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Procurement Digital Transformation: The Top 10 Ways Real-Time E-Procurement Matters

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The Hackett Group’s 2017 reportRaising the World-Class Bar in Procurement Through Digital Transformation cited that 84% of procurement leaders believe that digital transformation will profoundly transform the way they deliver their services over the next three to five years. Conversely, only 32% have developed a strategy for getting there.

The report finds that typical procurement organizations can reduce procurement process costs by up to 24% by implementing cloud-based procurement applications, robotic process automation (AI), advanced analytics and other digital transformation approaches. Furthermore, the report cites that “world-class procurement organizations” can reap process cost savings of 35% through digital transformation.

At Aquiire, we have found that even more untapped savings can be achieved by introducing real-time data into the purchasing and procurement processes. In his recent Spend Matters article “Search for the Best Results and Buy Smarter,” analyst Xavier Olivera advised:

Buying smarter is about securing the highest value for the user and the business by analyzing and comparing all your purchasing options; ensuring that the option you pick aligns with your firm’s contracts, policies and business rules; remaining within the established budget of your business unit; and, of course, fulfilling the user’s business requirements. The most essential element of buying smarter is the ability to search and find all viable options and supplement them with appropriate information to compare and analyze a potential purchase. The core requirement for supporting this capability is to have 100% accurate, real-time data.

We agree. Moreover, adopting real-time data as part of a larger e-procurement digital strategy offers many more benefits and value to procurement organizations. Here are the top 10 ways we have found real-time e-procurement matters:

1. Establishes a Single B2B Marketplace Where All Catalogs Are Searchable and Shoppable

With real-time search capabilities, the latest negotiated product information and pricing is brought together in one set of results, regardless of whether supplier catalogs are hosted inside or outside of the organization. Users no longer need to visit separate punchout catalogs (supplier websites) to search for the products they need. Instead, all data is “punched in” so users can comparison shop all of the options available from contracted suppliers in one consolidated internal marketplace. A supplier does not need to make any technical investments to be connected to you. (See No. 9 to learn more.)

2. Provides Side-by-Side Comparison with Up-to-the-Minute Prices

Most e-procurement systems require users to “punch out” to supplier e-commerce websites one at a time to find products they are seeking without a convenient way to compare current market pricing from multiple suppliers. A real-time comparison shopping experience functions much more efficiently by bringing back all important item details, including price, product description and specs, while allowing users to purchase the products they require — without ever needing to leave the organization’s private marketplace.

3. Automatically Organizes Product Information for Quick and Easy Shopping

A unique function of real-time search is the ability to integrate product descriptions and other unstructured data from the search results, and automatically group them into a highly visual e-commerce display. This gives shoppers the ability to drill down to deeper product descriptions, images and PDF manuals not originally designed into the catalog search structure.

4. Presents Buying Options the Procurement Way

Real-time guided buying is in stark contrast to punchout (e-commerce) supplier websites, which use the latest behavioral science and marketing techniques to upsell and cross-sell for higher-cost purchases from shoppers. With real-time guided buying functionality, procurement has the flexibility to decide how items are displayed and ranked in the real-time search results. Applying real-time guided buying functionality to the shopping experience allows procurement to wield an invisible hand, leading users on the best purchasing path based on specific purchasing rules, while still providing the consumer-like shopping experience they desire.

5. Maintains Procurement Know-How During Change Management

Change management is an inevitability in any organization. The resources needed to search for new candidates and the time needed to on-board/train new employees can significantly slow or derail achieving organizational goals. With the real-time guided buying rules in place, new employees — procurement administrators, accounts payable, IT and individual users — are consistently compliant to organizational purchasing procedures.

6. Secures the Best Deals in the Market

One of the key advantages of consumer e-commerce shopping is the prospect of finding an amazing sale. What B2C shoppers consider a “steal” is more formally defined by academics as an example of price dispersion — when different sellers offer different prices for the same product in a specific market. It arises from a lack of price transparency across all sellers at any point in time. Economists who study price dispersion have found averages between the lowest and highest prices offered from various suppliers for the same products can be up to 9%5. Advanced real-time capabilities let procurement take advantage of the economics of price dispersion within the private B2B marketplace.

7. Instantly Validates Negotiated Supplier Pricing, Products and Availability

A well-negotiated contract means nothing if the discounted prices are not reflected at the time of purchase. Procurement teams work hard to negotiate agreements with suppliers. But it is difficult to ensure that they are continually receiving on-contract pricing and products. The most typical discrepancies occur because of price and product “creep.”

Typically, expensive and time-consuming audit processes are necessary to identify and recapture these transactional errors. Not only is time delayed on receiving expected orders, but manual interventions and reorders require additional time and resources. Real-time purchase data allows users and administrators to discover off-contract pricing and products before the purchase is completed, rather than months after an invoice has been paid. The ability to automate price and product compliance monitoring in real time is an important supplier management functionality for procurement leaders.

8. Enables Procurement to Negotiate Better Supplier Pricing

Real-time data can drive substantial savings by continually tracking the organization’s purchasing history and supplying useful analytics to ascertain the competitiveness of current negotiated supplier pricing in comparison with alternate supplier prices at the point of purchase. By maintaining historical pricing data (for every SKU) and presenting the information in up-to-the-minute, comprehensive reports, sourcing teams have the actionable information they need to not only show their suppliers the categories where their pricing is higher than their competitors but also missed sales opportunities resulting from their employees selecting lower-priced alternatives.

9. Improves Supplier Relationship Management and Satisfaction

Your sales channel becomes more attractive to suppliers with advanced real-time capabilities. Real-time universal search allows users to quickly and easily browse supplier catalogs and websites from one private marketplace. As user adoption and purchasing increases through the marketplace, supplier sales will increase—even in a competitive shopping environment. This leads to contract negotiations that benefit both procurement and suppliers, increasing the value of the relationship and driving additional cost savings.

10. Streamlines Purchase Order Automation

Like many processes, the quality of the input can dramatically affect performance. Having real-time price validation of items before completing an order transaction removes potential order issues downstream in the procure-to-pay process and increases the speed of processing. Reducing manual labor costs on purchase order exceptions can offer huge savings opportunities for any procurement department, as the cost of processing automated versus manual purchase orders is often a remarkable difference. Real-time capabilities are not only important to capture the best savings from suppliers but are key in keeping purchases flowing through a touchless automated state, from order to payment.

Summary

Real-time matters in many ways. It enables universal search and price comparisons across any e-commerce site in the world — in a single search. It provides the same rich content that the supplier provides with added real-time audit and contract comparison. It offers instant lower cost alternative supplier pricing to capture untapped savings opportunities and long-tail spend. It will transform the catalog management process.

Real time is the only way to truly deliver guided buying that will achieve your procurement goals. The real-time processing of structured and unstructured data can power advanced features like instant alerts, risk analysis and actionable analytics. It drives compliant shopping and allows the enterprise to automate and apply all procurement rules. Real time saves time, money and mistakes. Real time matters because the world changes in real time.

For more information, download the complete white paper: The Top 10 Ways Real-Time E-Procurement Matters.

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