How can you make procurement processes less painful and less costly? Effective supplier and buyer enablement. Here's how.
Lured by the promise of millions of dollars in savings, many early e-commerce adopters jumped onto the e-procurement bandwagon only to find that getting results was not easy. Most of those companies learned the hard way that achieving the value and efficiencies available through e-procurement and supplier connectivity requires more than software deployment and technology integration. It requires effective supplier and buyer enablement, which includes an efficient content development process, buyer and supplier process alignment, and complete preparation and training of both parties.
Simply put, "enablement" is the process of helping suppliers and buyers to effectively connect and execute a broad range of complex transaction types with one another online. By neglecting or misunderstanding the enablement component of e-procurement, companies are likely to face system implementation delays and potential service issues while missing forecasted returns. Organizations must execute thorough readiness and adoption strategies on both the supplier side and the buyer side in order to overcome these challenges, which generally include:
The development of catalog content, the descriptive information associated with an item, is one of the most underestimated aspects of e-procurement. Because many suppliers do not have their content in electronic format, customers are forced to generate their own e-catalogs from multiple sources in multiple formats. Any company that has attempted to create and maintain standardized catalog content knows this is a cumbersome and expensive process. Developing content in a way that supports the various category specific searching patterns adds further cost and complexity.
Hands-free Transaction Integration and Support
Enablement, however, is about more than just building e-catalogs. It involves connecting and integrating suppliers of all sizes with a company's e-procurement, enterprise resource planning (ERP) and financial systems to lower costs and improve processes. Suppliers have varying levels of technical capabilities and are able to receive orders and submit acknowledgements and invoices in a variety of electronic formats. In addition, some of the best suppliers simply do not have the capability to connect with their customers electronically due to the inability to receive electronic data interchange (EDI) and eXtensible markup language (XML) documents.
Decentralized, Disparate Business Processes
Most companies have autonomously created business processes at the plant or site level. Couple that with variations across local supplier branches, and aligning processes and training suppliers to handle your business requirements becomes difficult. Standardizing processes so that true enablement becomes a reality requires sophisticated process engineering and training.
Resistance to Change
As with most major changes within a company, users are generally slow to accept and adopt a new e-procurement solution and the associated supplier and process changes. Most companies fail to implement effective change management strategies, such as continuous training and communication, to ensure that the new solution is accepted and easy to use. Change management is a cultural issue, requiring a substantial investment of time and effort, and most organizations undervalue its importance to the overall process. Savings will never be fully realized unless an e-procurement system is embraced and leveraged by end users.
Effective Enablement Strategies
The common implementation barriers associated with e-procurement can be overcome, but it requires that a number of strategies be executed.
Catalog Content and Supplier Connectivity
Companies can quickly overcome the challenges of catalog content by leveraging "pre-built" e-catalogs. Procurement service providers often offer and manage these catalogs to help customers accelerate the enablement process and facilitate ongoing maintenance. In addition, some of these service providers create custom catalogs for unique, customer-specific categories. These alternatives are significantly more cost effective than building and maintaining a catalog internally.
Regardless of whether companies undertake content development and maintenance with a service provider or handle it themselves, they should not attempt to build a catalog with every item they purchase. As a company examines its own spending practices, most often it will discover that 80 percent of its spend in any category is associated with 20 percent of the items. For a higher success rate, a company should understand what it frequently buys and then build catalogs to address the majority of items while augmenting with additional items at a later time. Building and maintaining content for rarely purchased items will be cost prohibitive. Before building content, it is also critical to understand how buyers will search for items and then build or attribute content accordingly. Finally, implementing business processes for repeatedly "spot bought" items is important for user adoption.
Companies should also develop a sound supplier integration strategy in order to ensure a seamless procurement process. For successful connectivity with their trading partners, companies must be prepared to connect with suppliers through a variety of technology formats. Some of the less technically ready suppliers that cannot receive XML or EDI formats will require a hosted, self-service interface to electronically receive orders and transmit order acknowledgements and invoice transactions. Outside service providers have the expertise to rapidly implement and centralize heterogeneous supplier connection formats into a buying organization's existing platform.
Business Process Integration and Supplier Training
Companies need to confirm that business processes are optimized and will be supported effectively. Before placing orders through a system, a company should carefully examine existing purchasing processes and requirements and model them, if necessary, in order to be more efficient. Taking an inefficient, manual, offline process into an online model will most likely make the process even less efficient and unacceptable to users. Processes inevitably vary from plant to plant and site to site, so companies should examine their processes and requirements at various locations in order to effectively align the e-procurement solution with each process, as well as to prepare suppliers accordingly.
Companies should also plan to fully integrate their e-procurement system with other operations systems in order to automate more of the complete purchasing process and generate additional value for the organization. By using experts to manage the integration process, companies can quickly integrate with existing ERP or legacy systems to engage one seamless platform for purchasing.
User Change Management
Companies implementing a process-changing system like e-procurement must also look beyond technology and make change management a high priority. In order to ensure that users are ready, willing and able to maximize the value of the new system, an effective change management strategy needs to be deployed. Change management should include strategies for engaging executive stakeholders to help drive change; a comprehensive communication and training strategy; ongoing compliance analysis; and closed loop, user-driven improvement processes.
Keys to an Effective Enablement Strategy
Here are a few suggestions for companies seeking to fully capitalize on their e-procurement investments:
Consider and prepare for the costs and time required to fully enable suppliers and buyers before embarking on an e-procurement initiative.
Companies should resist the urge to dive into an e-procurement initiative without first examining supplier and buyer connectivity and employee adoption challenges. A carefully researched, comprehensive approach to e-procurement will yield more savings and benefits in the long-term. Many buyers of e-procurement have found this to be much more difficult and expensive than originally anticipated.
Start with low-risk indirect categories and move toward more complex categories.
Indirect categories, like office supplies and janitorial supplies, can be implemented more quickly as most suppliers in these categories already have electronic content available. As a company builds early successes and the system becomes more readily used, it can roll out strategically sourced categories online gradually, using the same strategy.
Leverage outside service providers to support the "dirty" work.
Content development, systems integration, category implementation and supplier training are time consuming tasks that procurement service providers are better equipped to handle. Third-party providers can execute these services repeatedly and in a scalable manner. By outsourcing these tasks to experts, a company can accelerate the enablement process, while preserving valuable time and resources for other core business objectives.
Utilize category experts that understand category-specific buying methods, best practices and buyer needs.
Experts in each relevant spending category should work closely with the customer and suppliers to manage the seamless execution of business process, technology and supplier relationship changes. Since having dedicated category experts for all purchasing categories is unrealistic, companies should tap service providers to own the implementation and management of non-strategic categories while the company focuses its internal resources on more direct categories.
Encourage and maintain an atmosphere of communication and feedback between suppliers and end users.
Enablement is an ongoing process that should be continuously monitored and reviewed. It is important to establish dialogue with the people who are actually using the system, and address performance issues and make process improvements on a regular basis.
For faster bottom-line impact and a greater return on investment on procurement investments, companies should not underestimate the importance of supplier and buyer enablement. Understanding the enablement process and implementing the right strategies can lead to early and lasting success with e-procurement and help to unlock its value in order to drive meaningful savings.
Keith Hausmann is vice president of sourcing and category management for ICG Commerce. He can be reached at email@example.com.