How can you drive up speed of execution in purchasing while increasing compliance?

5 November 2010

Dan Hawker

Dan Hawker

Former Head of Tobacco, Wholesale & Retail

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:

  1. 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?
  2. 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?
  3. 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.

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