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Akn eCatalog Managment Part 1


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Akn eCatalog Managment Part 1

  1. 1. eCatalog Management - Best Practices Part IAt the heart of every procurement system is a catalog. Even in an environment lacking automation, requisitioners consulta hard copy or customer service reps use a catalog at the other end of a phone line. So it stands to reason that gettingeveryone to use the correct catalog from a preferred vendor at the contracted price will ensure that negotiated savingsfrom sourcing and contracting activities are actually realized. This paper will explore benefits and best practices aroundthese core elements: • Process Compliance (Adoption of the catalog and procurement system) • Price Compliance “By facilitating the purchasing of • Supplier Compliance indirect material, catalog-based buyingThis includes specifics around unlocking the value of existing eProcurement systems presents an admirable ROI andthrough improved catalog management. At the conclusion, there is a buyer’s checklist to eliminates manual procurementaid you in selecting an catalog vendor should you choose to take this path. process.” - Aberdeen GroupWhy is eCatalog Management Important?The average enterprise has more than 3,000 indirect suppliers, but only 224 catalogs available online through theirprocurement application. This translates to only 27 percent of their spend being actively managed. Many companieshave much less than 224 catalogs online and are not taking full advantage of this powerful tool. By enabling 80 percentor more of your catalog spend, your organization can increase leverage in the following: 1. Compliance – Consolidating purchases to preferred suppliers not only saves money, but increases negotiating power. 2. Increased operating efficiencies – Adds additional cost savings as well as reduces the order cycle time, producing happier users thereby giving purchasing more internal influence. But these benefits will never happen unless you have the catalogs available and casual user-friendly shopping carts to leverage the content and promote adoption. A casual user is different than someone who is frequently in the system—for instance, an accounts payable clerk using the ERP system. You have to expect that anyone—from the mailroom to the CEO—be able to walk up to the application for the first time and intuitively navigate the catalog and eProcurement systems. Obviously, most ERP applications do not fall into this category. So who should consider enabling eCatalogs? Well, as obvious as it sounds, everyone. “By facilitating the purchasing of indirect material, catalog-based buying presents an admirable ROI and eliminates manual procurement process.” 1 If you do not have an eprocurement system with best-in-class eCatalogs, up to 50 percent of your negotiated savings can be leaked through non-compliance, penalties and missed opportunities around invoice reconciliation (figure one).2
  2. 2. How Are eProcurement Systems, Catalogs and Networks Linked?Catalogs are pretty much useless without the ability to leverage their content in an eProcurement system. Many compa-nies already have eProcurement in place. If it is a best-of-breed solution, the catalog is usually an integral component ofthe system. If, however, it is Oracle, SAP, or another ERP system that is trying to bolt on eProcurement and then bolt oneCatalogs, you probably have already experienced significant pain around: • Clunky user interface that is frustrating and time-consuming to use; • Lack of powerful search capabilities to allow successful keyword searches and multi-supplier searches—without requiring the user to know the particulars of suppliers and their content; • Multiple ERP, purchasing, and other business systems, all with different user interfaces and proc- esses. Its hard to know which system to access for what information, and how to find it once there; • Ineffective or nonexistent category capture, which allows access to both goods and services, such as in requisitions requiring supplier collaboration (i.e. hiring temporary labor);3 • The slow, resource-intensive process of enabling and maintaining catalogs.Fear not! Choosing the right catalog to supplement your existing ERP eProcurement can unlock the value of your ERPinvestment. For those that do not have an eProcurement application, consider a best-of-breed procure-to-pay solutionthat can be implemented quickly and delivers a positive ROI within six months.How Many and Which Catalogs Should Be Online?According to the Aberdeen Group, best-in-class performers have enabled 64 percent of their suppliers, which places 80percent of their spend under management.4 This is in contrast to the industry average of only 29 percent of suppliersenabled and 15 percent for the bottom 30 percent performers. While catalogs are not the only element of supplier en-ablement, they are an initial component to connecting supplier information to their systems. The Aberdeen Group hasfound that best-in-class organizations do at least 74 percent of their buying through an eCatalog.5 All purchases thathave a “part