Changing views of eProcurement from Expense to Investment

Changing views of eProcurement from Expense to Investment

By Katalin Brennan

At this point it is well established that eProcurement has many immediate benefits.

Our recent blog on the ROI calculator showed a simple example of how to justify buying a procurement solution can make sense even for a short-term.  In this blog we will contrast the radical difference between tactical and strategic views when selecting an eProcurement platform.

Expense (tactical) View – highlights from our ROI calculator blog

Direct cost savings due to the eprocurement system capabilities

– single data entry, catalog and punch out item selection, request for quote function, budget tracking, dashboard view of important information, 24/7 access

– Time savings due to procedural changes

– automated approvals, vendor integration, error reduction, alerts for required actions

Investment (strategic) View

Insight

eProcurement systems are innately capable of producing trend analysis with charts, tables and reports without having to export date into other analysis tools.  This, in turn, means that users can gain valuable insight into what the procurement organization is doing well and what could be improved.  In the long-run, having and using insights could result in more cost savings than any procedural change since it steers decision makers from answering the how (tactical) toward answering the what (strategic).

Vendor Relations

eProcurement solutions encourage organizations to develop a closer vendor relationship in many ways.  Direct communication, contracts, catalog integration, and price negotiations are some important aspects.  However, long-term views should take into consideration extended collaboration factors like periodic automated vendor evaluation, performance satisfaction parameters, supply chain information sharing such as downstream vendor integration.  The change in vendor relationships is moving from item cost evaluation (tactical) to holistic comparison of vendors (strategic).

Technology Integration

As we all know, technology is constantly evolving.  This is no different with eProcurement which is now leading the charge in digital transformation and starting to integrate IoT (Internet of Things) and Blockchain technologies.  Researchers in the procurement industry are increasingly pointing out that organizations who prepare for early adoption and embrace the changes will reap the benefits.  Given that procurement is both a highly competitive field and an inescapable part of business operations, it is crucial to make it a more strategic executive function.

Technology integration decisions allow just that and as such, procurement managers, directors and CPOs must be on the lookout for software solution vendors who embrace the integration of new technologies and have a track record of constant improvement.

Organizational skill development

It cannot be stressed enough that eProcurement solutions are only as good as the people taking advantage of their many functions.  When organizations focus on the tactical facets of eProcurement, the frustration mounts because staff are generally given very little time to absorb the procedural changes relevant to making the new procurement solution a success.  Also, such short-term view is often associated with little training in the areas of advanced features like trend analysis, improved vendor selection and relationship management, and insight development to name a few.  The pressure to produce short-term ROI is generally very high which in turn reduces the ability to spend time on developing long-term skills.

In opposition to the tactical organizational approach, strategically oriented company leaders not only encourage but insist on building future focused skills at every level of the procurement organization.  More influential executives tend to approach the eProcurement system adoption holistically, whereby they develop both short and long-term training programs that work in parallel and serve ongoing skill development at all levels of the organization.  Highly attuned procurement professionals are also likely to promote cross-functional collaboration between the procurement department and other integral areas like sales, development, and operations to name a few.

Conclusion

Buying and deploying an eProcurement solution like Eyvo’s eBuyerAssist must be switched from the view of expense (tactical) to investment (strategic) in order to take full advantage of the effort, both time and money, that are poured into implementing the new procurement software.  Technology absolutely enables organizations to achieve efficiency and effectiveness, but only people making full use of the technology can move the needle from seeing eprocurement software purchases as an expense to an investment.  We encourage you to ponder these thoughts and contact us to start (or continue) your journey.

Happy eProcurement!

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