7 Secrets for Successful e-Procurement 7 SECRETS … · e-procurement work for your business 7 ... eBook 7 Secrets for Successful e-Procurement CONTENTS Executive summary Secret

eBook7 Secrets for Successful e-Procurement

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A ‘how-to’ guide for making e-procurement work for your business

7 SECRETS FOR SUCCESSFUL E-PROCUREMENT

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CONTENTS

Executive summary

Secret #1: Know your stakeholders

Secret #2: Be clear about what you want

Secret #3: Accept no compromises

Secret #4: Set quantifiable objectives

Secret #5: Get process-wise

Secret #6: Start small and build from there

Secret #7: Keep improving

Summary


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All companies want to gain effective control of how much – and with whom – they spend. To do this, they need to establish robust internal controls, enforce contract compliance and reduce maverick spending across their organization. The best solution for most companies is to deploy a dedicated e-procurement solution for indirect procurement.

However, too many companies who implement procurement software only see a fraction of the benefits they expect. They find that while their e-procurement solution is capable of providing all these benefits (and more), other factors come into play that affect its overall value. This is because e-procurement is just a part of the overall purchase-to-pay (P2P) process – and as such must be understood within a wider business context. Earlier e-procurement and accounts payable automation solutions were considered in isolation, but increasingly both aspects are planned at once to have full visibility and control across the P2P process.

Many companies make the mistake of looking at e-procurement solely as an IT led technology solution to be bolted onto their legacy ERP solution. This means they spend too little time focusing on evaluating how their business processes and end-user experience should evolve. While technology is important, it should not be the main focus but rather be seen as a vehicle to serve business needs.

In many ways it is better to view e-procurement primarily as a corporate change program. Doing so means that you will naturally focus on people and processes first, and technology second. In our experience, this is absolutely fundamental if you are to experience the full benefits of e-procurement.

POTENTIAL BENEFITS OF E-PROCUREMENT:

• Greater spend visibility

• Easier cost control

• Improved contract compliance

• Lower total spend

• Higher accountability

• Easier supplier collaboration

• Greater discount capture

• Improvements across the purchase-to-pay process

EXECUTIVE SUMMARY



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Basware has worked with thousands of organizations across all major markets and industries over the past 30 years. This has taught us what works (and what doesn’t) when implementing e-procurement within today’s businesses. While there isn’t room to convey all that knowledge in a single ebook, we have distilled the critical success factors we see every day into 7 Secrets for Successful e-Procurement.

1. Know your stakeholders

2. Build vision statement

3. Plan scope & resources

4. Set objectives

5. Get process-wise

6. Start small and grow

7. Keep improving

In the following pages, we’ll look at each of these critical success factors, and show how you can ensure that your e-procurement program delivers the benefits you need to support your organization’s success.

7 SECRETS FOR SUCCESSFUL E-PROCUREMENT

1. Know your stakeholders and their spend profiles

2. Build a vision statement to be clear what you want

3. Accept no compromises (in scope and resourcing)

4. Set quantifiable objectives to measure success

5. Get process-wise with all functions involved

6. Start small and build from there

7. Keep measuring and improving



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Any e-procurement program will touch many different departments across an organization. As such there will be numerous internal stakeholders who have an interest in how it is implemented and what it will mean for their department’s spend profile.

Ensuring a successful outcome means understanding these different groups and their spend profiles – not just who they are but what they do, how they do it, the challenges they face, and how they work with others. By doing so, you can help them understand how modernizing your procurement system will help give them the information they need to make better purchasing decisions.

Spend profiles are also very different in various industries. Manufacturing businesses have commonly focused on raw materials and production goods as their largest spend. Thus, their e-procurement initiatives have tended to focus on managing large purchasing volumes and inventory levels instead of the end-user experience for those buying everything else the organization needs. On the other hand, service businesses see indirect procurement as their largest spend. Regardless of the industry,

modern e-procurement systems help organi-zations cover the widest possible spectrum of spend profiles. This also means manufacturing businesses should be prepared to include people across their organization within the scope of e-procurement initiatives.

