Imagine this scenario: Your desk is full of piles of paperwork waiting to be processed and there’s some more on the way. You are staring at Excel sheets trying to make sense of the numbers before the important meeting with your largest supplier that starts in a few minutes.
If it sounds familiar, you’d agree that manual procurement is very tedious and time-consuming. This explains why more organizations are adopting an e-procurement strategy. As many as 95 percent of firms adopted technology in their procurement and supply practices according to the CIPS’ 2020 Digitisation in Procurement and Supply Report.
But adopting technology doesn’t guarantee immediate results. You need to create an e-procurement strategy that will guide your business procurement and supply processes. This strategy is a plan to obtain necessary supplies via automated tools in the most cost-effective way.
In this post, we’ll walk you through actionable steps to follow when creating and implementing an e-procurement strategy. Additionally, we’ll touch on how you can find the best e-procurement software that fits your needs.
6 steps to help you create and implement an e-procurement strategy
Putting together an effective e-procurement strategy that drives the desired result needs proper planning.
Step 1: review your current procurement strategy
Before you dive into creating a new procurement strategy, take some time to analyze the existing strategy.
Analyzing your current procurement process gives you a clearer picture of its strengths and weaknesses. This way, you can outline aspects that you want to improve in your new e-procurement strategy.
When reviewing your current procurement strategy, here are some questions you should ask:
- Who are your suppliers?
- What are the compliance checks in place?
- Who are your best-performing suppliers and who are the worst?
- What is the average delivery timeline for supplies?
- What systems do you have in place for tracking spend?
Getting some of this information might be hard if you’ve only manual processes in place. But it is worth the time and effort to track down available information.
Step 2: document gaps in your current strategy
Once you’ve understood your current procurement process, outline some of its shortcomings.
Identifying the flaws in your processes will help you to understand the negative impacts it has on your organization. More importantly, you can then brainstorm solutions in your new e-procurement strategy.
When it comes to shortcomings in procurement processes, here are some problems you should look out for:
- Maverick spending (rogue spend)
- High total cost of ownership (TCO)
- Late order delivery
- Reliance on traditional procurement software
- Employees bypassing procurement procedures
Identifying these problems will show you where your current process falls short and how you can improve them in your e-procurement strategy.
For example, you may discover that your list includes some unreliable suppliers, which causes shortages in your current procurement process. You’d need to review your suppliers’ list and find replacements.
Step 3: engage stakeholders
Once you’ve identified the gaps in your previous plan, the next step is to list stakeholders that your new procurement strategy might impact. This is because, without the necessary stakeholder engagement, it will be almost impossible to implement your strategy.
Also, stakeholders can point out shortcomings in your existing plan that you’ve missed out on. They can also suggest ways to improve your new procurement plan to help your organization achieve its business goals.
Therefore, make a list of stakeholders from the finance team to suppliers and end-users. We suggest that your list include anyone that your new e-procurement plan might impact.
McKinsey suggests “spending as much time as possible in face-to-face conversation (in-person or virtual), both with internal customers across the business, and with the most important suppliers and external partners.”
These meetings will help you understand “how people perceive the procurement organization today, to identify opportunities for procurement to add additional value in the relationship, and to start building toward a more effective collaboration model in the future.”
Step 4: create an e-procurement plan and set KPIs
Once management approves your e-procurement strategy, it is time to map out a plan and set clear KPIs. Doing this will help you create a concrete plan on how to implement your new e-procurement plan. It will also help you set expectations right as to what you and your organization should expect after the strategy is implemented.
When you’re choosing an e-procurement KPI, you should also ensure that it ties into the wider organization’s goals.
Let’s say your organization wants to cut costs to stay afloat in a recession. You’d want to select KPIs focused on helping the company achieve that goal. You might decide to focus on KPIs such as cost of purchase order, procurement cost avoidance, and procurement cost reduction.
Step 5: use procurement software
There are many moving parts involved in executing and managing an effective e-procurement strategy. And managing all of these parts manually or with traditional software is time-consuming and labor-intensive.
Therefore, you should choose procurement software that gets the job done. Using a suitable tool helps you consolidate your procurement processes in one place. This means that stakeholders or workers across different departments can easily collaborate without hassle.
So what should you look for in a procurement tool? It should:
- Integrate with ERP/Accounting systems
- Support the entire procure-to-pay cycle
- Have fast, customized approval workflows
- Provide spend insights and reporting
- Support expense management
- Offer vendor management capabilities
Using procurement software like Procurify allows you to track spend across multiple departments to see how much each is spending. Not only that, you can create a custom budget for workers in different locations or departments.
Step 6: implementation and review
Once you have chosen your e-procurement software, it’s time to implement it.
You should check that you have enough resources to implement your e-procurement strategy. On the other hand, you should pay attention not to put too much pressure on your people.
When you decide to implement an e-procurement strategy in your business, make sure you communicate its impact on your organization. Work with the HR team and heads of departments to dispense important information about changes and new procurement guidelines. Don’t forget to involve external stakeholders and vendors as they are already part of the process.
Creating an e-procurement strategy provides a more effective solution than using the traditional method. It can help you reduce costs and aid better relationships with suppliers if done the right way.
More importantly, using spend management software will also help in improving your company’s spend visibility and streamline your overall procurement processes for better results.
Looking to improve your spend control today? Read our pocket guide to creating strategic procurement for your organization: