The Importance of Due Diligence

Spend Matters welcomes this guest post by Apurva Malewar of GEP.

Emerging demands on leveraging cost-effective and efficient business solutions is not a new one. Sourcing and procurement groups have developed many successful sourcing strategies to identify cost savings, however, when it comes to realizing them, their strategies sometimes fall short. Effective use of technology to track savings compliance and realization, combined with process re-engineering where required, strong SRM program with 3600 feedback, collaboration and innovation are needed too. In this article, I will be sharing my experience of the impact an effective tool can bring to sourcing effectiveness.

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There are various sourcing and spend related tools currently in the market that help leverage consulting services for various organizations. Technology today has come a long way since the MRP days over 3 decades ago. If leveraged correctly, it saves time, creates transparency, manages workflows, helps with reporting and is considered the best one-stop shop for various categories that can integrate multiple departments or internal functions and vendors.

During my experience as a procurement consultant, I worked with one of the largest pharmaceutical giants in North America that had taken up this exercise a few months prior to me engaging with it. The company’s main focus was to find a common technology platform where it could conduct its sourcing, spend analysis and contract management activities. The company wanted a diverse multifunctional tool that helped integrate various domains in order to churn out a summarized overview of all its categories across various functions. The objective was to leverage technology across various domains and obtain substantial savings across its direct and indirect categories. It was crucial for the company to have technology tools that can help leverage various initiatives and projects through evaluating client needs. However, to achieve the intended outcome, a strategic road map was necessary in order to help migrate technology and interface it with client related data. Also integrating category related client data and mapping it’s spend data across categories plays a huge role. This did not happen, and the tool was implemented to low adoption and causing the client to lose direction rather than work toward a common goal utilizing best practices.

Most technology platforms available today help enhance sourcing and category best practices, including having an excellent reporting structure, working on multiple categories at the same time, leveraging suppliers during the bid process, managing scorecards to assist SRM and distribution of tasks among team, etc. The technology has the potential to evolve to being a one-stop shop for anything and everything related to sourcing. Having said that, technology by itself cannot get there or deliver the right results. The right mix of technology and consulting services working in tandem is what creates a huge positive impact, developing credibility and expertise across. Ask any sourcing and category managers where this technology implementation yielded results – their response will highlight the importance of having the right technology, however, they will attribute the success to a thorough due diligence and ongoing efforts toward maintaining adoption rates high.

Due diligence is not just about technology implementation – it draws out the interplay between various processes and procedures of the company and ensures the new technology supports and augments those processes. It is important for me to understand the “what?” getting the right supplier profiles, maintaining a scorecard of existing suppliers and tracking supplier risk, tracking the progress of the projects, ensuring that we have a smooth work flow, ensuring that specific tasks are being carried out and delivery channels are on time, ensuring that the technology at our end is capable across a broad range of sourcing activities, tracking down issues and road blocks and obtaining a timeline to have them resolved. A thorough due diligence covers all these aspects.

Back to my client, we first started by improving spend data accuracy and that the categories did not have to be re-structured. We developed a savings tracking mechanism to report progress and compliance and demonstrated the ROI of well-executed projects to boost adoption. In short order, we started reversing the initial trends and saw improved usage of technology and higher savings flow in.

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