I’d like to think my experiences over the past year-and-a-half diving headlong into the procurement industry has garnered some valuable observations and led to some interesting insights about the technology.
I can recall a conversation with a friend working in finance at a major manufacturing company that ended with, “Procurement … you mean those people that tell us they’re going to save millions every year? Ha!” Or another conversation with the athletic director of a major university who said, “They [procurement] make it hard for me to get anything!”
Of course these are extreme examples, and I don’t define the entire procurement industry based on two conversations. It’s actually quite the contrary. Through my experiences, I’ve found a high level of innovation in the procurement space and individuals who are eager to continue improving the reputation of departments within enterprises.
But if Procure-to-Pay (P2P) systems are only good enough to cover the basics, they add to the already existing negative perceptions of procurement.
For example, a few years ago—prior to implementing BuyerQuest—a client told the CPO and CFO that the team did such a great job negotiating with suppliers that they had documented plans to save $8 million. A year later, they had to tell those same executives they only realized $1.5 million in savings because end users had a hard time buying from the right suppliers. Instead, they were piling up off-contract spend using purchasing cards and expensing products and services.
And that’s just one of the dangers of a good enough P2P solution.
To improve, procurement teams need a best-in-breed solution that will take the entire enterprise to the next level—not a first-generation solution that will just “get the job done.”
A good enough solution can lead to a number of serious pitfalls and vulnerabilities for CPOs and entire procurement departments. Let’s take a dive into just how serious these dangers can be.
1. First-generation solutions limit procurement's effectiveness and efficiency.
Procurement solutions that are 10 to 15-years-old are often stale and disjointed. These solutions scrape by as good enough, making procurement teams work around the software and push off impactful process changes. And as a result of the workarounds, these P2P systems become burdened with custom add-ons that can’t evolve over time and quickly become outdated.
I once chatted with a CPO who used the analogy of a vintage car to describe their P2P system: large, familiar to those who have used it, loaded with custom upgrades and fixes, and still purring along. Yet, it has no bluetooth or internal diagnostics, and only gets 12 miles to the gallon.
Next-generation solutions like BuyerQuest come business enabled to support the needs of administrators, without the involvement of IT. The agile, strategic technology empowers procurement teams to feature favorite products, automate invoice workflows, and bundle products. Most importantly, these systems will evolve and increase effectiveness over time without customization. BuyerQuest, for example, makes P2P easy, efficient, and effective and ensures the system will never become a vintage gas guzzler.
2. Negotiating power disappears.
If a P2P system doesn’t have robust spend visibility, how can procurement teams leverage its data to negotiate with suppliers? Good enough solutions can’t answer that question and will never equip teams with the data necessary to be strategic beyond the requisitioning process.
The best P2P solutions give teams the visibility to strategically source goods and services to expand cost savings efforts. With next-generation technology, procurement departments know exactly what users want, how often they make purchases, and what they think of the products and services. In the end, sourcing teams and category managers can use that data to negotiate better supplier terms. With increased user adoption procurement teams can gain a large enough data source to drive effective purchasing trends. And increased purchase orders generated by a user friendly P2P system will certainly help with negotiations.
3. Hidden fees and lack of transparency create unhappy suppliers.
Suppliers want the ability to see their content through the eyes of their consumer. However, good enough solutions don’t have that level of transparency. Instead, they have barriers to entry, poor visibility between suppliers and buyers, and high costs to conduct business.
Next-generation solutions eliminate communication barriers, enhance visibility into the partnership, and welcome suppliers to the space for little to no cost. The result? Happy suppliers.
4. Procurement cannot drive organizational strategy.
In most organizations, the expectation of procurement falls into one main area: cost savings. Traditionally, procurement’s success has been determined by how much money they add to the bottom line—not their impact on overall organizational goals. To fulfill that one-track role, a good enough P2P solution may suffice.
However, if the P2P solution is only good enough, the procurement team will struggle to provide value beyond savings. A next-generation solution can expand cost saving opportunities, provide strategic insight into what users want, increase employee efficiency, reduce tactical labor, and ultimately position procurement as a key contributor to driving organizational strategy.
Related read >> The Top 5 Benefits of Next-Generation Procure-to-Pay
5. CPOs cannot get a seat at the table.
Good enough P2P solutions can’t provide the value CPOs need to earn the respect they deserve and drive organizational strategy. First-generation solutions primarily focus on cost savings, not driving and contributing to overall company goals.
With good enough solutions, it’s the same old story: a disjointed shopping experience, low user adoption rates, out-of-contract spend, and poor use of employee time and skills. That’s why BuyerQuest was developed—to ease the pains of good enough, first-generation solutions and change perceptions of the industry.
If CPOs want a seat at the table, they need to do more than save money. CPOs need to unify the shopping experience, lead with a mobile-first mentality, provide insight with analytics, and improve workflow efficiencies. To achieve these goals, procurement teams need a next-generation P2P solution. Armed with data and insights into buying trends and new opportunities, CPOs can transform the business and collaborate with all key stakeholders, including marketing, human resources, and legal.
Many of our clients have used the implementation of BuyerQuest to promote a rebranding of the entire procurement department. Our customers are changing the perception of procurement from policy police to a trusted advisor for stakeholders throughout the enterprise.
Making the case for next-generation P2P.
If you’re ready to make the case for a next-generation P2P solution, let us help you. The key is to understand your current challenges, business goals, current processes and resources, and align the technology with all of those areas.