By evolving past transactional processes and focusing instead on total value, Procurement is becoming a more strategic player within the business. Companies are seeking to align procurement functions with revenue goals, quality controls, Integrated Business Planning and total cost of ownership. Delivering that value will require teams to work differently, learn new skills, become more cross-functional and utilize new technologies.
A study by Ayming, titled Procurement 2020, sheds light on keys areas of opportunity from the perspective of the CEO and CPO. 42% of CEOs felt that procurement would benefit from more centralization and both CEO and CPO felt that procurement technology was important to increasing effectiveness – 79% of all respondents see procurement tools like procure to pay (P2P) and spend analytics as “vital to increasing value creation by procurement departments.” In fact, harnessing big data was a Top 3 opportunity as shown in the study.
Getting visibility on spend is a great way to increase your procurement department’s effectiveness. Procurement needs to look at the entire life-cycle of spend and also considered the various channels of spend across the organization. It is critical to monitor and evaluate the processes and systems for leakage – both vendor leakage and also channel leakage. Don’t assume that invoice spend will stay on invoices and credit cards will only be used for T&E.
Key to this is transforming T&E systems digitally across the global, rolling out a global corporate credit card program and consolidating travel agencies. Remember that each source of data will have a slightly different perspective on the spend. Typically CFO/CPO will ‘lose’ 42% of projected procurement savings, with poor spend visibility eroding negotiation and contracting performance between 5% to 7%. Using Expense as part of procurement analysis delivers hard-dollar savings of 6% to 7% (Aberdeen, Sept 2005).