Collaboration: Taking Procurement to the Next Level

Spend Matters welcomes this guest post by Mayank Saxena of GEP

When I look at the world of procurement, there are few distinct pieces that come to my mind. These are (1) Spend Analytics (2) P2P – the procure-to-pay cycle (3) strategic sourcing and category management and (4) contract services.

Based on my experience, I have come to realize how collaboration across these teams can work wonders, and there is significant merit to having a single supplier manage the entire gamut of activities. To illustrate what I am saying, I have a few examples.

1)     Typically, spend analytics team have issues classifying a lot of the line items because the PO’s/invoices often have no description of services being procured. To resolve this issue, buyers should be trained on how to provide adequate information for every PO, at the time it is created in the ERP system. We implemented this for one of our clients and within a month, our spend classification accuracy improved more than 60%.

We took this to the next level by training the buyers to capture the contract information associated with each purchase. Since every PO is tied to a contract, all that they have to do is register the contract number with every purchase and we can keep track of spend levels associated with each contract in real time. There are many benefits from this exercise. This improved spend visibility and helped us in improving supplier risk management. When the contract data is pulled up along with expiry dates, spend data and other details, it feeds into our opportunity assessment for strategic sourcing.

2)     We often find ourselves in scenarios where timeframe for sourcing and contracting is inadequate. It is here that collaboration between sourcing and contracting groups can help. The sourcing team can send out contract template as a part of the RFP and the contract terms can be negotiated along with the final pricing. Sourcing and contract management tools, if integrated as part of a single procurement platform, can help expedite the process further. Sourcing and contracting teams can also take a holistic view of negotiations rather than working in silos first on price and then on other T&Cs.

3)     The responsibility of supplier management and compliance tracking rests with the sourcing and category management team. However, the P2P team can be of immense help in this activity. A process can be set up where buyers have access to contract information and can flag maverick spend, supplier non-compliance etc., thereby playing a role in supplier performance management. The cases of non-compliance can lead to identification of new opportunities for the sourcing team. Similarly, the spend analytics team can flag trends in recurring spend items and draw the attention of the sourcing and category management team to potential areas of opportunity.

Collaboration across the various teams within procurement is the key to achieving synergies similar to the ones mentioned above. Process improvement across work streams requires significant changes and change management is one of the toughest things. Technology can be a key enabler for driving collaboration across various teams within procurement. External partners with significant experience in procurement transformation can be of immense help. In conclusion, it’s not going to be easy – but it will be worth it!

For more interesting thinking on procurement, visit the GEP Knowledge Bank.

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