Centralised vs Decentralised. Eternal Procurement Dilemma

Transcription

1 Centralised vs Decentralised Eternal Procurement Dilemma

2 The Usual Procedure Companies having a global footprint spanning multiple countries will typically centralize or decentralize their purchasing process across various operating entities contributing to the overall purchasing volumes of the parent organization. Every entity will have its own set of business processes and rules acting like independent silos. To manage these silos, companies would require a P2P solution which helps them define entity specific rules and at the same time roll up these transactions to the parent entity. The Question There is an extreme disconnect between what is normally followed and what experts. Can't we have a mixed approach where P2P can help to have a dual modal facilitating the benefits of both decentralized and centralized approaches for multinationals organizations? Drivers for Centralization and Decentralization P2P solutions in the market offer centralized administration thus helping organisations to do a one-time setup and configuration at a global level. However on-going management and support of the system at a global level is a tedious task for the centralized administration. Centralized administration also limits decentralized rule definition i.e. entity specific business policy enforcement. But what are the factors that drive centralization or decentralization of a company that has a global presence?

3 Drivers for Centralization Risk The risk factor for centralized organizations is minimized and they have confidence in one central authority that takes charge of all the important decisions such as deciding their procurement strategies. Common goals All the units of the organization are guided by a common vision and mission and the objectives are set so as to drive all units of the organization towards this common goal. This involves centralization of all processes and concentrates decision making at the HQ. Drivers for Decentralization Multiple languages and cultures Decentralization might be ideal for a company dealing with multiple cultures and languages as the nuances of doing business vary quite a bit based on the cultural intricacies of various countries. Region specific pricing of catalogs Several items, for example laptops, might be common across region. But pricing for items will vary as per regions and tax laws applicable there. Supplier onboarding (global, regional, local) A large organization might be dealing with several SMB's who operate only on a local scale. These suppliers will find it difficult to adhere to the policies set by the central command of a large conglomerate. User management capabilities Different business units might be responsible for different purchases in various regions. It might be tedious to draw up common logic in terms of hard and fast rules for user management. Region specific invoice matching rules As of now, several countries have employed their own regulations for invoice matching. It is mandatory for organizations to adhere to these rules for electronic processing of invoices.

4 Drivers for Centre-Led Approach Region-wise specific supplier selection during requisitioning and ordering Preferred suppliers might vary as per region or business unit. A supplier who provides good service in Europe, might not be as strong in the Middle East. Approvers across Companies/Business Units Discrete business units might have their own hierarchy for approvals. This might change in accordance with local laws as well. Thus managing workflows and approvals is easier for a decentralized organization. Conclusion Thus, it is evident that decentralization might be more suited to a large conglomerate operating in different business verticals across the world as one single rule or policy cannot be extended to the entire organization for effective administration. However, for the decentralized system to work well, there has to be seamless flow of information across departments and regions, as, more often than not, financial statements and audits are conducted across the organization as a whole. It is also important to note that the larger organizational direction has to be specified at the global level. Otherwise, each regional unit will have different priorities and the organization as a whole is pulled in several different directions at once, while not being able to achieve anything. An effective P2P system, thus, must distil the salient features of both, the centralized and decentralized systems, wherein the strategic decisions are taken centrally and operational activities are executed on a local or regional level. The importance of data integration and consolidation cannot be underestimated and is a pre requisite for a successful implementation.

5 isave AutoClass ianalyze icost Financial Savings einvoicing na im a ge Spend Analysis Procure-to-Pay irequest One View esourcing isource eprocurement S u pp l ie r N t e rk o w isupplier Supplier Contract icontract Authoring iperform icontract Repository Zycus is a leading global provider of complete Source-to-Pay suite of procurement performance solutions. Our comprehensive product portfolio includes applications for both the strategic and the operational aspects of procurement - eprocurement, einvoicing, Spend Analysis, esourcing, Contract, Supplier and Financial Savings. Our spirit of innovation and our passion to help procurement create greater business impact are reflected among the hundreds of procurement solution deployments that we have undertaken over the years. We are proud to have as our clients, some of the best-of-breed companies across verticals like Manufacturing, Automotives, Banking and Finance, Oil and Gas, Food Processing, Electronics, Telecommunications, Chemicals, Health and Pharma, Education and more. This whitepaper is written by Arvind Chakrapani, Product Group, Zycus Zycus Inc. All rights reserved.