Open the Supplier Floodgates: A Counterintuitive Approach to Getting Spend Under Management
Categories: Guest Post, Innovation, Procurement Strategy & Planning, Spend Management, Supplier Management | Tags: Coupa, Incendiary Tidbits
Spend Matters welcomes a guest post from Donna Wilczek of Coupa.
Here is a best practice that sounds counterintuitive at first: giving all your employees access to all the suppliers you’ve done business with in the last 18 months.
This goes against one of the textbook strategies for optimizing spend, which is limiting the number of suppliers that can be used for purchases of goods and services. When procurement professionals first hear this idea, their immediate response is, “What? There is no way I’m going to allow all my employees access to every supplier!” They imagine chaos, with employees creating orders all over the place and procurement losing control.
But the exact opposite happens. Giving everyone access to create requests from all suppliers gives you more control. You should be more afraid of what happens when you take the textbook approach.
The textbook approach is to enable suppliers in waves, one category at a time and only after they’ve been fully sourced. Maybe you do a marketing wave, then an IT wave, and so on. You prioritize the order, get all the suppliers in that category enabled on the network, and launch that wave, locking down the rest of the suppliers until the next wave.
Sounds logical and orderly, and if you’re hoping to actually control spend, it’s exactly the wrong approach. You’re effectively closing your spend visibility funnel while making the change harder for your end users, since they will only be able to use the system for a very limited part of their spend.
With the non-textbook approach, you load all of your suppliers at once and give everyone access (or limit access at a country or ERP level). Just get all the suppliers loaded with the information you have on hand. For your more technologically advanced or strategic suppliers, quickly enable them with more advanced methods (i.e. CXML).
With this approach, every employee that comes into the system then sees all “their” suppliers and can create a request. That’s a positive first experience and a great first step toward continued end user adoption. Most importantly, now that you have captured the request, you have track spend before it happens. That is what leads to spend control and optimization.
Remember, if employees make a request, it is just that – a request to do business with that supplier. At that point any request to suppliers without an active contract can route to the appropriate buyer and that person can take actions such as approving, selecting an alternate supplier, sourcing the request, and/or reviewing the supplier’s information for accuracy.
While your system is delivering value to your employees, work with additional suppliers, based on priority, to further enable them for catalog and transaction efficiency. You’ll continually improve the data within your procurement system without negatively affecting the employee experience. The key thing is to get those requests coming in without wasting time and money cleansing old supplier records that may never be used again.
Plus, it’s a lot simpler from a change management perspective to go out with a message of “all of your suppliers are here. It’s a one-stop shop and everything is ready for you,” instead of “well, only the top tier marketing vendors are here right now and you need to use some other system(s) for the rest of your spend.”
Think about it. If an employee comes into the system and they don’t see the supplier they’ve been buying from, what do they do? They leave the system and revert to old ways of doing business, such as picking up the phone and placing an order. They work around the system. Even worse, their first experience is that the system has nothing to offer them, and it’s quite possible they’ll never return. All of this leads to inefficient, non-compliant, and costly processes such as after-the-fact POs that get created when an invoice shows up at your AP department’s door.
That’s when you’ve lost the battle to optimize spend, because you cannot control what you cannot see. You will never be able to see what employees are doing if they don’t adopt your system.
The reason a limited supplier wave enablement is standard practice has less to do with it being a “best” practice and more to do with the limitations of many procurement software vendors.
In many systems, enabling suppliers is a cumbersome process. You have to contact the supplier, get them registered on a mandated network, and get them to agree to legal language to pay for transactions they receive through the network. When you have tens of thousands of suppliers, enablement ends up taking a long time, and so the wave approach was created to get systems up and running sooner. This model resulted in what you see at so many companies: systems with small numbers of suppliers enabled, limited benefits, and employees working around the system. All of this topped off with people rationalizing their wave enablement decision by saying at least it’s better than nothing at all.
Don’t risk it! Don’t make supplier enablement a huge, unwieldy process. Select a procurement system that doesn’t require a network for communication and that allows you to transact with suppliers without a complicated enablement. This will get you the fastest return on your investment and incremental value over the long term.
Getting the most spend under management is all about control. How do you get control? Not by trickling out access to suppliers. You get control by being able to track requests. Start your project off on the right foot by giving employees what they want and need from day one. They’ll come running to your system because it’s the easiest way to get their job done.
You’ll make your life easier, get more control, and increase spend under management — a winning trifecta from my viewpoint.