Remember, at its core, this is a change management exercise. While theoretically everyone can agree what this will mean, in our experience its implications will often be overlooked in real life situations. We regularly observe those managing even quite sophis-ticated e-procurement programs stop at simply knowing who the other stakeholders are. It doesn’t occur to them to reach out to these people, make the case for change and get their input. Or if they do, this is a one-time event and the next thing these stakeholders see is the final system being rolled out.

You will be much better equipped to understand the needs of different stakeholders if you already have corporate-wide visibility into all spend categories, and key suppliers in each category. This makes it easier to prepare each division, plus some of their key suppliers, for the change.

KNOW YOUR STAKEHOLDERS

Secret #1



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What’s your vision for e-procurement? To some, that might sound a little grand. But having a vision of sorts and writing it down is a critical success factor for almost any change program.

We see significant differences between those organizations who can clearly articulate their vision for e-procurement and those who cannot. Most significantly, those with an articulated vision are far more capable of building a spirit of consensus among stakeholders. They find it easier to rally support when they need to, and they more often succeed in aligning the expectations of often disparate groups.

This is not to over-complicate the issue. Your vision statement does not have to be complex or long-winded. In fact, shorter is almost always better. Think in terms of a single paragraph expressing the scope of the project, together with the expected benefits it will deliver to the business. Importantly, look to incorporate elements that will benefit from the program that are outside the procurement department and collaboration with finance. This will allow other stakeholders to relate to – and support – your approach.

We cannot over-emphasize the importance of this step. A properly crafted vision statement will pay dividends throughout your program. It will help you make sound decisions, keep you focused on what’s important, and help resolve conflicts.

So, for example, your e-procurement vision statement might look something like the following:

“This program will deliver measurable value to our company by rolling out best practice e-procurement and by supporting the purchase-to-pay process. It will improve visibility, control and collaboration across our organization and our supply base. In particular, it will help divisions of our company to reduce overhead and maximize return on spend and investment. We will achieve this by aligning the resources and processes of our suppliers, Procurement, Finance and the lines of business.”

Importantly, the vision isn’t just valuable at the outset of your e-procurement project. As a foundation for what comes next, it will be instrumental throughout the process.

BE CLEAR ABOUT WHAT YOU WANT

Secret #2

QUESTIONS YOUR VISION SHOULD ANSWER

• Can we make the move in stages or must it be

all or nothing?

• Are we delivering the greatest value to the

business?

• Do we have the involvement of the right

stakeholders?

• What should the program cover? “What should

the program cover, and what things are not

within scope?”

Having a well-articulated vision gives you something tangible and objective against which you can judge your actions.

“ HUNGARIAN RAIL, THE HUNGARIAN NATIONAL RAILWAY COMPANY, HAD A VISION OF TRANSFORMING ITS PROCUREMENT AND ACCOUNTS PAYABLE OPERATIONS INTO A COMPLETE, END-TO-END AUTOMATED PROCESS. USING BASWARE’S PURCHASE-TO-PAY SOLUTION, THE ORGANIZATION HAS IMPROVED ITS FINANCE AND PROCUREMENT PROCESSES, THUS GIVING IT THE CRITICAL TRANSPARENCY, CONTROL AND PRODUCTIVITY IT NEEDS.”




Once you have a vision (see Secret 2) the hard work begins. You will need adequate resources if you are to succeed, and should be prepared to make your case for why you require them. In the long term, an under-resourced project is likely to cost more and deliver less, so now is the time to get this right.

There are four basic elements to any project of this kind: people, time, money and scope. These are, of course, all interrelated – a deficit in one area will necessarily impact the others. Successful e-procurement projects are ones in which managers carefully balance these elements – treating them as parts of the whole.

Anyone trained in project management understands the need to balance the first three: people, time and money. But, from our experience, it is the fourth element – scope – which has the greatest effect on the success or failure of these projects. Managing scope should be the first and last task for any manager in charge an e-procurement program.

