Putting Procurement in Plain English: Let’s Start with P2P
I continue to be amazed at how difficult it is to explain to friends and family what the heck it is I do. My older children (7 and 10) completely understand what their mom does at work (“She helps people save money when they buy metal”). Nothing too abstract there! But try explaining what it is that someone does who researches eProcurement, P2P, supplier management, and sourcing optimization to the same group and then have them provide a translation back. Trust me, it isn’t pretty.
Perhaps my kids are onto something not being able to explain what their dad does for a living. Procurement is complex stuff, and many of the technologies and approaches we take to saving money, reducing risk, and driving compliance are not necessarily explained easily. Or are they? Is the reason that getting our colleagues on-board with programs and encouraging adoption of things at the levels we want to see for programs such as eProcurement is so difficult because we don’t put what we’re trying to do in plain English? I reckon it might be.
So going forward, I’ll be doing an informal series from time to time on the virtual pages of Spend Matters: putting procurement in plain English. In it, I’ll share as simplified and dumbed-down a take on different technologies and areas of the function as possible. Some will be more involved; others will be short. But in everything I write – perhaps translate is a better word – I’ll try to distill, to the essence, what the heck something, someone, or some function does without jargon, clichés, or geek talk.
As my pilot, I’ll start with the purchase-to-pay (P2P basics, with eProcurement). Here goes:
What problems does eProcurement solve?
- Employees spend money in “rogue” or unauthorized ways today, such as working with unapproved vendors, e.g., Amazon, Staples (in-store), Joe the Plumber, etc. Many spend in this manner without even knowing their behavior is not within policy! They do it because they have to buy what they need to do their jobs.
- Supplier pricing is often inconsistent and does not reflect negotiated terms based on the aggregate sum (total volume) of what a company spends in that area, or could spend, with a single supplier. The more you “consolidate” spending with fewer suppliers, the more you save. But this requires actually “buying,” not just identifying savings through negotiation.
- Companies spend money that is not approved or not in budget – which is only caught after the fact.
What challenges / opportunities do companies face without eProcurement?
- Driving compliance across all frontline employees authorized to make purchases will continue to be impossible without an eProcurement system (either with a corporate/purchasing card or without).
- Capturing savings in procurement (as opposed to just identifying it) will remain elusive for areas of the business that are traditionally overhead (e.g., IT hardware, pens/papers, light bulbs, etc.)
What problems are typically not well addressed today by these solutions?
- Enabling the “long tail” of suppliers versus just the largest ones. Most eProcurement solutions make it really easy to work with the Staples and Dells of the world, but not with small suppliers, who are the silent majority that most companies buy from.
- All the stuff that happens after you click the “buy” button and a purchase is approved internally. In other words, this involves what’s known as closing the invoicing, approval and payment loop – versus just managing the transactional shopping experience.
Stay tuned as our Procurement in Plain English posts continue. And do call me out if I’ve regressed into purchasing geek speak.
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