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Procurement Systems: The Implications For Sellers
Procurement Systems: The Implications For Sellers
Procurement Systems: The Implications For Sellers
Procurement Systems: The Implications For Sellers
Procurement Systems: The Implications For Sellers
Procurement Systems: The Implications For Sellers
Procurement Systems: The Implications For Sellers
Procurement Systems: The Implications For Sellers
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Procurement Systems: The Implications For Sellers

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Just as sales organizations have embraced sales systems to improve how they sell, buying organizations have implemented procurement systems to improve how they buy. But the use of procurement systems …

Just as sales organizations have embraced sales systems to improve how they sell, buying organizations have implemented procurement systems to improve how they buy. But the use of procurement systems have many implications for sellers.

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  • 1. Retail Price: $4.99Procurement Systems:The Implications For SellersImagine you were selling to a computer program instead of ahuman being? Well, although it sounds futuristic, the “Technology isincreasing popularity of procurement systems is bringing it transformingcloser to reality every day. procurement and that hasJust as in so many other areas technology is playing atransformational role in the areas of procurement and overall implicationssupply chain management. It is a key trend that is set to for sales.”continue, even accelerate over the next 3 to 5 years. But whatare implications for sellers? In this article we will find out.
  • 2. The Impact Of Technology On ProcurementJust as sales organizations have embraced sales systems to improvehow they sell, buying organizations have implemented procurementsystems to improve how they buy. The goal for both sides is toincrease efficiency, as well as to provide managers with increasedvisibility and control.What Is A Procurement System?What is a procurement system? Lets start by examining what itmeans to the end user in an organization – the manager or employeewho needs to buy something. We are all familiar with buying booksand airline tickets online. Well, the implementation of procurement isthe application of the same principles.Through-out the organization, rather than picking up the phone to asupplier for stationery, software or to book business travel, themanager or employee goes to their PC where they will see a screensuch as below:P a g e |2© The ASG Group 2012
  • 3. The system embeds the procurement procedures and approvalsprocesses of the organization into what is hopefully an easy to useinterface. The system cuts down on the paperwork and theadministration – whether it is a new buying decision, or simply a re-ordering process.Of course it also cuts down on the discretion of the user. For routineorders discretion is likely to be limited to buying from a pre-approvedvendor catalogue at an agreed price and up to an agreed quantitylevel. For more complex decisions a workflow, or buying process isprovided. A complete audit trail is maintained; together with detailsspend analysis information.Why Are Buyers Employing Procurement Systems?A key goal is to drive up the proportion of total enterprise spendunder management. But given the number, diversity andsophistication of purchasing processes underway the use ofprocurement technology is vital. The reality is that you cant runprocurement from a series of spreadsheets.The trend is towards the increasing use of technology to automatelow value and routine tasks relating to administering the transactionand to standardize/optimize the more strategic aspects of theprocurement process. Equally important it cuts procurement costs byincreasing the efficiency of the procure-to-pay cycle and by reducingall too frequent errors and delays.Specifically buyers are using online technology to collaborate withtheir internal customer and external suppliers in conducting keyaspects of the procurement lifecycle, such as; requirements definition,tendering, negotiation, award and contract management.P a g e |3© The ASG Group 2012
  • 4. Procurement is fast moving out of the paperwork and invoicingbusiness – they have software that will do that stuff. The technologywont replace the professional buyer, but it allows him, or her to do alot more. It leaves them free to focus on the more strategic andresults oriented aspects of procurement.Technology is yet another reason for a more process-driven approachto procurement in many organizations. That is because the IT systems “...curtailsimplemented have the effect of reducing the element of human maverick buyingvariability to ensure greater consistency and standardization over howthe organization spends its money. to ensure the proper process isThe systems can effectively curtail maverick buying ensuring a properapprovals process is followed and preferred suppliers are used. The followed.”system dictates how the purchase will be made ensuring workflowmanagement and process compliance. Buyer must buy from acatalogue, or through a mandated process. Unless all the boxes areticked and the steps completed the purchase cant be completed.Meanwhile there is a complete audit trail in respect of buying and fullvisibility of what has been spent.P a g e |4© The ASG Group 2012