The number one threat to any project this complex is “scope creep”. This is the tendency for even a well-specified project to gradually expand to include additional elements outside the original plan. The result is that deadlines are missed, costs steadily rise and the project becomes increasingly politicized.

“ WE WANT OUR EMPLOYEES TO HAVE A POSITIVE ATTITUDE TOWARDS THE E-PROCUREMENT SYSTEM, SO IMPLEMENTATION HAS BEEN CARRIED OUT IN COOPERATION WITH THE USERS.”

Ismo Karjalainen, Procurement Director, Finavia

ACCEPT NO COMPROMISES

Secret #3

(in scope and resourcing)

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In order to help you avoid scope creep, consider the following practical tips we’ve learned from well executed e-procurement programs around the world:

TIPS FOR AVOIDING SCOPE CREEP

1. Articulate your vision: Make sure you’ve agreed on a vision for the project and ensure that relevant stakeholders understand it (both what it covers and what it doesn’t).

2. Be clear about the priorities: List them and make sure your other team members know them too. Review them regularly to help stay on track.

3. Get key stakeholder commitment: Get key stakeholders and company leadership to sign off on the vision, goals and deliverables.

4. Examine your current processes: Before implementing an e-procurement solution, make sure you have critically examined your current processes. Don’t be afraid of change or of re-engineering processes to leverage best-practices. Take advantage of purchase-to-pay process expertise offered by vendors to give insights into your company’s current practices instead of simply accepting the existing process as-is.

5. Minimize creep: Project creep happens – the challenge is to minimize it. Conduct cost-benefit analyses for requested changes as a way of determining whether they are really worthwhile – and get the sign off from project leaders (and preferably general management) before diverging from the project’s original scope to please any single stakeholder.

6. Start small and expand: Consider starting with a single location or division as a test bed. Invite a limited number of key suppliers to participate. Then, use this template to roll out the solution to other divisions and countries.

Finally, a few words about people. It’s great when you get volunteers stepping up to help at the beginning of an e-procurement program. However, from our experience of hundreds of such projects, unless their time is 100% dedicated to the program, you should count these people as a zero-percent resource. The simple day-to-day realities of business mean that other pressures will all too quickly pull them away.

The lesson here is that you must resource your project properly. You must ensure that enough of the right people from selected divisions are fully allocated to your e-procurement rollout project. Otherwise, your resources are likely to disappear just when you most need them.


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How will you know when you’ve succeeded in your e-procurement program? Certainly there will be a range of benefits. But unless you can put hard numbers against them, they will remain little better than subjective opinions.

As with any worthwhile business endeavor, the objectives you set for your e-procurement program should be measurable, quantifiable and time-specific. Admittedly this can present a challenge. It can be difficult to establish an effective baseline against which you can judge the program’s success. But all is not lost.

Software vendors, industry analysts, independent consultants and academics have all produced publicly accessible data on this topic. (Our own model can also help – see below.) It will all help you build a reasonably accurate baseline scenario. Such data offers a foundation on which you can develop program objectives that are ambitious yet achievable.

Also, it pays to look for data sources across departments within your business — for example you may well find data collected by the invoice processing solution yields productive insights into your corporation’s spending patterns.

SET QUANTIFIABLE OBJECTIVES

Secret #4

“ WE NOW HAVE A UNIFORM PURCHASING METHOD THROUGHOUT THE GROUP. THE NUMBER OF SUPPLIERS HAS DECREASED CONSIDERABLY: FROM 8,627 IN 2008 TO 3,492 IN 2013.”

Ismo Karjalainen, Procurement Director, Finavia



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Here are examples of tangible, measurable key performance indicators (KPIs) that organizations we work with are improving through e-procurement and a more holistic approach to purchase-to-pay:

PURCHASE TO PAY KPIs

• Number of suppliers: As part of leveraging spend analytics and e-procurement to reduce maverick spend and increasing user adoption you will direct more spend to fewer suppliers. This places you in a position to negotiate better terms with those suppliers.

• Maverick spend performance: The goal for buying all frequently purchased goods and services should be self-service using catalogs or forms negotiated with preferred suppliers. An automated select-and-submit approach for the purchase of indirect goods and services makes life easier for everyone. As more orders go through your e-procurement system, the time needed to approve invoices will be reduced.

