by Bryan Cruickshank

3 tips on improving procurement systems

Jun 27, 20124 mins
IT LeadershipIT Strategy

There is nothing new about e-Procurement. For years, organisations have been slowly automating their supply chain to reduce inventory levels, increase business flexibility and speed products into the market.

But a recent survey by KPMG finds that most procurement teams are not taking full advantage of their existing systems and technology.

In fact, almost one in five organisations still require manual intervention on at least a third of their invoices.

Clearly, there is ample room for savvy CIOs to help their procurement functions make better use of IT and, as a result, deliver more value to their organisation’s bottom line.

But when it comes to procurement, one of the biggest challenges for CIOs often relates to visibility.

The reality is that a large portion of procurement’s technology activity happens somewhat outside of the organisation.

So whereas other functions, such as finance, tend to sit in the middle of the business and therefore provide the CIO with complete transparency into their specific technology requirements, procurement often shares their IT systems with their supplier base.

As a result, many CIOs shy away from tackling the technology challenges of procurement based on the assumption that they only have power over half of the equation.

Many CIOs also suffer from a lack of understanding of the full scope of ways that the procurement function drives business value.

More than simply pushing down supplier prices and negotiating contracts, procurement when fully optimised often plays a significant role in the cash position of the organisation.

It helps in ensuring compliance with regulation and in delivering insightful management information to drive business decision making.

Against this backdrop, many CIOs tend to assume that the best way to enable the procurement department is by helping them make better use of the organisation’s existing ERP systems.

In our experience, these systems rarely provide the full coverage and scope of functionality necessary to enable many of the higher-value activities that procurement provides to the organisation.

Look at the plethora of niche providers that are springing up to offer procurement-ready solutions such as spend analytics and space management to recognise that a one-size-fits-all solution may actually be reducing procurement’s value rather than enhancing it.

CIOs can help procurement deliver faster, more valuable services to the organisation by considering the following:

– Talk data with the CPO: CIOs and IT leaders should start by sitting down with their organisation’s Chief Procurement Officer (CPO) to develop a shared understanding of exactly what data is important to the procurement function.

Define this from both an internal supply of data to the business and an external data sharing with suppliers perspective

Pace of delivery will be key to this discussion as some data requires more timely management than others.

Over the long-term, CIOs and CPOs will need to maintain an ongoing dialogue about the use and value of the various solutions to ensure that, as market conditions change, procurement is able to adjust their requirements to suit their needs.

– Understand the gaps: Armed with a clear understanding of what is important to procurement, CIOs must start to build a complete picture of the systems and technology that currently supports the function.

Determine how well the existing technology is being used. If it is not being fully utilised, this may be an indication of a lack of skills and training within procurement, or that the technology itself is not fit for purpose.

– Fry the big fish: Once you understand the needs and the gaps, CIOs should work closely with the procurement function to develop a three-year plan that focuses on enabling either the biggest or most mission-critical areas of activity.

Not only will this build immense credibility within the organisation, but it will also provide both the technology and procurement functions with practical insight into how the technology is responding to the needs of the organisation in terms of functionality and timeliness.

While CIOs tend to be somewhat focused on delivering the big and complex programmes, procurement enablement often offers a valuable opportunity to achieve big results from relatively small investments.

And given today’s focus on cost-efficiency and value, it’s an opportunity that should not be squandered.

Bryan Cruickshank and Richard Nixon at KPMG UK