3 Ways to Save Costs and Improve Compliance with e-procurement
Contents The Need to Eliminate Rogue Spending Exists for all Businesses...3 Leveraging Technology to Improve Visibility...5 Integrate your procurement system into your ERP solution...6 Simplify your processes with automated workflows...7 Leveraging your data to enable better and faster decision-making...8 Achieving Better Cost Management through Visibility and Closed-Loop Communication...9 The Bottom Line: Maintain Strategic Goals while Empowering your Workforce...11 About ReQlogic...12
The Need to Eliminate Rogue Spending Exists for all Businesses Every organization procures indirect materials most of them used primarily for the day-to-day running of the business. Indirect spend is defined as spending that is not directly related to production, for example office supplies or the hiring of temporary staff. Though typically not mission-critical, in most cases these indirect materials are low dollar, but high volume in nature and can account for up to 80% of all procurement. You might have spent a lot of time finding the right suppliers and negotiating contract terms, but chances are someone in your organization has purchased outside of the contracts. Often called maverick spend, this is not necessarily done on purpose. Many times the issue is that critical data is unavailable or not easily accessible. This can be especially true for mobile or field employees. Organizations using clearly defined spend management measures see a significant reduction in maverick spend and transaction cycles. Why does it matter? Because non-compliance directly affects the bottom line! Statistics have shown this type of spending to be a significant amount of the total indirect spending, resulting in companies losing potentially hundreds of thousands of dollars in missed discounts! By some estimates, companies spend an average of 35% more when maverick spend occurs than by purchasing via pre-established contracts. Non-compliant purchasing not only cuts into overall profits due to higher cost, it can negatively impact an organization s market competitiveness. 3
The Need to Eliminate Rogue Spending Exists for all Businesses If this sounds familiar, you are not alone. Many organizations struggle to control runaway costs and drive more productivity into the purchasing process. In today s economic climate, the need to eliminate unplanned or thoughtless spending exists for all businesses. Fact is that organizations using clearly defined spend management measures see a significant reduction in maverick spend and transaction cycles. However, there can be significant challenges in implementing such procedures especially in areas of supplier enablement, catalog management, and end-user adoption of procurement technology. The key is to find a solution that is not only easy to use and integrated with your organization s enterprise resource planning (ERP) system, but it needs to offer advanced collaboration capabilities to ensure all employees whether in the office or in the field have access to the right data at the right time. The key is to find a solution that is not only easy to use and integrated with your organization s enterprise resource planning (ERP) system, but it needs to offer advanced collaboration capabilities to ensure all employees whether in the office or in the field have access to the right data at the right time. 4
Leveraging Technology to Improve Visibility It is safe to say that the vast majority of organizations employ a mobile workforce. When it comes to procurement procedures, this adds another requirement a procurement solution needs to fulfill 24/7 access to critical business data. Field employees depend on technology to keep them upto-date and enable them to complete tasks with the same efficiency regardless of whether they are in the office or on the road. Transparency, timeliness and accuracy are vitally important to ensure projects are kept on track and approvals are made on time. The foundation for better visibility, actionable intelligence, and ultimately compliance, lies in e-procurement technology but it has to be the right technology. Many of the root causes associated with maverick spending are related to insufficient forecasting and planning processes and the lack of a standard, single point of truth integrated into an organization s ERP. If a technology platform is to overcome these challenges, it has to provide a centralized point of input, enable process automation, and capture critical data in order to perform trend analyses. The foundation for better visibility, actionable intelligence, and ultimately compliance, lies in e-procurement technology but it has to be the RIGHT technology. The following provides three ways to leverage e-procurement technology for improved cost control and compliance. 5
Leveraging Technology to Improve Visibility 1 Integrate your procurement system into your ERP solution E-procurement systems can streamline your entire purchasing process by providing a single platform to manage requisition, approvals, buying, receipt, reconciliation, and reporting. However, to achieve complete visibility, integration with your organization s ERP solution is vital. By integrating e-procurement into your ERP solution, you can maximize your existing technology by extending its functionality while minimizing cost of ownership. Efficiencies can easily be built into the procurement process for an existing ERP system by integrating a solution to automate the workflow of the approval process and by limiting the list of approved vendors and products. To truly make your e-procurement system seamless, it should include a vendor portal. Enabling direct vendor access can further reduce manual entry on part of your team and provides closed-loop communication between your employees and vendors. By integrating e-procurement into your ERP solution, you can maximize your existing technology by extending its functionality while minimizing cost of ownership. Providing your employees and suppliers access to a standardized, integrated interface will significantly reduce compliance violations as all approved products are made available in a single database. Users do not have to access several systems to navigate multiple catalogs or fill out different requisition forms for different providers. Moreover, a browser-based interface enables access to real-time data anytime, anywhere. 6