• Requisition-to-order cycle time: As part of tackling maverick spend and driving user acceptance, you should already think about a service level. Buying something with legacy systems may take weeks to fulfill and that is not something people are willing to wait for – making them prone to go maverick. Today’s online shoppers are used to quick delivery and expect the same at work as well.

• Early pay discounts captured: This goal might not be the most obvious target for e-procurement programs, but by working with Accounts Payable (AP) to get suppliers paid faster, AP can take advantage of suppliers’ early payment discounts. This represents true cooperation across AP and Procurement where the whole P2P process is optimized.

“ WE SYSTEMATICALLY GO AFTER ACHIEVING EARLY-PAY DISCOUNTS. IN THE PAST, WE CAPTURED ABOUT 50% OF ALL EARLY-PAY DISCOUNTS THAT WERE AVAILABLE TO US; WITH BASWARE, WE WERE ABLE TO PUSH IT TO 95%.”

Manager, finance at a large manufacturing company 1)

1) The Total Economic Impact™ of Basware’s Integrated Purchase-to-Pay (P2P) Software Solution (September 2015). A commissioned study conducted by Forrester Consulting on behalf of Basware.



http://www.basware.com/knowledge-center/accounts-payable-procurement-purchase-to-pay-e-invoicing-Forrester-TEI-ROI-study



As a procurement professional, you know all about the processes that underpin your profession. You may of course also have processes that are unique regarding how procurement works in your organization. But if you are to maximize the value of your e-procurement initiative, you’ll need to go further.

We have already discussed the importance of understanding the hopes, fears and motivations of your stakeholders before you start your project. Now, as the program begins to gain momentum, it’s time to go deeper. No process is an island. In today’s businesses different departments’ processes constantly intertwine. Changes to one area inevitably affect other areas.

That’s why it is important that you spend time educating yourself and your team about the inner workings and goals of all the functions involved across the P2P process. Finance, of course, is a prime example. A significant percentage of the value you can achieve comes from optimizing the entire P2P process. For this, you may leverage the help of an external expert who can analyze your accounts payable and procurement processes, and help you leverage best-practices.

In their latest survey Purchase to Pay Today (APN) reports that 63% of respondents from companies interviewed answered that their Accounts Payable and Procurement departments worked closely together, and 19% have the ambition to become one unified Purchase- to-Pay department. This is a clear indication of the importance organizations are placing on a more collaborative way of working.1)

Institute of Finance and Management (IOFM) also reported that the level of coordi-nation between accounts payable and procurement will increase as finance executives dismantle the silos separating finance, procurement and treasury – and adopt automation solutions, e-invoicing and open commerce networks to work smarter.2)

1) Accounts Payable Survey 2015 prepared by Purchase to Pay Today (APN®)2) An IOFM white paper: 9 Trends that will Transform Purchase-to-Pay in 20153) The Total Economic Impact™ of Basware’s Integrated Purchase-to-Pay (P2P) Software Solution (September 2015). A commissioned study conducted by Forrester Consulting on behalf of Basware.

“ OUR DEPARTMENT HEADS USED TO HAVE TO PROVIDE AUTHORIZATION TWICE: ONCE TO AUTHORIZE A PURCHASE, AND LATER TO AUTHORIZE THE INVOICE AFTER DELIVERY WAS MADE. THAT’S TWICE AS MUCH WORK. WHAT WE WANTED WAS A SOLUTION THAT LETS DEPARTMENT HEADS DEAL WITH PURCHASES JUST ONCE. WITH OUR PURCHASING SYSTEM FROM BASWARE, THE EMPLOYEE CREATES A PURCHASE REQUISITION AND GETS IT APPROVED BY THEIR DEPARTMENT HEAD. BY THE TIME THE INVOICE ARRIVES, IT’S ALREADY APPROVED AND CAN BE SENT FOR PAYMENT AUTOMATICALLY – ASSUMING THE DELIVERABLE IS AS AGREED. THAT HALVES THE WORK OF TWO PEOPLE.”

