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The future of procurement is digital; cost optimisation through e-Procurement

How procurement teams can no longer ignore the need to digitalise
By Steve Rowland on 10 December 2020

As is the case with virtually all organisation functions, the future of procurement is digital and with advances in technology, organisations are able to save time and be more efficient throughout the supply chain.

Procurement software and platforms will, for many small to medium enterprises (SMEs), or financially struggling public sector bodies, be the difference between sinking or swimming as they start on the road to recovery. There are many great solutions out there and we at eXceeding can help to recommend solutions based on your organisation’s individual needs and support the roll-out, adoption and long-term use, with the benefit of completely impartial advice.

The digitalisation of supply chain optimisation and inventory management, can both also drive considerable cost optimisation but for the purposes of this article we are focused on eProcurement.

What is eProcurement?

Wikipedia defines eProcurement as:

… the business-to-business or business-to-consumer or business-to-government purchase and sale of supplies, work, and services through the internet.

It is the practice of digitalising your procurement processes and centralising your spend data. Using innovative new technology, it is possible to centralise processes and to automate interactions between an organisation, its customers, suppliers and key stakeholders.

eProcurement can support procurement at each key stage:

  • Deciding to make a purchase or tender for services.
  • The selection of goods or the management of the tender process, including the centralisation of all documents and criteria surrounding this decision.
  • The approval of the order and issue of purchase orders.
  • The processing and logging of that order on the supplier’s side.
  • Invoicing and payment.
  • Delivery and (in the case of ongoing works or services) continued contract management.

What are the key benefits of eProcurement?

  1. Speed: tasks which were previously managed manually can now be automated which frees up your internal resources to focus on their ‘day jobs’ and organisational functions that only internal staff have the knowledge to deliver. Everything from document management for approval processes, through to negotiations and storing contracts, can be centralised, automated and managed digitally. ‘Realtime’ data can also be transmitted immediately and without the potential for human error.
  2. Visibility: it is increasingly important for multiple stakeholders to have full visibility of what the organisation is spending on outsourcing and purchasing. For public sector organisations, where transparency is paramount, this is even more important. But even in the private sector, centralising spend data enables key stakeholders to identify opportunities to consolidate, negotiate or optimise costs across the organisation.
  3. Efficiency: eProcurement software is designed to improve workflows for procurement teams. Companies can set pre-approval processes to decentralise procurement processes, increasing efficiency when ordering goods or services. By managing these workflows digitally, there are also often substantial efficiencies in managing and processing payments, where previously there may have been laborious (and manual) approval processes in place.

Which key procurement processes can be managed through eProcurement?

Here are our top four tips for procurement software which may be incorporated into your organisation’s overall cost optimisation strategy.

  1. Supplier onboarding.
    With a supplier onboarding platform, you can handle your supplier onboarding process through centrally storing your supplier information and check your supplier’s compliance with financial standards, insurance, certifications, industry best practice and organisational measures, manage your key supplier contacts and create bespoke workflows for supplier approval. To guarantee supplier compliance and control the onboarding due diligence can be repeated at regular intervals, giving continued peace of mind.
  2. Spend analytics.
    To reduce procurement costs, you need to have visibility of your organisation’s spend data and the ability to conduct analysis of that data to effectively identify cost saving opportunities. The analytics process captures the spend data and through simple assimilation of the data by querying what, who, how, why, where and when are you spending – an effective cost optimisation and sourcing strategy can be determined and implemented as a result. Spend analytics software allows you to record the raw data in one place creating visual representations and interrogate that information to provide critical insights into your organisations’ spending, resulting in the development of an effective cost optimisation strategy.
  3. Online auction software.
    To reveal procurement opportunities and deliver cost reductions, online auctions are key and nothing is as effective as reverse e-auctions to encourage suppliers to drop their price on commodity procurements. Online auctions are becoming the normal way of conducting business in both the private and public sector, so having a platform to which you can invite suppliers to bid for all areas of your organisations spend, for both products and services, means that suppliers are prepared to engage and offer the best price. This is an efficient and transparent approach to the market and increases the competitiveness across a range of suppliers, allowing your procurement team to deliver savings quickly and effectively.
  4. Contract management database.
    Being able to store all of your contracts in one central database helps organisations improve the visibility of existing contacts. It ensures all key dates, service level agreements [SLAs], key performance indicators [KPIs], service credits and commercials are available, tracked and managed. Automatic reminders can be sent when a contract is due to expire (avoiding auto-renewals of contracts no longer required) or allowing sufficient notice to run a new procurement for complex goods or services. A contract management database facilitates the management of the supplier during the term of the contract – essential in longer-term agreements with key suppliers. Standardising process, increasing spend visibility, ensuring compliance and providing a reporting tool for performance analysis and measurement; with a contract management tool you can identify and reduce maverick spending (through increased control and visibility) as well as improve the tracking and reporting of the agreed commercials – e.g. the price/fees, savings and rebates.
The future is digital

The reality is that any organisation not embracing digitalisation is missing the opportunity to:

  • Automate processes to eliminate the element of ‘human error’,
  • Free up internal resources for other core business tasks,
  • Centralise data and provide organisation-wide transparency on spend data,
  • Increase efficiency and streamline procurement processes from customer to client to supplier.
  • Save money or make budgets go further!

Ready to talk digital? As procurement consultants we spend time reviewing the market to understand the best software to meet our clients’ needs. We can support you in deploying a range of e-Procurement solutions and provide your business with the opportunity to stay up to date with the technology available.

Steve Rowland

Before eXceeding, Steve spent 16 years working on the supplier-side of outsourcing. During Steve’s 24 years’ experience, he has worked on global and UK outsourcing deals, ensuring the creation of win-win partnerships.

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