Cover Story: The Veterans

Long-time e-procurement users share their best practices for driving value


Drafting this type of roadmap offers several benefits, including providing a framework for selecting enabling technologies. This is especially helpful in today's technology environment, in which any number of software companies vie for the attention of supply chain executives. "Between Falgun and I, we probably get a call a day from companies that have all kinds of tools," says Stewart. "But if you build the roadmap, you know the next technology that you need, and you can begin talking to the technology providers about what you want to do and then make the technology work for you." In addition, the roadmap serves as a tool for selling the overall technology strategy and specific solutions to senior management to gain funding; for validating that the e-procurement strategy supports the company's greater business objectives; and for keeping the initiative focused as it progresses through incremental stages.

Preparing for Next-generation e-Procurement

HP's Shoemaker and Tyco's Stewart believe that their companies have achieved significant gains by implementing e-procurement technologies, but neither is willing to rest on past accomplishments, and both are looking out for the next generation of e-procurement capabilities. They are joined by other early adopters of the technologies who are planning to drive their enabling initiatives more broadly across their organizations and more deeply into their purchasing and supply management processes. This strategy makes sense, says Chris Sawchuk, procurement practice leader at The Hackett Group, because considerable opportunity remains for purchasing organizations to move staff from transactional activities into more strategic work such as strategic sourcing and supplier management.

For instance, based on Hackett's benchmarking data, Sawchuk says that "world-class" procurement organizations have 46 percent of their staff focused on what Hackett calls "higher-value processes" versus only 37 percent of their peer group. "That means that 54 percent of purchasing staff even at world-class organizations are still focused on lower-value processes," Sawchuk notes. More extensive adoption of appropriate e-procurement technologies could help any organization move more staff into those higher-value activities, Sawchuk says, provided companies are willing the necessary investments in suitable solutions, ensure that end-users have access to the solutions, and verify that users are, in fact, adopting the solutions.

Looking to the future, Sawchuk believes that the next generation of e-procurement capabilities will focus on the demand management side of purchasing. This shift, he explains, is a result of the changing nature of the value that procurement is bringing to the table. "Today the chief financial officer and senior management are valuing Procurement unidimensionally, based on the amount of money that it can save," Sawchuk says. "But cost savings will slow over time because inherently we can't save ourselves down to zero spend. When Procurement is valued only on annualized cost reduction savings (typically price), its organizational value proposition is potentially at risk." As a result, procurement organizations must look for tools that will allow them to have greater control over the value and utility of the enterprise's spend, which is a function of better managing end-users to align their individual and aggregated purchasing decisions with the broader procurement strategy.

Jay Baitler, executive vice president of Staples Contract Division and a long-time e-procurement evangelizer, agrees that demand management is the next frontier of enabled purchasing. In part, he says, companies can do this by ensuring that the electronic tools they provide to their employees are user-friendly and offer an easy way to find and purchase the goods they need, when they need it. But companies must also look beyond simple compliance and begin to either leverage their own spend data or take advantage of the types of data that a supplier like Staples can provide to understand the total delivered cost of each purchase and how buying behaviors can be altered to lower the total cost. Using these data, for example, a company might limit next-day delivery options for non-critical items — say, pens and pencils — to lower a vendor's costs and, ultimately, share in those savings. "We have the ability to look at trends and modify those trends to achieve lowest total delivered cost," Baitler says.

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