Insight

No time? No budget? You can still drive procurement value

It’s a matter of priorities

 

The pandemic accelerated a mindset shift around speed and urgency as businesses across virtually every industry worked to achieve timely, efficient recoveries. There simply was no time for business as usual. As companies continue to work through various levels of ongoing disruption, time and budget remain scarce commodities across all organizational functions, not least of which is procurement.

Long before COVID-19, procurement leaders had already acknowledged the value of deploying new ideas and technologies across their operations. Today, these executives recognize the real imperative is to break down old structures and silos and work toward becoming more collaborative with internal partners and to establish end-to-end technologies that can facilitate greater insights and better decision making. Identifying and unlocking greater value is the clear strategic objective.

With the increased need for organizational adaptability and the ever-growing democratization of data across the enterprise, the march toward digital procurement is fully in progress—from infrastructure upgrades and operational management to improving technology and the supplier experience.

Reorganizing


An interesting concept, especially if some of the spending categories have receded. There may be an opportunity to shift responsibilities, enabling category managers to take on more of the sourcing responsibilities and supplier management. Or you could move some of those activities into the stakeholder organizations, which can increase efficiency and free up time to address some of the more high-value tasks.

Supplier self-service


Self-service is one of the key benefits of e-procurement done right. Companies should maintain solid supplier portal functionality so suppliers can check invoice status and engage in digital bidding. Pushing supplier enablement, taking advantage of the time to bring new suppliers on board, and making sure invoices are coming in digitally can save a tremendous amount of time.

Standardizing contract templatess


Simplifying the way firms contract with new suppliers could significantly streamline the approval process, where back and forth over legal redlines is often a major speedbump. Putting a collection of basic templates in place and then, for example, rationalizing a clause library to house standard preapproved contract language, can facilitate the transition to an efficient level of guided self-service contracting.

Process mining


This tactic continues to be an important part of procurement portfolios, providing a clear snapshot of enterprise-wide purchasing processes in near real time, enabling you to identify and address pricing, compliance, and supplier inefficiencies. Process mining can be instrumental in discovering where manual efforts are producing inefficiencies, as well as help identify automation opportunities. If you plan to embark upon this exercise, it’s critical to ensure the relevant data is accessible, properly structured and, above all, accurate. 


When time is of the essence—which it always is

From dealing with fragmented data across tools and spreadsheets and reacting to external market events, rather than being proactive, to getting weighed down by non-value-added, administrative processes and meetings—among other impediments—many procurement activities are simply taking too much time without generating commensurate value.

As companies implement more complex purchasing solutions, a broad lack of integrated systems has been exposed, which is leading to disconnected processes. Ensuring these systems talk to each other to get end-to-end visibility is a big challenge for a lot of procurement organizations.

Procurement teams are being asked to handle more and more, from supplier sourcing, onboarding, and risk mitigation to getting contract management applications up and running and managing source-to-pay systems.

There are several strategies organizations can employ to combat capacity and bandwidth issues. 


Leverage/maximize technology

Unfortunately, many companies do not take full advantage of their purchasing software’s features and ongoing enhancements. Indeed, in a recent survey KPMG found that only 29 percent of respondents were adopting at least 50 percent of new features from their cloud SaaS providers.1 In other words, they're implementing the technology but largely are not performing ongoing updates. As a result, applications remain in their initial state for years in some cases and the firm isn’t realizing the value it otherwise might in the form of guided buying, sourcing, and contracting, which can free up time to focus on more strategic aspects of the procurement process.

1HFS/KPMG SaaS Adoption Survey, 2023
    


Procurement catalogs

Not only can catalogs drive contract compliance, but they also simplify the way individuals engage with various applications and the overall procure-to-pay process, which can lead to greater user satisfaction. Procurement catalogs define the items and services that company employees can order for internal use and centralize spending while streamlining purchase orders.

    


Self-funding initiatives

By pursuing projects that drive savings that outweigh the costs of the project, procurement can increase the chances of budgetary approval.  Projects that conduct sourcing, drive working capital optimization, produce headcount savings, and deliver similar defined value that can be clearly articulated have a greater chance of being approved.

    


Reorganizing

An interesting concept, especially if some of the spending categories have receded. There may be an opportunity to shift responsibilities, enabling category managers to take on more of the sourcing responsibilities and supplier management. Or you could move some of those activities into the stakeholder organizations, which can increase efficiency and free up time to address some of the more high-value tasks.

    


Supplier self-service

Self-service is one of the key benefits of e-procurement done right. Companies should maintain solid supplier portal functionality so suppliers can check invoice status and engage in digital bidding. Pushing supplier enablement, taking advantage of the time to bring new suppliers on board, and making sure invoices are coming in digitally can save a tremendous amount of time.

