Procurement teams can fall into a trap of using disparate and decentralized systems to manage their procurement processes. This can happen for a number of reasons, including complex and cumbersome legacy procurement systems, software feature fatigue, budget limitations, and a reliance on outdated tools.
Procurement managers and CPOs should understand the problems caused by using disparate and decentralized tools to manage the procurement process. Yet if a complete procurement solution is used to manage RFPs, suppliers, requisitioning, then the entire procurement function can be brought under one umbrella. This allows for effective data use, streamlined processes, and decreased risk.
The Downfalls of Outdated Procurement Methods
After moving away from paper procurement systems, the logical next step is to email and
Excel. This change revolutionized procurement, in terms of the speed at which transactions could occur and the power to harness the data-crunching capabilities of Excel. However, the industry has moved on. New cloud-based procurement solutions have been built to replace now outdated email and Excel. SaaS solutions are more secure, more centralized and more robust than these manual methods.
According to Jeff Gilkerson from the Hackett Group, around 70% of large organizations have adopted e-sourcing. Unfortunately, this means 30% have failed to adapt and are now lagging behind when it comes to e-procurement implementation. Not only are these organizations unable to harness the benefits of these software solutions, there are unequivocally putting their organizations at risk. Furthermore, even for the 70% who do have e-sourcing, actual user rates vary due to a number of reasons: poor change management, lack of training or failure to embed e-sourcing into everyday procurement procedures, just to name a few.
The Drawbacks of Enterprise Procurement Systems
Procurement solutions have come a long way since their initial inception. In the past, it was common to find procurement software implemented on premise, though over time, the benefits of cloud-based solutions have proven to outweigh the advantages of on-premise.
That being said, not all e-procurement solutions are created equal. The range of offerings is extensive, from streamlined e-sourcing tools that can be set up in a matter of minutes to cumbersome solutions that require months of training and hand-holding.
While it may be tempting to hop on the enterprise procurement train, it’s more beneficial to take a look at your own organization’s procurement needs before doing so. Bigger is not always better.
Here are some of drawbacks to these types of solutions:
- Processes remain inefficient during the long implementation period.
- Small tasks or events take a long time to create and execute.
- An IT team is required for troubleshooting.
- Complexity leads to lack of end user compliance.
- Price is often a barrier, especially for SMBs.
The Dangers of Feature Creep
Despite these drawbacks, enterprise procurement systems are often viewed as attractive options due to their wide range of functionalities. In theory, doing everything from procure to pay on one platform is ideal. Afterall, if you choose well, you’ll never have to go through the painful process of buying e-procurement software again, right?
This is often where misalignment between buyers’ needs and upper management’s desires starts. Buyers face the challenge of being on the front line. CPOs want to develop a sustainable and strategic procurement function, while achieving year-on-year cost savings. They need tools that will give them the oversight to see whether or not their strategy is on the right path, and buyers need tools to help them be more efficient and more productive — they need tools that will help them comply with the strategy and processes set forth by upper management.
E-procurement solutions with a large number of features comes at a cost: complexity. The greater the complexity, the longer it takes to learn the software. A long implementation results in increased time to ROI, lack of procurement efficiency during the implementation process and a decrease in end-user compliance. If the software is too complex, end users will need additional time and extensive training before they’re able to properly use all the features in the chosen solution. Such complexity increases the likelihood that some users may never use the features as they’re meant to be used, and consequently, the benefits of the system will be lower. In fact, some users may simply revert to email and Excel to avoid the hassle and investment required to learn the new system.
The Benefits of a Streamlined e-Procurement Solution
Once you’ve decided to forgo the outdated methods of email and Excel for managing procurement, you still face a forest of options. You’ll have to look carefully at your organizational goals and speak with stakeholders, especially end users, to get a better understanding of their needs.
Easy-to-use e-sourcing solutions also result in decreased compliance risk. A streamlined, lightweight solution can usually be implemented in a matter of minutes, at least on the software side. The change management process may take a little longer, but users are more willing to use a new solution when they see an immediate improvement in their daily tasks, rather than waiting for months for the benefits to emerge.
Even in organizations where a decision has already been made to undergo a lengthy enterprise procurement system implementation, quick wins can still be had by adopting a streamlined sourcing tool as a patch during, and perhaps after, the implementation process. Since these tools require little to no training, buyers can use the platform to run requests while they undergo training for the more complex system. In addition, a more user friendly tool can be used to ensure total compliance to the procurement process should the enterprise tool become more of a burden than a blessing.