Achieving Best-in-Class
Procurement

by Alex Saric

In my last post, I discussed how to successfully launch a digital Procurement transformation. A strong start is critical, but it’s just a start. The true potential value of effective digital transformation requires rapid progress, addressing more processes, more spend and more suppliers. Organizations are naturally eager to achieve best-in-class performance, yet most find themselves stuck somewhere along the way, with low to moderate levels of digitization, spend under management, access to data, etc. Why do so many Procurement organizations struggle to make progress? In this post, I’ll look at the key challenges and how to accelerate your journey to best-in-class Procurement. 

Serve Your Customers Well

A recent Forrester survey on Executing a Successful Procurement Transformation looked at the top challenges to Procurement transformation at each stage of transformation. For those at an intermediate stage, striving to achieve best-in-class, there was a fairly common set of roadblocks impeding progress. Beginners and advanced organizations faced a blend of issues reflecting a mix of people and technology, but for those midway in their journey it was a really a matter of technology.

User adoption of technology was near the top of the list, in second place. That is unlikely to surprise most readers, but I feel too many don’t properly consider what really drives user adoption of procurement technology, resulting in poor decisions that come back to haunt them. The obvious factor is the intuitiveness of the software interface. This is what we naturally think of when comparing consumer sites – how easy they are to navigate. This is certainly an important criteria to consider. But this is just one of several. And leading technology providers have for the most part made huge strides in recent years so several now perform well on this measure. And organizations increasingly plan roll-outs well, with user input and support.

What really drives user adoption is not just knowing where to click, but being able to find what you need. Content is king. It’s what really makes Amazon and other consumer sites so useful and heavily adopted. The same applies to user adoption of spend management software. If you are assessing suppliers or analysing spend, is the information available accurate and easily accessible? If you are making a requisition, can you find everything you are looking for, have accurate availability and pricing information and compare options easily?

This is where the details really matter, and a deeper assessment is required. It is also where true differentiation today lies and why certain vendors consistently maintain high customer retention and others struggle, despite looking similar on the surface. One important criteria is whether a unified data model underpins the technology, where information from all processes seamlessly links means you can pull accurate information at any point, such as that required to build a supplier 360. It also means new innovations, especially those leveraging AI such as digital assistants, can derive more accurate insights. Unsurprisingly, the 3rd most common obstacle was inaccurate or hard to access spend data.

When it comes to the P2P process, a couple factors are especially important to consider. First, can products be easily compared side by side in the interface (versus having to punch out to specific vendor sites, disrupting the experience and losing the ability to compare products from different suppliers easily)? The second criteria is directly related to the top overall obstacle to digital transformation, especially critical to companies progressing towards best-in-class – supplier onboarding.

Think Beyond Your 4 Walls

It is natural to focus internally, at one’s direct needs, when evaluating technology. But with organizations increasingly dependent on suppliers, our faiths are more intertwined than ever. If suppliers are not onboarded, users can’t find their products to requisition. No slick interface can fix that. Nor can supplier-provided information be automatically combined with 3rd party and internal performance data to build a complete view. Nor can users collaborate effectively with suppliers on product or service innovations. If suppliers are not onboarded, digitization efforts and all the efficiency and other benefits thereof will never materialize. Procurement and AP will continue manually matching Invoices to POs to contracts, dealing with exceptions, paper and all the headaches that tie up capacity from more strategic activities. Spend under management will remain low. Say goodbye to your dreams of achieving best-in-class procurement.

If its that important, why aren’t organizations better evaluating the ability of different technologies to onboard suppliers? The primary reason is that many factors are thrown around in the market as driving rapid and effective supplier onboarding. It can be hard to understand what really drives onboarding for those that lack experience with different approaches. Some common arguments are that larger networks or vendors that already onboarded many of your suppliers for other customers mean better onboarding. These arguments sound logical but really don’t have much impact as suppliers typically have to conduct some level of onboarding for each customer due to different addresses, catalogues, processes involved, etc.

What really drives rapid and high levels of supplier onboarding is simplicity. No fees, no limits to activity, no vendor conditions to accept and a simple way to connect with flexible options that meet supplier preferences. Nothing that creates concern, a need to check with legal or a desire to call you to complain or ask questions. This approach has led to 99% of suppliers (by count – don’t be tricked by spend metrics that leave a long tail of manual transactions) being onboarded at companies such as CACI (>40,000 onboarded), Credit Agricole (>60,000 onboarded), Fannie Mae (>70,000 onboarded) and many others. Companies like Maxim Healthcare that tried different approaches prove this out.

There are certainly many other factors to consider to ensure the technology you choose does not become an obstacle to achieving best-in-class procurement. But by avoiding the most common pitfalls, you will have a significant advantage over your competitors and peers. In my 3rd and final post on driving a successful procurement digital transformation, I’ll discuss how some leaders are progressing beyond best-in-class, to build a true competitive advantage. For an objective assessment of how mature your procurement organization is, plus specific tips on how you can accelerate the next stage of your journey, take the free Forrester Self Assessment.