Greg Shoemaker, vice president of central direct procurement with Palo Alto, Calif.-based technology company Hewlett-Packard, agrees that e-procurement has produced a substantial return on investment for his organization. "We have definitely seen tremendous benefits over time from using e-procurement tools, and those benefits fall into categories like speed, efficiency and security," says Shoemaker, a 20-year HP veteran who manages about 40 percent of the company's $45 billion in total spend. Shoemaker also believes that e-procurement tools that can automate previously manual processes are becoming simply a necessity in the current economic environment. "Paper purchase orders are quickly becoming a thing of the past, and that's a good thing," he says. "The volume of transactions that we run is staggering, and you can no longer manage a growing, dynamic business in a manner that's manual anymore."
Not that e-procurement has made purchasing organizations obsolete. On the contrary, Shoemaker believes that in some ways the new e-tools have accentuated the value of the function by reaffirming the impact that skilled procurement staff can bring to the bottom line. "The electronic tools make things faster and more efficient, but they don't take over for the expert content knowledge that you need to manage a category," he says. "You still have to do the basic procurement work of understanding your marketplace, understanding what the needs of the business are, putting together sourcing strategies that are going to result in getting the most competitive pricing at the quality levels that you require to maintain your position in the industry and your brand recognition. Electronic tools don't displace all that work."
Shoemaker manages teams of HP procurement staff that meet periodically to review current and emerging IT tools to support procure-to-pay processes at the company, and he participates in cross-functional teams of executives that make buying decisions and recommendations on procurement solutions. As such, he emphasizes that e-procurement tools will only benefit an organization if the solutions are a fit for the company's way of doing business and part of an overall strategy. "You can't have a solution that is searching for a problem," he says. "You need to make sure that you're designing your toolset upfront to meet your business model and the business process." At HP, Procurement works on solutions development and selection with IT through teams that include tech-savvy staff from the business side. "This helps ensure that we get to the end game that we want to achieve," Shoemaker says. Currently HP uses an e-procurement solution from Ariba as well as a number of homegrown solutions to manage its procurement processes and interactions with its suppliers.
Creating a Roadmap at Tyco
Shelley Stewart also believes procurement executives must ensure that their senior staff includes subject matter experts who have in-depth experience with the types of tools and processes that a company plans to deploy. "Having the right person leading this type of project is critical," he says. "It lends credibility not just in the procurement world, but with IT and the business unit as well."
At Tyco, for example, Stewart has tapped Falgun Patel, director of e-sourcing and e-procurement, to lead the implementation of a central data repository to collect and "cleanse" spend information from more than 200 enterprise resource planning (ERP) and other systems across the company's four core segments. Patel was a veteran of a similar initiative at Motorola, where he led a team that implemented a spend data warehouse using a solution from Informatica. After he joined Tyco in 2003, Patel drove a nine-month rollout of a similar solution, based on an application from Ariba, to give the company's procurement and sourcing staff visibility into spend across the enterprise. "We're talking a mammoth task here, with about eight million purchase orders annualized," says Stewart, "and we've been lucky to have Falgun lead this project over the last couple years."
Stewart also stresses the importance of creating a roadmap before a company heads down the path to enabling its procurement processes. The five-year roadmap that Stewart, Patel and their team crafted at Tyco in 2003 addressed the fundamental "pain points" in the company's procurement and sourcing processes, and it encompassed the overall strategy for addressing those business challenges, the process changes necessary to support the strategy, an outline of the types of technology required to enable those processes, and the overall goals and milestones along the way. The roadmap covered the period through 2007.