The most powerful word in procurement
- 14 Mar 2016
- Technology & Innovation
What would you consider the most powerful word in procurement to be? When faced with 2016’s challenges many words such as savings, value, and visibility will no doubt be shaping strategies and plans. However, should we perhaps focus on the actions that are needed in order to achieve procurement goals? With that in mind, at the top of our list is integration.
Our recent CPO Viewpoint study conducted with senior procurement, finance, IT and sales & marketing professionals, showed clear inter-departmental integration concerns. While 44% of procurement respondents cited ‘very close’ relationships with other departments, only 18% of other functions agreed. Absence of business integration can stop procurement from accomplishing its ultimate goals yet there are three key integration challenges that we've identified– business integration, systems integration and software integration.
Internal and external relationships are equally important, in order to achieve successful business integration. Great work in sourcing suppliers will be wasted if internal customers are not on board. As revealed in our CPO research, procurement believe that they have strong relationships with other functions, but their counterparts disagree. In order to change this procurement needs to operate within a triumvirate as a link between suppliers and buyers.
Additionally, it can be a challenge for procurement to communicate their visions clearly and effectively to the business, which can have a negative impact on business integration.
Leadership expert Simon Sinek outlines an interesting theory in his TED Talk – How great leaders inspire action. Many people know how to do their job, but how many actually know why they are doing it? This highlights a major issue as businesses are failing to lead their people because they reveal the details of the tasks, but not the full vision.
Creating and maintaining strong communication channels with internal customers will help to preserve a better integrated business.
However business issues aren’t the only integration challenges procurement faces. Technology is another critical part which affects two areas – how well integrated procurement’s own software is, and how well integrated it is with other business systems.
At the moment many procurement functions are seeking software that can provide an ‘end-to-end’ sourcing and purchasing process. The most effective way of doing this is to implement a single Source to Pay solution, addressing the full sourcing and purchasing process, holding all data in one place. Organizations taking such approach can benefit from achieving more compliant purchasing transactions, increased savings, better supplier value visibility and more, says Aberdeen Group. However, many companies are currently using partial solutions, such as a Procurement system or Source to Contract tool, making integration of these two components essential in order to successfully implement a full Spend Management solution.
Another challenge to consider is the ownership of the integrated software. Typically accounts payable and procurement share control over the Procurement process, which can result in disagreements over what system to choose. This can result in more than one solution being used at the same time or key departments not buying in to others’ choices.
Additionally, using ‘cheap and cheerful’ procurement modules within wider software platforms like ERP can create more issues. Usually such procurement tools are bolt-ons to the central system’s and offer very little development, maintenance and support from the supplier.
In comparison to an integrated Source to Pay solution, separate modules struggle to provide true process automation, visibility and control.
Integrated Source to Pay makes spend analysis simple and quick as all of the data is in one place, allowing procurement to directly create sourcing events, automate management of and adherence to contracts across spend, and create cyclical improvement processes for business.
System integration ensures that all of the valuable activity and data within the sourcing and procurement platforms feeds into wider business processes and also allows other systems to feed into the procurement tool adding insight, context and value.
We are seeing an increase in the use of intuitive integration platforms which allow different business departments to make their own choices without the risk of looking their information and it existing in silo. Current integration approaches such as Medius Connect make it easy to connect best of breed systems together - it does not matter if they are cloud based or on-premise from a data perspective, but also in terms of real process flows.
With stronger integration other software applications can be linked across all processes as well as wide ranging data points such as credit referencing databases, punch-outs to supplier websites and social media. All of this is necessary for a more connected business and world.
So integration should be procurement’s most important word of the year, which means consistent communications throughout the business and elimination of gaps in the procurement processes. In conclusion, it’s all about taking advantage of the benefits from business systems and those used across the business being fully connected.