Process & Best Practice Content

5 Reasons Supply Base Rationalization Can Be the Enemy of Effective Procurement Spend Management

category management

Traditionally, procurement organizations have been advised to consolidate their supplier base (with the handful of suppliers with the greatest percentage of purchases), negotiate strong contractual discounts and encourage their employees to purchase from these preferred vendors at the prenegotiated pricing. On the surface, rationalizing an organization’s supply base can seem like an effective way to improve procurement performance. By rationalizing the number of suppliers that enterprises work with, procurement leaders can reduce costs, improve quality and save the time of procurement teams who are too often lost in the arduous process of managing indirect tail spend. However, due to the rise of more advanced B2B e-commerce platforms and highly volatile pricing fluctuations for products, the supplier consolidation strategy is quickly becoming outdated.

The 5 Key Benefits of Effective Buying

A wealth of worthwhile benefits can be gained through adopting an effective buying approach. By making just small changes in our approach to buying, we can expect to see significant value and benefits as a direct result. You might ask why you should do anything differently at all when individuals and organizations already manage to buy well without any kind of intervention. But to truly appreciate why we should consider a new buying approach, we must first recognize the size of the prize that can be obtained.

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5 Reasons to Make Procurement Matter Now

Today’s cloud-based procurement software platforms offer many advantages for companies seeking to gain greater visibility into — and control over — spend. This is just one reason why the market for e-procurement software is expected to grow from $1.35 billion in 2016 to $2.75 billion in 2021. Senior decision-makers at organizations contemplating the adoption of an e-procurement solution will find plenty of information about the advantages of doing procurement better through process automation. What’s missing from most of the available literature, however, are insights into how a modern procurement infrastructure can help companies accomplish specific business objectives.

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A Good Spend Culture Is Not Just About Saving vs. Spending

procurement savings

At the Procurify office in Vancouver, #SpendCulture is a tongue-in-cheek phrase that sometimes gets tossed about when we see someone being particularly thrifty. It’s ironic that we’d assign that meaning to the phrase when our own spend culture is very much focused on investing in rapid growth and creating an agile environment where we prioritize keeping our team comfortable, motivated and well resourced for continual development. Our office in Vancouver is located in a prime downtown location. We have a kitchen well stocked with snacks (including cider on tap) and dedicated space for video games (including a VR station), among other perks. To some business leaders this seems like the opposite of a good spend culture. We would humbly disagree.

Capitalizing on the Common Ground Between IT and Procurement

IT

IT and procurement often find themselves at each other’s throats, but the two functions have many similarities that escape the first glance. By finding common ground, IT and procurement can team up to bring several lucrative improvements to the broader business, including far more than just cost savings, risk prevention and increased revenue contribution. Indeed, a working partnership between procurement and IT can be the foundation for building a successful digital transformation.

The Path to World-Class Spend Management: Identifying an Ideal Solution Partner

No organization wants to practice merely average spend management. But as business becomes increasingly more complex, achieving world-class or even superior results has become more challenging, too. Attaining better spend management outcomes will, of course, require organizations to use modern software solutions in this digital era. Yet while software is a necessary condition to improved spend management results, to achieve world-class results requires more than technology alone. Procurement organizations have begun to recognize this. They are becoming less focused on software features and functions and are expecting more. They want a partner that is focused on outcomes and bottom-line results, one that actively participates in the delivery of those outcomes or even owns and guarantees them. Here's how to identify such a partner.

Beyond Greenwashing: How to Make CSR Clauses Truly Effective (Part 2)

Editor’s note: This is Part 2 in a two-part series covering EcoVadis’s recent study of CSR contractual practices among buyers and suppliers. Part 1 covered the limited effectiveness of today’s CSR clauses

Among buyers, inserting a corporate social responsibility (CSR) clause into their contracts with suppliers is a pretty common occurrence. According to EcoVadis’s 2018 study on CSR contractual practices, about 70% of buyers do so. The same study found, however, that more than 50% of suppliers say that they have come across CSR requirements that could not be met. But perhaps the greater problem is the fact that most CSR clauses are vague and ineffectual, providing for little enforceability and verifiability.

Are CSR Clauses Truly Effective in Improving Supply Chain Sustainability? (Part 1)

Corporate social responsibility (CSR) clauses are a common feature in contracts between buyers and suppliers. Yet the vague language of the majority of these clauses suggests limited effectiveness in actually bringing about sustainable practices, according to a recent study of more than 550 buyers and suppliers conducted by EcoVadis. Today, the adoption of CSR practices is quickly becoming the norm. According to the International Association of Contract and Commercial Managers (IACCM), nearly three-quarters of companies include a sustainability clause in their procurement contracts. Moreover, half also monitor their suppliers’ environmental and social performance.

Are Reverse Auctions a Threat to Good Supplier Relationships?

auction

Can reverse auctions — and e-procurement in general — sour a good supplier relationship? One of our readers wrote in with this question, worrying that reverse auctions may put pressure on supplier margins to such an extent that it is detrimental to the buyer-supplier relationship. In a reverse auction, suppliers compete for the buyer’s business by underbidding one another. This increased competition among the supply base ought to lead to lower prices for buyers, although it also runs the risk of undermining a supplier relationship that has taken time and effort to build. What’s the point of developing a strategic supplier relationship if you’re going to use an automated auctioning process anyway?

Tackling the Real World Complexities of Spend Management for Organizations Living in Change

No two organizations procure and pay for the goods and services they need in exactly the same way. Yet few solution providers today offer the functional depth, flexible implementation support and domain expertise needed to address the complex spend management requirements of organizations living in change. Some solutions address broad, generic challenges with a pretty screen, but with little sophistication, depth or configurability. Others provide the bare-bones experience, meeting the minimum of functionality requirements albeit for a low cost, but with little evidence of proven results. It is clear that there is no one-size-fits-all spend management strategy, and for organizations facing real world spend management complexities, these generic offerings fall short.

You Ask, We Answer: Procurement’s Burning Questions From the First Half of 2018

We kicked off Ask Spend Matters last July, and throughout the course of this past year, our readers — you! — have sent us dozens upon dozens of fascinating questions on topics ranging from big data to tail spend to group purchasing organizations to services procurement. Answering your questions has been both illuminating and fun, and we only hope that you have learned as much as we have. Today, we look back at the Ask Spend Matters articles that we published in the first half of this year. You asked about professional development needs, spend management vs. e-procurement, high-volume, low-dollar spend and more — and we answered.

Risk Management: Can You Keep a Secret?

I recently wrapped up a project researching the risk management solution market. I’ve lost count of how many different product presentations I’ve seen over the past month. Just assume it was more than a dozen. Yes, I admit it, I ran the gantlet and have emerged a bit jaded. Such is the nature of the risk I took. (Sorry, couldn’t help myself.) Across the spectrum of what truly has become a gold rush of risk management solutions, I was repeatedly asked much the same question by the vendors: “How can we best differentiate our market position. What’s the secret?” Let me quickly distill what I’ve learned.