Spend under management – the OpusCapita way
Procurement Trends, Source-to-Pay, Sourcing, E-procurement
In many of my blogs I talk around a subject and really do my best to avoid any kind of sales pitch – which is probably the way you like it. Today I want to depart from that method and (while still avoiding the sales pitch) give you a view into how we enable spend under management with our solutions and services.
What is spend under management anyway? According to Inside Supply Management Magazine, 'Spend under management is generally defined as the percentage of a company’s spend that is actively managed and controlled by the procurement function.'* Great – so anything not controlled by Procurement is by definition 'not managed'.
Now imagine a multi-billion euro company, offices in different countries, many thousands of employees and possibly a mix of direct and indirect spend. This already sounds complicated but if we break it down into smaller pieces, it becomes more manageable.
Goal: Spend under management
Stakeholders: Suppliers, Procurement Department, Requisitioners
Key process elements:
- Sourcing & Supplier Engagement
- Operational Procurement
- Services Procurement
It’s possibly simplest to begin at the end and walk back to the beginning. For Procurement to manage spend, employees (those in procurement and outside of it) need to be able to buy from suppliers who are under contract. For suppliers to be under contract, they need to have been sourced, engaged and onboarded. Sounds simple but there’s a lot to unpack there.
Starting with supplier engagement, we have a tool called Supplier Information Manager. This is the part of the OpusCapita Business Network onboarding experience where a supplier is requested first to apply to be a supplier and then to register by providing all relevant supplier data, including pretty much everything you might keep in your master vendor file but then more. Because the supplier is incentivized AND able to self-service their own data through the portal, many things area easier. Obviously, there is less time maintaining the data, but you can also use it for sourcing projects. In addition to leveraging the hard data (like locations, financial scoring, supported procurement categories, certification requirements, etc), we also bring in soft facts like supplier ratings gathered by your employees as they interact with the supplier.
Further supporting engagement and sourcing, we have a tool called the Self-Service Manager. This tool focuses on one essential element of modern e-procurement: catalog submission, validation and acceptance. While some suppliers will find it easier for you to punch out to their web shop, most larger companies would still prefer the continuity of all contracted items (and pricing) being pulled into the one-stop-shop which is the company catalog (or simply the shop).
Now at this point, I know there is a little bit of a chicken and egg thing going on and it’s true, e-procurement doesn’t start from nothing, in the beginning, there is a lot of getting existing suppliers onboarded with their products and pricing into the company shop. But once that’s done and the systems are in place, sourcing is effectively done electronically with a tool called RFx.
So now we have a system in place where suppliers have registered, providing all relevant information and have provided an approved catalog which we’ve added to all the other supplier catalogs in our shop (by the way, this shop is called the Online Product Catalog). Let’s jump ahead to the operational part of procurement and imagine someone wants something – perhaps it’s something complicated or a large volume of something. The requisition comes to the Buyer and it’s now the Buyer/Category Manager’s role to fulfill the request. No if there was just 1 item requested it might be a simple thing to place the order – it could even be automatically ordered. But, because in our little use-case, the requisition calls for 100 of the items, the Buyer can then choose to create a sourcing event with RFx. He can take the requisition and flip it into an RFQ and send it to all qualified suppliers for bidding. The selection process can include all the information we’ve got plus any those supplier performance measures and more. When the award is given, the order is then made in-line with the winning proposal.
This is spend managed. It’s managed with the various tools within OpusCapita eProcurement which support suppliers, buyers and requisitioners as they go about their day. The example I’ve described above leaves plenty of room to say: 'what about services procurement – that’s hard to get under management' or 'how about MRO (materials, repair and operations) – that’s a whole different set of problems and you probably don’t even touch it'. The short answer to both categories of spend is an emphatic YES! We do have some specific tools to make sure that services procurement works in the system. We use Smart Forms to make buying product/service bundles easier and we also use Service Entry Sheets where the supplier can enter how much of the service has been delivered and the buyer can approve the entry in order to match the invoice and authorize payment.
With MRO it’s true that there are other issues which have to do with systems integration, but we have also learned that this highly complicated category of procurement is something we are able to tackle. We even find ourselves able to support auto-fulfillment, explosion drawings and real-time integration with EAS, Inventory and other back end systems so that MRO procurement becomes consolidated by the 'one-stop-shop' which is our Online Product Catalog.
Lastly, we do have a Procurement Manager which gives tools to the category managers who are required to split, combine, bundle, etc. requisitions as required. You can do more with it obviously, but this blog post is way too long as it is.
If you’re still with me – congratulations, you clearly deserve ice cream tonight no matter what anyone else thinks. Feel free to get in touch if you have any questions and otherwise, have a great day and go manage that spend!
Rowan has more than 10 years of experience in the purchase-to-pay arena. During this time, he has managed the go-to-market for a diverse set of portfolios including Accounts Payable Automation, B2B Networks, Financing Services, eProcurement and Product Information Management.
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