- Incorporating information from a purchase order into a financial system or general ledger. "It can be difficult to come up with a common interface from an e-procurement application that meets all of the data requirements of an ERP's financial applications," says Alex Milward, senior manager in Andersen Consulting's European eProcurement Leadership Council, based in London. "It all depends on how each business unit has configured the ERP. Some will require very little information from the purchase order. Other businesses may have configured its ERP system to require such information as delivery lead times. You have to make sure that information can be captured from the purchase order, and that means having a good understanding of the business requirements of both the procurement and finance departments."
- Contract compliance. "This is probably one of the major objectives of any procurement organization," says Milward, as well as the main driver behind most e-procurement implementations. "And ERP systems have a lot of information that can be stored around preferred contracts and suppliers." So it is doubly ironic that oftentimes after an integration project "the purchase order doesn't contain reference numbers of that contract so the procurement organization can track how much spend went through a specific supplier contract." This can be a problem, especially if an organization has multiple contracts, he says.
- Materials management. "Companies are currently wrestling with how they can take advantage of all the good things e-procurement offers and then integrate that with their materials management systems," Milward says. So far, they have been largely unsuccessful.
Traditionally, materials management systems automate a work task that needs to be performed on a routine basis a particular maintenance service that needs to be done to a certain machine, for example. "There could well be a piece of equipment that needs to be replaced as part of the maintenance," Milward says. And, of course, there are other items that may be needed to perform this task, such as safety glasses or certain cleaners or chemicals all of which are listed in a bill of materials. "This is an area where e-procurement systems can help. You may want to associate those expenditures back to that particular maintenance job, so you can track the true costs of your maintenance program." Unfortunately, integrating these two functions and separate sets of data "is still a challenge that is very difficult to overcome," Milward says. "In the ideal world there would be one set of data and one system."
- Supplier allocation and other front-end planning. "Many e-procurement systems have sophisticated sourcing functions that allow companies to find new suppliers based on cost or delivery times or capability," says David Bassuk, senior manager of the New York-based Kurt Salmon Associates e-commerce practice. But these front-end capabilities often don't integrate well into back-end planning functions such as tax planning or transportation management. "When you make a purchase you have to understand what the implications will be on the company's overall strategic plan. Right now there is not a lot of integration of that sort of information."
Choose the Right Integrator
- Use scripted scenarios when choosing an integrator. Instead of having the company give a canned presentation based on a general request for proposal, develop a scripted scenario that is similar to the business model you wish to develop for your organization.
- Check references, but try to find clients of the integrator beyond those provided by the company itself. Ask if the integrator delivered all of the productivity promised at the start of the project and if it transferred essential project knowledge to the client company at the end of the project.
- Have checks and balances incorporated into the contract. If certain benchmarks are not met by a specific period of time, then penalties should kick in. At the same time, be willing to offer incentives for reaching certain goals or promised ROI.
Communicate With Your Suppliers