“ IN THE PAST, WE HAD A LOT OF UNPRODUCTIVE DISCUSSIONS BETWEEN THE ACCOUNTS PAYABLE AND THE PROCUREMENT TEAMS. THEY NOW WORK TOGETHER MUCH MORE CLOSELY AND HAVE A BETTER UNDERSTANDING OF EACH OTHER’S PROCESSES. THE WHOLE ATMOSPHERE IMPROVED.”

Rune Pind Nielsen, Accounts Payable Manager, Atea

Manager, finance at a large manufacturing company 3)

GET PROCESS-WISE

Secret #5



http://www.basware.co.uk/knowledge-center/accounts-payable-survey-uk-2015




1) The Total Economic Impact™ of Basware’s Integrated Purchase-to-Pay (P2P) Software Solution (September 2015). A commissioned study conducted by Forrester Consulting on behalf of Basware.

Today’s cloud-based solutions and supplier networks make it easier to start small and build from there. Consider starting your e-procurement program with a single location or division. Invite a limited number of key suppliers to participate. Then, use the template for rolling out the solution to other divisions and countries.

Make sure your supplier activation program for the initial launch and beyond is designed to increase coverage. Choosing a well-established supplier network makes it easier to get more suppliers connected with your processes, since many of them are likely already part of the leading networks.

So you’ve planned the systems you will use. You’ve got buy-in from other stakeholders. And you’ve aligned processes. You’re good to go, right?

All too often we encounter multinational companies who expect a global roll-out all at once. Everything may look perfect on paper, especially from headquarters’ perspective. The project leaders may have done an amazing job of managing both the people that matter and the scope of the project. But until the new e-procurement system launches, there is no certainty that you’ll have thought of everything every stakeholder in each country needs. Your chosen e-procurement vendor should be able to help.

One thing we recommend to every company we partner with is to devote enough time and resources. Start with a single location or division, and test every component with end users (not just those people who were involved in specifying and implementing the program). See how well it integrates with other systems (e.g. ERP) and departments. Run some scenarios to mimic common (and not so common) situations you will face.

Of course, you cannot test your e-procurement solution unless you have set up relevant products for people to buy. Don’t expect huge adoption of e-procurement if your roll-out offers only empty shelves. Hence, you should include a few key suppliers in the initial roll-out.

It is of course far easier (and better) to fix things before you do the full roll-out. Whether the hiccups are technical – for example process-driven – or simply a case of requiring more training, now is the time to get it right.

Importantly, the initial roll-out, though limited in scope, is a serious exercise requiring dedicated resources and a clear commitment from everyone involved. As such, the initial roll-out should have its own KPIs that are monitored closely to assess what’s working and what needs further attention.

“ IN SHORT, COSTS HAVE BEEN REDUCED, AND EFFICIENCY HAS GONE THROUGH THE ROOF!”

“ WE CAN NOW FINALLY SEE — ON A NATIONWIDE LEVEL — WHICH ACTUAL SUPPLIERS WE USE AND HOW MUCH WE USE THEM. WE CAN USE THESE INSIGHTS TO BETTER NEGOTIATE WITH EXISTING SUPPLIERS AND EVEN CONTRACT WITH SUPPLIERS IN AREAS WHERE WE PREVIOUSLY DIDN’T HAVE ANY ARRANGEMENTS.”

Stéphanie van der Stelt, Manager Finance Accounting & Control, Bilderberg

Development manager at a large property management company 1)

START SMALL AND BUILD FROM THERE

Secret #6






It is easy to think that once your e-procurement system goes live, the job is essentially over.

The reality, however, is quite different. To realize the full benefits of your new program you’ll need to continue to work with your stakeholders. Just as e-commerce sites are continuously monitoring and improving their sites to refine the products available and suppliers they use to better serve their customer needs, you should be too.

Communication is essential to long-term success. You should be asking:

QUESTIONS TO ASK TO ENSURE CONTINUOUS IMPROVEMENT

• Is the adoption level rising? If not, why not?