Leveraging Technology to Improve Visibility 2 Simplify your processes with automated workflows Today, most procurement teams are asked to be ever more efficient and do more with less, creating the need to reduce or eliminate repetitive, manual tasks, while maintaining tight control on expenditure approvals. Aside from allowing centralized data entry, the right e-procurement software will provide advanced automation and collaboration capabilities. Approval alert features can ensure managerial oversight. In cases where procedures are non-compliant, the system can immediately notify the user and pre-empt any unauthorized purchases. At a minimum, procurement software should offer the following automation and workflow capabilities: The best e-procurement systems will streamline even the most complicated workflow procedures. POs and invoices New vendors and hires Travel requests and expenses Contracts The best e-procurement systems will streamline even the most complicated workflow procedures and should offer features that enable delegation of tasks in order to avoid any delays in the approval process due to an employee being unavailable for a period of time. More sophisticated procurement solutions will provide multiple options for invoice processing giving users the flexibility to submit invoices themselves, allowing vendors to enter information directly into the system via a vendor portal, or submit invoices via email automatically starting the invoice transaction for processing. In order to be more efficient, employees require access to information when and wherever they need it this is especially true for the mobile workforce. In significantly reducing labor-intensive purchasing processes, employees will be much more likely to adhere to an organization s compliance policy. This, in turn, will enable employees to redirect efforts to more strategic efforts such as consolidating vendor master lists and negotiating better pricing from preferred vendors. 7
Leveraging Technology to Improve Visibility 3 Leveraging your data to enable better and faster decision-making E-procurement can be a catalyst for more efficient spend management by providing a holistic view of all activities involved in the procurement process from sourcing and purchasing to delivery and payment settlement. However, while providing a platform to manage all of your data and processes is the foundation, the true value of e-procurement software lies in its ability to translate that data into actionable intelligence. By using a centralized procurement system, your organization will not only get the ability to analyze historical data and get insight into who bought what products at what cost; that data will also become the basis for your strategic business decisions. The true value of e-procurement software lies in its ability to translate data into actionable intelligence. Centralized tracking of transactions enables full reporting on requisitions, items purchased, orders processes and payments made and built-in audit trails provides the necessary data for posttransaction analysis. Through improved visibility into current and past spending, your organization will be able to achieve a comprehensive view on key metrics driving cost reductions, process improvements, and optimized supply chain performance. These metrics are the foundation to evaluating current performance and identifying potential growth opportunities. 8
Achieving Better Cost Management through Visibility and Closed-Loop Communication Enabled by technology, the continuous flow of procurement activities significantly increases organizational efficiency through better visibility and communication. Passing on information electronically saves employees from having to manually input and manage data. As a result, employees now have the bandwidth to spend more time on strategic tasks, adding more value to the company. Some studies estimate that by leveraging e-procurement to reduce labor-intensive activities, companies can achieve an average of 30% savings on human capital. The continuous flow of procurement activities significantly increases organizational efficiency through better visibility and communication. Aside from saving time, e-procurement can provide significant cost savings associated with procurement activities. These cost reductions are achieved through a combination of lower transaction costs, improved negotiation power, and better spend analytics. 1. Lower Transaction Costs Automating key procurement process can greatly reduce transaction costs due to time savings achieved by eliminating paperwork or labor-intensive processes associated with procurement activities. It also reduces errors in the ordering process by building in data validation capabilities, which in turn will cut down on wasteful expenditures. The cost of indirect spend can add up quickly, with some studies showing that for a typical company, a 5% reduction in purchasing cost can increase revenue by as much as a 30%. Taken as a whole, the efficiencies of procurement automation add up to considerable financial savings for any organization savings that will add directly to the bottom line. 9