  • 5. In the past CFOs and CPOs were often heard to say; If only we knewexactly what was being spent on all products and services bought andwith all of our suppliers!Thanks to new software that information is being made available tomanagers. As a result they can pinpoint where savings can be madeand more effectively manage demand, as well as supply. Spendanalytics is a key driver of procurement system adoption (as in the “Spend analyticsPurchase Control system screenshot below). is a key driver of procurement system adoption.”Another advantage of the real time visibility of what is being spent isthat it tangibilizes promised savings. Given the skepticism that oftengreets procurements claimed savings this evidence of real financialimpact is essential.A more structured approach to risk management of the supply base isanother important driver of procurement systems adoption.Many procurement system vendors offer add-ons. A good example isvendor Ariba whose Collaborative Network brings together 730,000global businesses to trade using its systems.P a g e |5© The ASG Group 2012
  • 6. What Do Procurement Systems Mean For Sellers?The top 6 implications for sellers of buying systems are: 1. The organization is likely to be more sophisticated in terms of its buying, more rigorous and more structured in its approach to selecting and managing suppliers. The program dictates the steps that the buyer must follow. As always it is important to understand those steps and to help the buyer to navigate them. 2. The relationship dimension of winning the order is likely to be less important and more of the selling is likely to be done by means of online Rfx submission. Typically buyers will have less discretion in terms of how decisions are made. 3. Buyers are likely to have access to more information, more data on prices, market trends, etc. They have a detailed record of what has happened in the past, future spend forecasts, compliance levels, supplier market conditions, business metrics and supplier performance. As a result of all this intelligence they can be more difficult to sell to. 4. The sellers cash flow is likely to be more predictable, with orders and invoices generally being processed more efficiently and to a higher degree of accuracy. 5. For the preferred supplier anticipated sales volumes are more likely to be achieved because:  Forecasts are based on more accurate spend analytics in the buying organization.  Greater contract compliance (it will be difficult for those within the buying organization to buy other than from the preferred supplier).P a g e |6© The ASG Group 2012
  • 7. Indeed, if you are the chosen vendor then chances are theorganization with an e-procurement system in place will buy morefrom you for these reasons. On the other hand, if you are not thepreferred supplier, then youll probably be getting a lot less businessas maverick buying is likely to be curtailed. 6. Supplier relationship management is likely to be more systematic and thorough. That means those you deal with in the buying organization will be periodically required to rate your performance, as well as to assess contract compliance. Sellers be warned a score card is being kept on you! The buyer has a dashboard and you dont want your companys name to appear on it with an alert beside it.Leading Procurement Systems Suppliers:The following is a list compiled by Forresterof key procurement system vendors:  Ariba  Basware  Capgemini Procurement Services  e-Plus  Hubwoo  Lawson  Oracle E-Business Suite  Oracle PeopleSoft  Perfect Commerce  SAP  SciQuest(Source: The Forrester Wave, eSourcing Solutions, Q1 2011)If your customers or prospects are using asystem it is well worth visiting the vendorssite. Not only will it contain specificinformation on the system provided, but it isalso likely to include whitepapers and research on procurementtopics.P a g e |7© The ASG Group 2012
  • 8. The Science Behind This PaperThese insights and tools are based on:1. Buyer Research – our ground-breaking research into how modern buying decisions are made and the implications for sellers.2. Best Practice Research – Over 1 million pages of best practice sales case studies, books and research.3. Common Practice Research – Our peer comparison benchmark of 1,000s of your competitors and peers.The Sales Engine® and SellerNav are trademarks of The ASG Group.The entire contents of this document are copyright of The ASG Group and cannot bereproduced in any format without written permission.Want help in tackling your sales challenges? Contactenquiries@theASGgroup.comwww.theASGgroup.comP a g e |8© The ASG Group 2012

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