• Is most of your spend going through your system?

• Are your end-users getting their orders fulfilled quickly enough?

• Do you have the necessary visibility into key aspects of the process?

• Is the number of electronically connected suppliers increasing?

• Is it well integrated with other relevant processes, or is more work

needed?

• Is it delivering against the objectives you set out in the original vision?

• Do you have the metrics to prove it?

Fundamentally, this involves periodically checking that you are fulfilling the objectives of your original vision statement, albeit at a more detailed level. Compare the situation before and after implementing the new solution.

Are you seeing the improvements you expected? Are the benefits increasing over time? Is the e-procurement system helping stakeholders meet their own business objectives and spend visibility giving them the insights they need to support their decision making. By asking these questions and actively listening to stakeholders’ evolving requirements, you can improve your understanding of company-wide spend, identify process bottlenecks and deliver greater benefits to all parties.

Based on the feedback, fix anything that needs fixing before it becomes an insurmountable problem. This feedback will also help identify skills gaps that can be filled with training. Finally, it will enable you to fine tune your approach over time to achieve greater value. At this point an external process expert can add value by working with you to define a development roadmap.

The companies we see thriving with their e-procurement initiatives view them as an ongoing, living process. They are constantly monitoring performance and making incremental improvements. Those with real-time process and performance analytics are better equipped to act proactively even before they start getting negative feedback. And they never forget the human aspect in everything they do.

“ NO ONE WANTS TO DO MANUAL PROCESSING HERE ANYMORE – THEY ARE USED TO THE BASWARE SOLUTION TAKING CARE OF IT AUTOMATICALLY.”

Kyösti Bergdah, Development Manager, DNA

KEEP IMPROVING

Secret #7




Every business is different. Each has its own unique set of challenges, its own individual culture, geographic scope and spend patterns. But of the hundreds of successful e-procurement programs we’ve been involved in, those companies that have seen the greatest value and had the smoothest implementations have almost always followed the 7 secrets set out in this guide.

They have seen the benefits we outlined at the beginning:

• Greater spend visibility

• Easier cost control

• Improved contract compliance

• Lower total spend

• Higher accountability

• Easier supplier collaboration

• Greater discount capture

• Improvements across purchase-to-pay process

Get started with your e-procurement program (or simply get more information) by contacting us: www.basware.com.

“ THANKS TO THE BASWARE SOLUTION, WE’VE BEEN ABLE TO IMPLEMENT A NEW CULTURE THAT IS FOCUSED ON PROCUREMENT AS A STRATEGIC PROCESS. NOW, STRATEGIC PLANNING FOR PURCHASES BEGINS AT THE REQUISITION STAGE, INSTEAD OF AS A REACTION TO RECEIVING THE BILL. IT ELEVATES OUR OPERATIONS TO A WHOLE NEW LEVEL.”

“ A PURCHASING SYSTEM THAT SUPPORTS DECENTRALIZED PURCHASING HAS IMPROVED OUR PROCESSES IN MANY WAYS, NOT JUST IN PURCHASING.”

Zoltán Werle, Corporate Services Director, Hungarian Rail

Rune Pind Nielsen, Accounts Payable Manager, Atea

In the final analysis, the secret to an effective e-procurement program comes down to knowing what you and others want, implementing the solution that matches these needs, and then committing the time and resources required for proper roll-out and continuous development.

SUMMARY




ABOUT BASWARE Basware is the global leader in providing networked purchase-to-pay solutions, e-invoicing and innovative financing services. Basware’s commerce and financing network connects businesses around the globe. As the largest open business network in the world, Basware provides scale and reach for organizations of all sizes, enabling them to grow their business and unlock value across their operations by simplifying and streamlining financial processes. Small and large companies around the world achieve significant cost savings, more flexible payment terms, greater efficiencies and closer relationships with their suppliers.

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7 Secrets for Successful e-Procurement 7 SECRETS … · e-procurement work for your business 7 ... eBook 7 Secrets for Successful e-Procurement CONTENTS Executive summary Secret