Achieving Better Cost Management through Visibility and Closed-Loop Communication 2. Improved Negotiation Power Lower transaction cost is the initial saving achieved through leveraging an e-procurement system; the reduction in direct cost of goods and services is a secondary saving. Procurement software itself does not reduce the purchase price of goods and services, but it creates the conditions for achieving further price reductions. By leveraging e-procurement technology, employees can be directed to purchase from suppliers with whom there is a pre-negotiated agreement in place, designed to achieve greater economies of scale. This counters the problem of employees sourcing goods from a range of suppliers at different price conditions. By gaining better visibility into transaction costs and overall spend, companies can leverage that knowledge to negotiate better terms and conditions as suppliers might offer even higher volume discounts, resulting in significant savings that would have been missed. 3. Enhanced Spend Analytics The instant availability of detailed information on what is being spent is among the most valuable benefits of an e-procurement system as it provides the basis for thorough analysis of spend patterns, which in turn can be used for strategic decision making. By being able to conduct detailed spend analyses, organizations are now able to identify potential financial gains that can be achieved from consolidating purchasing needs and better enforcing compliance with pre-negotiated contract agreements. One of the less obvious but equally important benefits gained from improved purchasing compliance is that the associated cost savings, improved visibility, and reduced risk all reflect well on the procurement function overall. By providing complete, user-friendly purchasing catalogs, employees have better control over demand and spend, which in turn will encourage them to purchase through the system within contracted pricing terms and from preferred vendors, reducing the amount of maverick spending. Through automatic verification of purchasing transactions and creating an audit trail in a centralized e-procurement system, companies are able to significantly improve overall compliance and optimize transparency across the organization. Integrating an e-procurement solution not only increases process efficiencies; it contributes to organizational effectiveness as a whole. Organizations become much more transparent with better auditing and collaboration capabilities. As a result, companies are able to improve strategic spending, shorten inventory cycles and better control budgets - all contributing to increased savings across all categories. 10
The Bottom Line: Maintain Strategic Goals while Empowering your Workforce It is evident that the right e-procurement system saves time and money and it adds value to the traditional procurement process through improved compliance and enhanced visibility. But e-procurement systems not only have to capture data to be able to tackle the problem of maverick spending; they must also encourage user adoption through accessibility and usability. Rather than simply mandating compliance policies, e-procurement solutions can be a powerful driver to empower your workforce to make faster, better decisions by giving them the right information at the right time. Technology alone, of course, is no guarantee for success. Many times organizations will step into the trap of thinking that if you implement a tool, all of your problems will be solved. But that is seldom the case. Understanding the capabilities of procurement software to efficiently manage your processes and leverage your data is key. Even more importantly, organizations must view their e-procurement strategy holistically as an integrated component of their overall business strategy and they must understand the impact of their e-procurement strategy on the entire organization. Organizations must view their e-procurement strategy holistically as an integrated component of their overall business strategy and they must understand the impact of their e-procurement strategy on the entire organization. If done right, implementing an e-procurement solution will provide the foundation for a more streamlined, collaborative, and financially-viable organization laying the groundwork for continued growth. The technology is there, but it is a matter of organizations being able to maximize its full potential to achieve a competitive advantage. 11
About ReQlogic ReQlogic is an end-to-end e-procurement system providing powerful automation and workflow functionality to help companies reduce costs and increase value. ReQlogic seamlessly integrates with all Microsoft Dynamics ERP platforms or it can operate as a standalone solution, adding requisition functionality to any backend ERP solution. With over 40,000 users worldwide, multi-language capabilities, and proven implementation methodology, ReQlogic is the recommended solution for companies looking to achieve: Automation of purchasing and employee expense cycles Improved efficiency and accuracy of transactions Submission and review of transactions anytime, from anywhere Ensured Sarbanes-Oxley compliance Lower cost of ownership Building E, Suite 100 Ridgewood Corporate Square, 170 120th Avenue N.E., Bellevue, WA 98004 Phone: +1 (734) 302 2316 info@reqlogic.com To learn more about ReQlogic, visit our website at www.reqlogic.com. 12