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![Focus on Procurement - Sourcing & Contracting
pc@xoomworks.com | www.xoomworks.com
Often the focus is on establishing technology around the transactional side of procurement, however an
organisation will look to its Procurement department to its Sourcing and Contracting.
In many cases the technology will already be present to achieve a more significant digital footprint. Below are some
ideas on that may help drive this forward:
Contracts
• Establish a Central Corporate repository [no exceptions]
• Break down your contract and terms into a controlled parameter based library. Using predefined templates the
buyers can then incorporate additional terms from the library if required.
• Bring in external data to help model the optimum Contract.
Sourcing
• Use the Category planning process to drive your Sourcing Activity
• Utilise auctions as part of your standard RFP process
• Integrate your approval processes for Contracts and Savings into your Sourcing process
Optimisation
• Bring these two functions together, lining your sourcing activity to a Contract
• Drive your Sourcing automatically from your Contract Renewing process
• Integrate these processes into your Category plans.
• Introduce AI data analytics to expedite the Source to Contract process and decision making process.](https://image.slidesharecdn.com/digitalprocurementpresentation-180319111901/85/Digital-procurement-assessment-workshop-8-320.jpg)
Uploaded byJeff Hocking
Digital procurement assessment workshop
Digital procurement involves combining tools, processes, and technology to digitize procurement functions. This enables tracking supplier savings, contract management, eAuctions, and other processes. Nearly all needed technology exists today. Benefits include efficiency, reduced procurement costs, lower transaction costs, and enhanced supplier management. Challenges to digitization include budget, time investment, experience, and readiness across the source-to-pay process. Focus areas for digitization include category planning using data modeling, integrated sourcing and contracting processes, and automated savings tracking from planning through accounting. The next steps are to review current processes and prioritize digitizing areas not fully enabled by current systems.
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Digital procurement assessment workshop
- 1. Digital Procurement Trevor Tyler pc@xoomworks.com| www.xoomworks.com
- 2. What is DigitalProcurement pc@xoomworks.com | www.xoomworks.com In simple terms it is a combination of tools and processes combined with technology that altogether enable Digital Procurement across the procurement landscape. In this session I aim to break this down into bitesize components that by themselves start the drive toward digitising the procurement function. Nearly all of what you need exists today, most of you would have already have some form of digital technology already in place. Any gaps can typically be solved with simple technology solutions.
- 3. Procurement Landscape forDigitisation pc@xoomworks.com | www.xoomworks.com Tracking of Supplier Savings Contract Renewals eAuctions Purchasing Cards Contract Creation (Library’s) Supplier Spend Analysis Supplier Risk Assessment Vendor Master data Management (new Suppliers) Approvals – all types Category Planning Procurement Governance Reporting – Transactional / Strategic Market Research RFx Templates Purchase Orders Before we look deeper some, if not all, of the processes below will be familiar. How may of these are using digital technology to fulfil these activities in your organisation?
- 4. Why and whatare the benefits ? pc@xoomworks.com | www.xoomworks.com Tracking and reporting financial savings achieved through procurement initiatives across your organisation. Efficiency in ongoing production of category plans through automation and data modelling. Reduce your Procurement cost of function - use digital technology minimising manual related tasks, allowing your buyer to focus on the value added activities. Reduce your transaction costs across the whole Source to Pay process, including Introducing higher levels of data integration and AI into Supplier Spend analytics, Enhance negotiation methods achieving a step change in savings, on average 20%. Digitise and Optimise your Contract Management, Renewal and Reporting. Identify and reduce Contract leakage. Enhance Supplier Management processes. Below is an example of some of the benefits that can be achieved through the use of digital technology.
- 5. What are theChallenges ? pc@xoomworks.com | www.xoomworks.com • No budget • Business case difficult to justify expenditure.Cost • Requires significant people investment, therefore not focused on sourcing and contracting • Overall timeline takes years not months Time • Procurement function focused on Sourcing • Change management not a resident skillExperience • No Centralised resource across the Source to Pay process. • Tactical Vs StrategicReadiness
- 6. Category Planning SourcingContracting Supplier Management Purchase Order Payments Data Analytics Journey towards enablement of Digitisation pc@xoomworks.com | www.xoomworks.com Below is very high level ‘cheeky’ view of typical of the journey an organisation goes through. Journey to Digitisation Complete Needs Attention Maybe have a template? All your sourcing going through your system? How is your contract renewal process? Tracking Supplier KPIs ? All PO’s ? Invoice mismatch rate? Have those savings come through?. Impact of CPI % changes on your contracts ?
- 7. Focus on Procurement- Category Planning pc@xoomworks.com | www.xoomworks.com Current Market Research Data Modelling Supplier Spend Existing Data Sourcing & Contracts Saving Targets Planning ProcessRisk Digitisation Inputs • Commodity market data • Market trend data. • Historic and predicted indices data • Supplier data financials, risk score • Costs Outputs • Supplier rationalisation • Make or buy options • Specification Rationalisation By bringing this data into a common data model then using predictive analysis to table your options from which you can create your Category plan. Refresh this plan as and when needed against previous baseline.