number” to “price” relationship are candidates for an catalog. With the proper set-up and technology, ser-vices such as temp labor, consulting, marketing and print can also be ordered from a type of catalog—further increasingthe percentage of catalog-based purchasing. A better way to address this question, however, is not necessarily done bysetting a number or percentage target, but to ensure that at a minimum the following two conditions are met: 1. All contracted items are contained in the catalog 2. All suppliers who are sent 150 orders or more per year and can provide an catalogBy having all contracted items as a catalog item, an organization can ensure that the savings identified during the sourc-ing process are being realized in the procurement process as outlined earlier. eCatalogs from frequently used supplierswill save the organization time and money by reducing the time needed for the requisitioner to create an order, the timefor a buyer to place an order, and the process required for accounts payable to reconcile the invoices. (You’re also keep-ing your suppliers’ costs down by increasing their efficiency.) Doing a keyword search to find and select the item is muchfaster than using a traditional paper catalog or parts list and filling out the required information in a requisition. The risk ofordering an incorrect item is also reduced as information about the item is readily available and displayed to the end userin the catalog.Organizations that are new to eCatalogs usually Depending on your industry, services can be one ofexcel at identifying the top suppliers to enable the largest spend categories and is often over-first in their system. The top three categories looked. Categories that can comprise up to 80 per-that most organizations do well with are: cent of indirect spend and should be investigated 1. Office Suppliers include: 2. IT Equipment 1. Temp Labor 3. MRO 2. Consulting 3. Print 4. Marketing Services
  3. 3. Types of eCatalogsThere are three primary choices of eCatalogs in use and each has their own pros and cons which are described belowas well as highlighted in Table 1. CIF (Catalog Interchange Format) – This is a catalog hosted and maintained by the customer or catalog ven- dor. The primary benefit is control, preferred product guidance, and pricing. The downside is it is more re- source-intensive and may not be as current as other methods. PunchOut – Users punch out from their procurement solution to a supplier-hosted catalog home page, where they search, compare, and select. The user then has to return to the procurement vendor in order to complete the requisition. Level 2 PunchOut – This has some of the best of both worlds. Level 2 PunchOut will bring the user directly to the “aisle”, “shelf” or product (depending on configuration) of a supplier-hosted catalog that surfaced in their catalog search. An aisle>shelf>product example is Printer Ink>Epson Printer Ink> Epson Ink #12345. This provides maximum control to the enterprise while offloading the burden of maintenance to the supplier with the added benefit of being more up-to-date. The downside is that it is more time-consuming to establish and be- cause it requires more effort on the part of the supplier, not all are open to this method. catalog Types Table 1There is also an older technology, web scraping, that has bots or spiders go out an “scrape” the suppliers’ website forcontent. This technology was initially embraced by consumer price tracking websites such as NexTag, but has sincebeen abandoned due to lack of accuracy. One major issue around this type of catalog has been the lack of proactivepricing compliance, particularly as it pertains to volume or tiered pricing. Plus, there is no capability for data enrichmentor cleansing as well as no support for services procurement. The ultimate negative may be that it is a buyer-intensivesolution—the burden rests with buying organizations to manage and maintain: commodity code classification, monitoringfields for filtering, managing bots, etc. One additional type of catalog that is becoming more widely used, CDF (CatalogData Format), is specifically for Services Procurement. This may combine rate cards and other specific parameters thatare required to procure services such as contingent labor, consulting, marketing services, facilities, and print. Eight Top Tips to Zap CIF Catalog ErrorsIf youve uploaded a CIF (catalog interchange format) catalog onto Ariba® Supplier Network™ or plan to do so, youre proba- bly familiar with the validation process—in which your catalog is reviewed to ensure that it is set up correctly. If your cata-log has errors, you get a report that details the problems. Catalogs smaller than 4 MB are validated in real time, which means you can click on the links, correct the errors directly on your uploaded catalog, and then get instant validation results once the changes are made. For catalogs 4 MB or larger, you can review the report to see where errors appear, but youll need to make corrections offline on your CIF file and then re-upload the corrected version for validation. Click here for a list of the 8 top tips to Zap CIF Catalog Errors: