Director and Consumer Business Lead
Bluefin Solutions
How can you drive up speed of execution in purchasing while increasing, not decreasing, compliance?
05 Nov 2010
Consumer Products, Finance, Manufacturing, Procurement, Telecoms, Consumer Business
Companies today need to execute with ever increasing speed. They need to be able to trust that the right decisions are placed in the hands of the right people, and they need to keep processes as simple as possible.
This is particularly important with external spend, where large amounts of money may be spent by companies in sectors such as consumer products, telecoms and manufacturing. With external spend, the financial impact is further coloured by the need to develop trusting relationships with business partners to drive through value as well as saving costs.
The key aims in analyzing the process relating to external spend are:
- Identify what spend is "out of process" - should it have been placed through a strategic supplier? Was it invoiced without a purchase order? Was there a suspiciously short time between the purchase order being raised and the goods or service receipt being booked?
- Identify which parts of the business require more support from Procurement - are there people who are consistently doing the wrong thing? Are there functions that don't appear to know about key supplier relationships?
- Measure and improve Spend Performance - how does the business compare to its peers? How can the spend process be accelerated, and compliance driven up? How can supplier relationships be developed to help achieve business objectives?
Depending on the company’s IT strategy, different tools can be used for spend process analytics. Whether you already have an SAP BW system in place, and want to leverage that investment, or you are looking at SAP's SPM, or want to take advantage of advanced deployment such as Xcelsius dashboards. Whichever tool is used, the solution needs to take in detail across a range of core processes around Procure to Pay, and combine them consistently to present a single view of the business.
With this single view, complex routines can run to analyse the processes in ways that make sense to the business, delivering insights such as:
- How quickly does my team turn round purchasing requests?
- How well-adopted is my eProcurement solution?
- What are the drivers for non-compliant spend, and who do I need to engage to correct it?
My first experience of spend process analytics was as part of an initiative to drive up adoption of an eProcurement system over 10 years ago. However useful – necessary, even – eProcurement systems have become, the underlying drivers don’t appear to have gone away, and with the ever increasing pressure on companies to do more things with fewer people, decent spend process analytics are a vital tool.
Comments
Dan Hawker 17 Nov 2010
Absolutely - it all depends on what your procurement team's objectives are at the time.
If one objective is around driving through speed of execution, you may have recently implemented a new workflow solution. So the KPIs will be a blend of KPIs around the initiative (number of transactions through the new process for example) and KPIs that the initiative is trying to affect (average end-to-end cycle time for example).
Seeing the outcomes from the different levers that the team can address provides instant feedback - if they're going in the right direction, it's a form of public recognition that you're doing a good job, which is what most of us want in terms of job satisfaction.
What frustrates me is that the technology to do this has been around for ages, and its not rocket science. But how many times do we see it? Not many. The most common use of data for feedback is printing off static tables of data for use in meetings.
Another use for these plasma screens is to switch to events - such as eSourcing events - and have the team gather round and witness the fruits of their labour in action. Its very powerful to watch an auction underway, where material financial benefits are literally appearing before your eyes!
Luke Griffiths 17 Nov 2010
Dan - also getting some of those procurement process performance metrics up on a plasma screen in the office is a great morivator and can encourage continuous improvement. Perhaps you have experience of what should go up there?