    


Standardizing contract templates

Simplifying the way firms contract with new suppliers could significantly streamline the approval process, where back and forth over legal redlines is often a major speedbump. Putting a collection of basic templates in place and then, for example, rationalizing a clause library to house standard preapproved contract language, can facilitate the transition to an efficient level of guided self-service contracting.

    


Process mining

This tactic continues to be an important part of procurement portfolios, providing a clear snapshot of enterprise-wide purchasing processes in near real time, enabling you to identify and address pricing, compliance, and supplier inefficiencies. Process mining can be instrumental in discovering where manual efforts are producing inefficiencies, as well as help identify automation opportunities. If you plan to embark upon this exercise, it’s critical to ensure the relevant data is accessible, properly structured and, above all, accurate. 


When budgets are tight—which they always are

Under the best conditions, funding is a perpetual challenge. How do you deliver value without budget? How do you activate innovative ideas and broad, transformational programs if you don’t have the dollars?

Whether it’s a matter of limited procurement involvement in planning and budgeting, not enough discretionary budget for non-core activities, or constrained stakeholder budgets, typically there's just not enough funding for all the transformative initiatives you want to pursue, however that’s defined within your organization.

To drive more funding in the next budget cycle, consider these approaches as a way to highlight the value of the procurement function. 

Prompt-pay discounts

Many organizations are simply missing these opportunities. Procurement teams should review their current purchasing process and standardize payment terms to ensure you realize these discounts.

Extending payment terms

If working capital is a priority, work with suppliers to push payments out. This entails better managing master data, reviewing the overall terms for accuracy, ensuring approval thresholds are where you want them to be, and communicating with suppliers to ensure everyone is on the same page.

Tail spend management

This is another area that is often overlooked. During periods when you're busy with higher-value sourcing tasks, you may not focus on tail spend—intermittent, low-volume spending that’s largely uncategorized and not well organized. Simply by doing a percentage of the firm’s purchasing through one of the many e-commerce sites, you can activate a “one-stop” shopping experience and potentially reduce the effort needed to onboard numerous smaller suppliers.

Spend forecasting

By leveraging historical data and spend forecasting technology to optimize inventories and third-party spend,  companies can learn from the past, establish spend targets and goals, and drive cost reductions more methodically.

Benchmark-driven category management

Take the opportunity to look externally for ways to improve the financial performance of your procurement function. Analysis can uncover data leading to competitive best practices and new spending objectives to work toward. A number of today’s procurement applications include embedded analytics that enable firms to compare themselves against competitors within their industry, as well as other similar businesses.

Contract analytics

Are you initiating contracts and filing them away, but not reviewing them regularly? Particularly in connection with complex external service providers, are you truly receiving the support the contract calls for? Do you have clear SLAs to validate those contracted services? Identifying trends, irregularities and any resulting opportunities to improve terms and ensure maximum commercial value.

Prompt-pay discounts

Many organizations are simply missing these opportunities. Procurement teams should review their current purchasing process and standardize payment terms to ensure you realize these discounts.

Extending payment terms

If working capital is a priority, work with suppliers to push payments out. This entails better managing master data, reviewing the overall terms for accuracy, ensuring approval thresholds are where you want them to be, and communicating with suppliers to ensure everyone is on the same page.

Tail spend management.

This is another area that is often overlooked. During periods when you're busy with higher-value sourcing tasks, you may not focus on tail spend—intermittent, low-volume spending that’s largely uncategorized and not well organized. Simply by doing a percentage of the firm’s purchasing through one of the many e-commerce sites, you can activate a “one-stop” shopping experience and potentially reduce the effort needed to onboard numerous smaller suppliers.

Spend forecasting

By leveraging historical data and spend forecasting technology to optimize inventories and third-party spend,  companies can learn from the past, establish spend targets and goals, and drive cost reductions more methodically. 

Benchmark-driven category management

Take the opportunity to look externally for ways to improve the financial performance of your procurement function. Analysis can uncover data leading to competitive best practices and new spending objectives to work toward. A number of today’s procurement applications include embedded analytics that enable firms to compare themselves against competitors within their industry, as well as other similar businesses.

Contract analytics

Are you initiating contracts and filing them away, but not reviewing them regularly? Particularly in connection with complex external service providers, are you truly receiving the support the contract calls for? Do you have clear SLAs to validate those contracted services? Identifying trends, irregularities and any resulting opportunities to improve terms and ensure maximum commercial value.


Prioritize to optimize

It's critical to think about how you and your stakeholders can best prioritize the aspects of the function that are most important to the organization. Validating those conversations with internal partners across the enterprise is vital because these are not just purchasing decisions, they are business decisions and can lead not only to a shared understanding of organizational objectives, but a new level of appreciation for value of procurement to the business.

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Dipan Karumsi

Dipan Karumsi

Principal, Procurement and Outsourcing Advisory Practice Leader, KPMG U.S.

+1 614-249-2384