- 8. Focus on Procurement- Sourcing & Contracting pc@xoomworks.com | www.xoomworks.com Often the focus is on establishing technology around the transactional side of procurement, however an organisation will look to its Procurement department to its Sourcing and Contracting. In many cases the technology will already be present to achieve a more significant digital footprint. Below are some ideas on that may help drive this forward: Contracts • Establish a Central Corporate repository [no exceptions] • Break down your contract and terms into a controlled parameter based library. Using predefined templates the buyers can then incorporate additional terms from the library if required. • Bring in external data to help model the optimum Contract. Sourcing • Use the Category planning process to drive your Sourcing Activity • Utilise auctions as part of your standard RFP process • Integrate your approval processes for Contracts and Savings into your Sourcing process Optimisation • Bring these two functions together, lining your sourcing activity to a Contract • Drive your Sourcing automatically from your Contract Renewing process • Integrate these processes into your Category plans. • Introduce AI data analytics to expedite the Source to Contract process and decision making process.
- 9. Focus on Procurement- Savings pc@xoomworks.com | www.xoomworks.com Supplier Saving Targets Agreed across the Organisation Clear Plans to deliver – integrated into Category Plan Saving calculation and Approvals Savings in the Financial Accounting & Tracking Processes Calculating, Agreeing and Approving Supplier Savings are on the whole a manual processes. Digitising this process within the Procurement platform and integrated into the Finance systems will help drive more efficiency into the planning Sourcing and Contract management processes. Using clear definitions of how savings are calculated along with AI techniques will enable you to easily identify and track these initiatives within your Supplier base. Not to mention agreeing and approving them within the wider organisation, then once achieved track the benefits within the accounting processes. This form of digitisation helps to understand the effectiveness of the contract, which will then help inject more intelligence across your commodity landscape identifying further opportunities.
- 10. What to donext & Summary pc@xoomworks.com | www.xoomworks.com In summary you most likely will already be on you own journey to a full digital procurement model, some organisations may already be fully enabled across their landscape. For those that are not I hope that this brief overview has given you some ideas, in short though I would recommend the following: • Review your current Procurement target operating model and put digital procurement at its heart. • Examine your all procurement processes in conjunction with your current system platform and prioritise the non systems activity. • Look at the holistic procurement process, not just the transactional. • Take a look at your procurement cost of function, identify how automation can reduce the manual admistration tasks. • Drive towards to single data module for Procurement, consolidating Sourcing, Contract , Spend and external data into a usable model
- 11. Xoomworks Digital ProcurementWorkshop pc@xoomworks.com | www.xoomworks.com Review current procurement operating model o Including summary numbers such as sourcing events, contract numbers, volume of POs, estimated contract leakage….) Walkthrough current business processes: o Category planning o Procurement research o Sourcing events (RFIs, RFPs, auctions) o Contract, supplier and risk management o Governance (approvals, authorities, workflows) o Purchase to Pay process o Procurement and management reporting Review Procurement strategy, target operating models, and savings targets Discuss solutions and optimisation to further digitise the procurement process A typical one day workshop agenda includes:
- 12. Thank You for Listening Q& A pc@xoomworks.com | www.xoomworks.com
Editor's Notes
- #2 Good Morning, My name is Trevor Tyler, I’m a procurement consultant at Xoomworks. Today I’m going to talk about Digital Procurement, what it is and the type of journey that could be undertaken to reach a full digital enable procurement function. Before I start though, a bit about my background. Previously I worked for British Airways for 33 years, the last 20 of which were in Procurement.
- #3 So what is Digital Procurement, it is not just one thing, in reality it is a combination of tools and processes utilising technology The next few slides will hopefully start to paint a picture of what can de done to either start or complete your digital enablement journey. In the main most of the technology exists, however in my view it isn’t as yet all in one cohesive package. Overall I think that probably right, can you achieve everything on one platform, possibly, but is that the right thing to and what comprises would be required. 1 min
- #4 But before we dive a bit deeper I’ve put a list together of what functions that are done with a typical procurement team. The list is not comprehensive and in some organisations some these actives may well be done by other teams, for example Supplier spend analysis this maybe done within your Finance team, or Research may be provided by a third party. However as a collective of The question is how much of these tasks are undertaken manually, effectively or in some cases at all.
- #5 So what would be the benefits of increasing the level of digitisation within the procurement processes. On this slide I have listed some examples, but is not a comprehensive list, and of course the benefits will depend on how your organisation is set-up and how much automation is already in use. I’ll pick a few out, tracking and reporting of supplier savings driven by the procurement process. How much time and effort is applied to calculating, getting approved and tracking through the financial accounts these savings. In my experience the amount of energy, the endless discussions over the accuracy of the numbers, what type of savings is this ‘is cost avoidance a real saving’, answers on a postcard. Then getting sign-off just can be all consuming, in many cases I have seen this be all agreed many months after the contract has been agreed and supply has started. The benefits in efficiency alone are worth considering. Contract leakage, well we know it happens. I have seen in my previous role, a 3rd party come in undertake an exercise to compare agreed contracultural prices vs invoices paid to find yes we have overpaid. In one case I recall when presented back to the Supplier a cheque for what was just short of 7 figure number was given to us the same day. The last one to mention,