integrated Source-to-Settle Platform Brings Unparalleled Benefits to Supply Management and register for Ivalua’s upcoming webinar on how to Help Build Your Business Case Today on January 28 @ 11 PST / 14 EST / 19 GMT!

Source-to-Settle: More than Just a Set of Service Modules

Having Source-to-Settle capability involves having more than Source-to-Contract and Procure-to-Pay solution modules. As explained in our last post, if an organization wants to achieve the best results, just having both solutions is not enough. Certain categories of savings and value only materialize when the Source-to-Settle solution is integrated end-to-end.

For example, due to the existence of multiple, disconnected solutions which rely on multiple, disconnected databases, there are huge accuracy issues.

First of all, there is a proliferation of manual errors due to duplicate data entry. When data has to be manually re-entered into other systems, or selected for export and import to other systems, human error always creeps into the process. The average error rate for keystroke entry is approximately 1%, as tabulated by Raymond R. Panko at the University of Hawaii, and this human error can be very costly. For example, assume the contract pricing for laser cartridges has been erroneously entered into the Procurement system as $70 a unit when it should be $60 a unit. Further assume that the organization buys 1,000 of these a year and that the old rate was $69.95. If the Procurement system has a tolerance of error of 0.1%, then it will never detect if the Supplier continues to charge the old rate and the organization will overspend by $11,940. Now assume that the organization buys 10,000 units a year and all of a sudden the organization is out $119,400!

But this is just the tip of the iceberg. With multiple systems, there is no single version of the truth. So, if there is disagreement between the P2P and the ERP system, which system is correct? And which system do you run the analysis on to identify the target categories for sourcing? It makes a difference. The greatest value comes from identifying the category with the greatest opportunity. And that can only be done with complete, accurate data.

For more information on these missed opportunities, along with fourteen other opportunities that only materialize with an integrated Source-to-Settle solution, download Sourcing Innovation’s latest white-paper on how An Integrated Source-to-Settle Platform Brings Unparalleled Benefits to Supply Management and register for Ivalua’s upcoming webinar on how to Help Build Your Business Case Today on January 28 @ 11 PST / 14 EST / 19 GMT!

Prove Your Mettle with Source-to-Settle

We all know the importance of having both Sourcing and Procurement* solutions as neither solution on its own is sufficient to enable an organization to extract the savings and value inherent in each sourcing and procurement project. For example, the savings that result from the best negotiated contracts in the world as a result of an intense strategic sourcing project will never be realized when a lack of good procurement processes and systems results in over 30% maverick spend. Similarly, the best procurement processes and systems in the world are useless if the organization is unable to take advantage of the data and inherent efficiencies to source better contracts next time around.

However, if an organization wants to achieve the best results, just having both solutions is not enough. Certain categories of savings and value only materialize when the solution is integrated end-to-end. What do we mean by this?

Consider the situation that occurs when an organization has separate Source-to-Contract (S2C) and Procure-to-Pay (P2P) solutions. In this situation, what typically happens is there are two code-bases, relying on three separate databases, that rely on the ERP, the Vendor Master database it controls, and the Inventory Master database the ERP connects to, which is generally under the control of the Logistics and Warehouse Management solution.

In this situation, in order to accomplish a task, the Supply Management professional may need to consult three databases to find the information she needs, use two completely different workflows to issue an RFQ and then issue a PO, and use two completely different solutions to extract the relevant transactions for analysis and do the analysis. It’s not efficient, and, moreover, since data has to be entered in (at least) two different solutions, it’s error prone. As a result, the organization is missing out on up to sixteen different efficiencies and benefits that would otherwise be available to it.

What are these efficiencies and benefits? To find out, download Sourcing Innovation’s latest white-paper on how An Integrated Source-to-Settle Platform Brings Unparalleled Benefits to Supply Management and register for Ivalua’s upcoming webinar that will Help Build Your Business Case Today! on January 28 @ 11 PST / 14 EST / 19 GMT!

Remember, it’s Sourcing and Procurement!

Future Trends 2014 (Consolidated Links)