A real Digital Procurement Strategy can only be implemented by a big company, right? – Wrong
The problem with “procurement” is the common belief that a business has to be of a size where the savings potential available will, as a minimum, cover the costs of hiring the procurement resources necessary to achieve those savings.
But the challenge is usually the level of confidence on whether the savings are really there, whether a procurement hire will be able to find them and as important deliver them, the cashflow costs from the hire to the return on investment…. the list goes on.
It is a classic Catch 22.
Does the risk and initial costs of trying to make savings justify the potential return? Much easier to do nothing!
Instigating a successful Digital Procurement Strategy is about taking a totally different approach.
Every Digital Procurement Strategy starts by automating your accounts payable process.
This single and simple step enables the digital capture of every invoice processed: every supplier, invoice and most important every invoice line item including the vendor’s item code, description, unit of measure, quantity and price.
This data is vital because every procurement spend review requires this level of spend analysis to be able to quantify the savings available.
The automation of the capture of detailed spend analysis removes the single largest barrier to identifying and delivering savings and opens the door to Saving as Service.
Savings as a Service
Spend Optimization organisations now have instant access to all of the information they need to quantify the likely savings available and decide whether those potential savings justify them engaging with your business.
The common sales approach of these procurement professionals is to provide their services free of charge up until the moment they can quantify the savings.
Having instant access to the digital spend analytics not only reduces the time they require for the savings analysis, it also ensures that the savings potential identified are credible, accessible and achievable.
From your perspective, Digital Procurement means that to quantify the savings potential you have done almost no work, incurred no costs and at no risk.
So far, so good.
At this point, you agree to the “share of savings” percentage fee with the spend optimization provider, pull the trigger, and leave it to them to continue the process.
The next step for the Procurement professional is to generate and execute the tender process (again this is digital to make this entire process as simple as possible) which quantifies the savings and then select the preferred supplier.
Preferred Supplier Adoption
The next problem is how do you get all of your staff to then buy from the preferred supplier to actually deliver those savings.
Again, Digital Procurement comes to the rescue.
The most effective way to drive user adoption of preferred suppliers is to enable them to buy online from that supplier at the lower prices as part of your Accounts Payable Automation process.
For the users, the experience could not be easier.
They simply select the supplier and “punch out” automatically to the website, fill their basket and with one click, create a “requisition” with the application.
The requisition the goes through the appropriate digital approval process and on final approval is sent to the vendor for delivery.
It gets better.
The vendor then sends a digital invoice, which is automatically matched to the order (and receipt if required) and automatically send to the approver to confirm delivery and on final approval is posted to your existing accounting / ERP application.
Everyone loves buying online – it is simple, fast and convenient and that drives adoption, which in turn delvers the savings.
The more they buy from the preferred supplier, the more you save.
Finance also benefits.
They get total oversight and control over every purchase before it is made and will also save between 65% and 90% of the time they would have spent on any manual Accounts Payable process.
Rinse and Repeat
Having proven the value and savings achieved through the first project, move straight onto the next category of spend and repeat.
Each project delivers quantifiable and sustainable savings year on year which add up to make a strategic difference to both cashflow and profitability – or simply achieve more with the available funds.
A Digital Procurement Strategy is about enabling every business to cut their costs, with minimal time investment, cost and almost zero risk.
So why wouldn’t you?