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Digital Procurement balances business requirements to improve efficiencies 

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tail spend

Coordinating the various needs of a business is a challenge, for small and large organizations alike. Whether you’re looking to improve your processes or meet projected targets, ensuring everyone in your business has what they need to function optimally can take up precious time and resources that hinder opportunities for more strategic projects and talent development.

Empowering teams to own their procurement processes through digital purchasing systems improves efficiencies while maintaining staff independence. By ensuring everyone in the organization has the items they need without inundating the procurement team with purchase requests, operational requirements are balanced in a way that improves business function and helps achieves goals.

Procurement teams need to go through internal processes of implementing digital change, while still streamlining processes to secure the resources and financial wellbeing for the broader organization. One way to do this is through online procurement, which provides substantial benefits that shouldn’t be overlooked. Following are a few tips on how using a centralized procurement function can improve your business.

1.  Better tail spend management

Tail spend purchases, like office supplies and IT equipment, can add up quickly and hinder the productivity of procurement teams through repetitive and time-consuming purchases. For organizations with a broad base of multiple suppliers, it can become a challenge for Procurement to keep up with what is being spent and where these purchases are being made. Unchecked, the procurement team can waste significant time locating these purchases, which are often bought at higher prices for the sake of convenience and the time it would take to source better deals.

But it’s important that staff feel trusted to make purchasing decisions for their own departments. They want to buy supplies as they need them, rather than asking Procurement for approval at each and every step. For example, teachers are best equipped to know which supplies are right for their classes, but equally the procurement team needs to know employees are achieving best value for the organization.

This can be solved by buying all tail spend items online, through a central transparent and efficient program. Olivia Rowling, founder of the Butterfly Patch Nursery group, did exactly this. Previously, her business’s procurement model used multiple suppliers, spending up to £20,000 to equip each facility with its requirements. However, by shifting to an online procurement method, the cost of each nursery was driven down by 60%.

This online shift was the key factor that helped her team save hours in planning and administration. Managers are able to easily add what they need to an online basket before their orders are approved and processed by a central decision-maker. The ease of this process has allowed her team to place more focus on other organizational goals and Olivia now sees digital procurement as the useful aid that has put her on track to launch 300 nurseries within the next three years.

2.  Efficient price comparison for compliant buying

Organizations managed by strict overarching policies will find online procurement especially relevant because it provides the best possible value when making purchases. Rob Owens, Chief Operating Officer of Stephenson Multi-Academy Trust (MAT), is guided by governmental requirements and under MAT rules, a purchase’s price and quality needs to be compared between three separate suppliers. Recalling how his finance team sometimes places hundreds of orders, Owens found the process of seeking and quality-checking different suppliers quite cumbersome.

By moving to online purchasing, Rob’s team could easily and quickly compare suppliers’ prices and quality, satisfying the Trust’s procurement rules and saving a huge amount of time and resources. Not only were they able to secure cheaper prices than they were getting previously, but the time invested in procurement was massively reduced, giving the procurement team more time to explore interesting new projects. MAT staff felt satisfied and excited by the prospect of reducing laborious paperwork and using that time to focus on new ways to develop the MAT’s provision to students.

This shift to online procurement generates positive indirect benefits for the teaching staff because the less time teachers spend procuring, the more they are able to focus on their core function. Additionally, any savings teaching staff make leaves more in their budget, allowing them to buy more for their departments and consequently, provide an abundance of quality resources for the students. The ability to compare a vast selection of suppliers creates a competitive market that is a huge advantage to any organization. In fact, business customers have reported a 94% competitive selection parity, which can reduce prices by up to 70%.

The team can receive a VAT receipt through Amazon Business, so they can claim back the VAT as an exempt organization. Rob calls this a ‘massive plus,’ adding that the effective and efficient level of compliance is hard to find elsewhere.

3.  Decentralize the procurement process

With the right features that allow CPOs and procurement officers to balance the time and cost savings with the requirements of the wider team, online procurement offers many clear benefits. It is often practical for wider parts of an organization to have purchasing powers, so they can order individual items, rather than making requests to the procurement team every time they need to buy a printer paper or a box of pens. This has obvious time-saving advantages for the procurement team, but it can rapidly become complicated and difficult to track.

The UK’s University of Leicester employs 4,000 people, over 100 of whom have purchase cards. The lack of a digitized procurement system, coupled with the relatively large number of staff with purchasing responsibilities, made it difficult for the procurement team to track expenditure across the institution as a whole.

Anthony Midgley, Category Manager and Procurement Systems Lead at the university, found it extremely useful how modernizing his business’s procurement process made spend immediately visible. Midgley was able to see what was ordered with the system, in real time, eliminating the need to chase records at the end of the month. He could use his time more wisely, which meant he could ensure the university procurement function ran as smoothly as possible.

Another advantage of decentralized procurement is the ability for the CPO to set up each office and branch in the online shop with their own name and billing address. Because the same invoice number and payment terms are defined across all orders, expenses are quickly and easily consolidated - improving purchasing efficiency. In fact, business customers have determined a 13% average cost saving when procuring online, as opposed to manual procurement processes.

Above improved accuracy and granularity, this feature helps provide greater control and visibility, giving CPOs a reliable overview of tail spend and related expenses, without having to micro-manage every purchase of office supplies. CPOs will have access to a wealth of new data that allows them to make sound recommendations and demonstrate value to internal stakeholders. At the same time, employees with purchasing responsibilities have the freedom to purchase items as they need them, demonstrating trust and building strong working relationships between Procurement and the wider organization.

Online procurement helps solve organizational challenges 

While the rewards of shifting to digital are clearly substantial, there are still barriers to change – the biggest hurdles being budget management, and balancing organizational urgency with the introduction of new technologies. Online procurement, unmistakably, plays a vital role in solving these challenges – offering indirect and direct benefits to every element of the business, such as staff, finance and customers.

Digitizing procurement gives CPOs a strategic advantage by providing all the information they need to help them future-proof their procurement process while ensuring continued growth and a competitive edge. For the Butterfly Patch Nursery, the University of Leicester and Stephenson MAT, a digital purchasing process has been instrumental in helping Procurement to move these organizations forward.

 

 

 

 

 

 

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