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All technologies follow a natural progression, beginning with conception and followed by iterations of improvement. In some rare cases, these iterations compound until they accelerate to the point of exponential innovation. In the last couple of decades, we’ve seen more technologies — from computing power to rocketry — reach this upper echelon of development. Now it’s procurement’s turn.
It has been a long and frustrating journey for procurement professionals. Previous generations of e-procurement software have been plagued by a bevy of issues that ultimately resulted in a lack of ROI and added value. The three primary culprits are:
1) Lack of spend under management — This is one of the defining metrics of any procurement organization, but is often difficult to define and even more difficult to rein in. Up to now, any expert would say getting 100% of spend under management is impossible.
When it comes to e-procurement, according to The Hackett Group, the average organization only manages about 9% of spend through catalog-based e-procurement tools, with the world-class companies at a mere 34%. The question I would ask is, “Are we witnessing the death of the catalog as we know it?”
2) Maverick spending — End users are often unhappy and frustrated with being unable to find up-to-date products with the right descriptions, pricing, images and/or availability. So in turn, they buy outside of policy. Passionate employees looking to get their jobs done are labeled “maverick” or “rogue” spenders and are deemed to be at odds with procurement. So, should procurement really be trying to control and direct where employees buy or should they give them the freedom to buy anywhere while maintaining visibility?
3) Poorly designed tools — In the past few years, procurement has been elevated from an operational role to a strategic one. But in order to focus on adding value — in addition to cutting cost — procurement professionals need tools that work well, provide visibility and automate mundane tasks.
Unfortunately, that hasn’t been the case to date. Today’s tools don’t easily enable collaboration between requisitioners, professional buyers, suppliers and managers. They also do not provide insights that help procurement professionals become more effective leaders.
All of this points to the need for a solution that addresses these problems head on. Procurement isn’t a backroom function to let languish with outdated tools and capabilities. Rather, it’s potentially the largest opportunity to add value at companies across the board.
Join Tradeshift CEO Christian Lanng and the Hackett Group’s Sr. Procurement Advisor Amy Fong on Oct. 14 for Fixing the Broken Promises of E-Procurement, a live webinar. See what the future holds for the industry and watch a live demo of Tradeshift’s new e-procurement solution, Tradeshift Buy.