In my last post, I discussed how to successfully launch a digital procurement transformation. A strong start is critical, but it’s just a start. The true potential value of effective digital transformation requires rapid progress, addressing more processes, spend and suppliers. Organisations are naturally eager to achieve best-in-class performance, yet most find themselves stuck somewhere along the way with low to moderate levels of digitisation, spend under management, access to data, and so on. Why do so many procurement organisations struggle to make progress? In this post, I’ll look at the key challenges and how to accelerate your journey to best-in-class procurement.
A recent Forrester survey on Executing a successful procurement transformation looked at the greatest challenges procurement teams face during each stage of transformation. For those at an intermediate stage, striving to achieve best-in-class, there was a fairly common set of roadblocks impeding teams’ progress. Beginners and advanced organisations faced a variety of issues reflecting a mix of people and technology but, for functions midway through their journey, it was a matter of technology.
User adoption of technology was near the top of the list, in second place. That is unlikely to surprise most readers, but I feel too many do not properly consider what drives user adoption of procurement technology, resulting in poor decisions that come back to haunt them. The obvious factor is the intuitiveness of the software interface. This is what we naturally think of when comparing consumer sites: how easy they are to navigate. While an important criterion to consider, it is just one of several. Leading technology providers have, for the most part, made huge strides in recent years, so several now perform well on this measure. And organisations increasingly plan rollouts well, with user input and support.
What drives user adoption is not just knowing where to click, but being able to find what you need. Content is king. It’s what makes Amazon and other consumer sites so useful and heavily adopted. The same applies to user adoption of spend management software. If you are assessing suppliers or analysing spend, is the information available accurate and easily accessible? If you are making a requisition, can you find everything you are looking for, have accurate availability and pricing information and compare options easily?
This is where the details matter and a deeper assessment is required. It is also where true differentiation today lies and why certain vendors consistently maintain high customer retention and others struggle, despite looking similar on the surface. One important criterion is whether a unified data model underpins the technology, where information from all processes seamlessly links so you can pull accurate information at any point, such as that required to build a supplier 360. It also means innovations, especially those leveraging artificial intelligence such as digital assistants, can derive more accurate insights. Unsurprisingly, the third most common obstacle was inaccurate or hard to access spend data.
When it comes to the P2P process, a couple of factors are especially important to consider. First, can products be easily compared side by side in the interface (versus having to visit specific vendor sites, disrupting the experience and losing the ability to compare products from different suppliers easily)? The second criterion is directly related to the top overall obstacle to digital transformation, especially critical to companies progressing towards best-in-class: supplier onboarding.
It is natural to focus internally, on one’s direct needs, when evaluating technology. But with organisations increasingly dependent on suppliers, our faiths are more intertwined than ever. If suppliers are not onboarded, users can’t find their products to requisition. No slick interface can fix that. Nor can supplier-provided information be automatically combined with third-party and internal performance data to build a complete view. Nor can users collaborate effectively with suppliers on product or service innovations. If suppliers are not onboarded, digitisation efforts and all the efficiency and other benefits thereof will never materialise. Procurement and Accounts Payable will continue manually matching invoices to purchase orders to contracts, dealing with exceptions, paper and all the headaches that tie up capacity from more strategic activities. Spend under management will remain low. Say goodbye to your dreams of achieving best-in-class procurement.
If it’s that important, why aren’t organisations better evaluating the ability of different technologies to onboard suppliers? The primary reason is that many factors are thrown around in the market as driving rapid and effective supplier onboarding. It can be hard to understand what drives onboarding for those that lack experience with different approaches. Some common arguments are that larger networks or vendors that already onboarded many of your suppliers for other customers mean better onboarding. These arguments sound logical but really don’t have much impact as suppliers typically have to conduct some level of onboarding for each customer due to different addresses, catalogues, processes involved, and so on.
What drives rapid and high levels of supplier onboarding is simplicity. No fees, no limits to activity, no vendor conditions to accept and a simple way to connect with flexible options that meet supplier preferences. Nothing that creates concern, a need to check with legal or a desire to call you to complain or ask questions. This approach has led to 99% of suppliers (by count – don’t be tricked by spend metrics that leave a long tail of manual transactions) being onboarded at companies such as CACI (more than 40,000 suppliers onboarded), Credit Agricole (more than 60,000), Fannie Mae (more than 70,000) and many others. Companies, such as Maxim Healthcare, which have tried different approaches to prove this.
There are certainly many other factors to consider to ensure the technology you choose does not become an obstacle to achieving best-in-class procurement. But by avoiding the most common pitfalls, you will have a significant advantage over your competitors and peers. In my third and final post on driving a successful procurement digital transformation, I’ll discuss how some leaders are progressing beyond best-in-class to build a true competitive advantage. For an objective assessment of how mature your procurement organisation is, plus specific tips on how you can accelerate the next stage of your journey, take the free Forrester Self Assessment.
Alex Saric is CMO at Ivalua.
This contributed article has been written by a guest writer at the invitation of Procurement Leaders. This is published as a piece of sponsored content, published in partnership with Ivalua.