What CIOs Need to Know About Procurement Systems

 
 
By Karen A. Frenkel  |  Posted 11-05-2014 Email
 
 
 
 
 
 
 
 
 
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    "Staggering" Lost Opportunities

    The cost to companies for not having better sourcing and procurement solutions takes a toll on employee productivity. 72% of respondents whose procurement system does not improve productivity say a better system would save them almost 3.2 hours a week on average. That translates to 258 hours per user a year, or nearly an entire work month.
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    Costs of Working Around Procurement Systems
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    Costs of Working Around Procurement Systems

    Because there are 204,000 sourcing and procurement workers in North America, one work month lost equals 32.3 million hours wasted by wrestling with or working around inefficient sourcing and procurement systems.
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    How Lost Time Would Have Been Used
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    How Lost Time Would Have Been Used

    69% of respondents say they would find new savings opportunities. 36% say they would save money by guiding a purchaser to better choices. 28% would get more spend categories under contract. And 21% would purchase more cost-effective items.
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    Rule 1: Choose the Right Software
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    Rule 1: Choose the Right Software

    The survey identified five rules that make some deployments more productive than others. Make sure the procurement software supports automation of your key business processes and that it is not difficult to use. 34% of respondents who are very or extremely satisfied with their system say the features they need to successfully automate their processes are the most important reason for their satisfaction.
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    User Interface Is Key
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    User Interface Is Key

    Respondents say they value depth of features more than ease-of-use. They would rather have software with the features and functions they need, even if it is a little harder to use.
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    Best Practices For Selecting Software
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    Best Practices For Selecting Software

    1) Identify a small set of business processes and functions that the system must support. Choose those that drive the greatest increases in productivity. Make them deal breakers. 2) Require vendors to demonstrate that the software can support those critical processes. Then run through them yourself to determine whether the user experience is acceptable.
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    Rule 2: Don't Rely on One Vendor
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    Rule 2: Don't Rely on One Vendor

    Companies often choose the same vendor for all their sourcing and procurement applications, rather than selecting the right software for each application. They like the simplicity of working with one company, a consistent UI across modules and applications integrated out-of-the-box. Yet, 66% of respondents could have achieved better productivity by selecting applications from two different vendors rather than standardizing on a single vendor.
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    Rule 3: Invest in Implementation
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    Rule 3: Invest in Implementation

    It matters little whether internal resources, third-party services or vendor services implement a system. Rather, the level of resources applied and the experience of those implementing the work has the most significant effect. Implementation is critical to both the initial launch and the long-term success of the system.
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    Rule 4: Frequently Update Your Procurement System
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    Rule 4: Frequently Update Your Procurement System

    48% of respondents who regularly improve their system say it makes them more productive. 40% in the same category say that their system could improve. Only 10% say their system does not improve their productivity, and 2% say it makes them less productive.
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    Rule 5: Ease of Use Is Essential
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    Rule 5: Ease of Use Is Essential

    Ease-of-use is critical to how effectively users leverage tools. 81% of respondents agree that if their corporate procurement tools were easier to use, there would be less rogue spending. 78% agree that if their corporate procurement tools were easier to use, their employees would find better deals.
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    Recommendation
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    Recommendation

    Ideally, companies should be able to buy the right software for their sourcing and procurement applications from one vendor. If they cannot, the best solution is to go with the right software for each application.
 

Inefficient procurement tools cost businesses in North America more than $1.5 billion annually and waste 32 million work hours, according to a new survey by cloud provider SciQuest. It found that only 28 percent of sourcing procurement professionals believe their procurement system increases productivity. The study recommends five rules to bridge a "massive productivity gap eating away at bottom lines," says Mark Digman, a senior vice president at SciQuest. "When sourced and implemented correctly, procurement systems represent an opportunity for organizations to drastically reduce costs, improve process efficiency and gain visibility into spending decisions. This research indicates that most organizations are falling well short of these transformative benefits." To determine how organizations can get a positive return on their procurement investments, the report surveyed 241 sourcing and finance professionals at 200 U.S. companies with $500 million in revenue. To read the survey, "Optimizing Your Sourcing and Procurement: Five Simple Rules," click here.

 
 
 
 
 

 
 
 
 
 
 

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