How to achieve Maximum Value

From Your Procurement Technology

2014 Enrich LLC. All rights reserved.

Executive Summary
Procurement software has helped many organizations achieve significant results in
the performance of strategic goals, including compliance and process
improvements. It can also provide additional value through price improvements or
value engineering. However, the software can only do so much: many organizations
fail to achieve significant value improvements after implementation because they
are not using their software to its fullest potential. Our white paper will help you
determine the best methods to achieve maximum value from your procurement
software.

2014 Enrich LLC. All rights reserved.

Introduction
Procurement software is a critical component in an organizations efforts to reach
strategic goals around compliance, process improvements or cost savings.
Before implementing a procurement software solution, it is important to review
your existing processes to identify potential areas of improvement. This will help
you maximize the results you get from your software and prepare you to
respond to executive leadership when they ask, Are you achieving maximum
value?
There are four key stages to achieving maximum value.
1. Find the Money
2. Get the Money
3. Keep the Money
4. Manage Risk
It is important to review each stage to determine the effectiveness of your
software installation and internal processes, so that you do achieve maximum
results.

Stage 1: Find the Money

The first step is discovering the full extent of your organizations spending
otherwise known as Spend Visibility. Liken it to imagining your organizations total
spend as an iceberg. You can easily see the tip of the iceberg, but there is a huge
mass below the surface that is not immediately exposed. When you analyze your
organizations spending, relevant detail can be lost in the Chart of Accounts (CoA)
especially if your organization has many CoAs.
To find the money, start by reviewing a years worth of data to determine what
your organization spends its money on, who with, how often and how much. This
is not as easy as it sounds. It involves the development of a unique taxonomy
(specific to your organization) to enable you to categorize and classify your costs.
In many organizations, finance departments have deployed iProcurement systems
to manage requisitioning, ordering and invoice reconciliations.
Consequently, their taxonomies resemble the CoA rather than what is required by
the purchasing department. It is important to create a taxonomy that addresses
the needs of all interested departments.
If the object of gaining visibility is to smash-and-grab the cash, this will probably
be a one-time manual process managed by an analyst using horrendous
spreadsheets. If, however, the procurement function is more strategic, the value
of spend visibility will be understood along with the value of the repeatability of
the process.

2014 Enrich LLC. All rights reserved.

Continuous spend visibility allows leadership to make strategic judgement calls on

what the organization will spend its money on (for example,
the move from paper to digital in marketing, or from internal hosting to cloud
applications in IT). Continuous spend visibility places procurement and the
business in full command of its spend.
With full and accurate spend visibility, Procurement
departments can engage business leaders on the
basis of fact, agree on priorities and pursue
sourcing programs that will deliver the best value
for the organization. Because of that visibility,
they can monitor spending more closely and
ensure that their anticipated benefits are being
realized.

With full and accurate

spend visibility,
Procurement departments
can engage business
leaders on the basis of fact,
agree on priorities and
pursue sourcing
programmes that will
deliver the best value for
the organisation.

Oracles Procurement & Spend Analytics software

can provide your business with clear visibility of
spend, enabling your leadership team to make strategic
judgement calls on tranches of spend, engage with stakeholders on a
foundation of facts, and build and prioritize sourcing programs. Enrich can
offer complete support to help your team get the full picture of your
organizations spending.

Stage 2: Get the Money

This will be achieved in the sourcing exercise. It may well be the result of a
programme that has moved from Request for Information (RFI) to Request for
Proposal (RFP) to Request for Quotation (RFQ), and could include eAuction.
Simply following a defined sourcing process does not automatically guarantee the
results you seek from the items or services you purchase. To get the best results,
you must first clarify precise specifications for the items you are sourcing. The right
purchase should exactly meet your needs, and you shouldnt spend too much on
additional unnecessary features or sacrifice critical components to save money.
These specifications should be prescriptive, precise and clearly define the desired
outputs or outcomes for the item or service. This will allow potential suppliers to
demonstrate their expertise and ability to meet your requirements. It will also
benefit your organisation to stay abreast of competitors activity and industry
trends. This will allow you to make wise sourcing decisions.
Procurement departments that have little or no spend visibility often find
themselves putting out fires in order to keep up with business demands. This leads
to spontaneous and reactive tendering in unrealistic timeframes. In these
situations, the sourcing activity is run purely to obtain a price, and very little
procurement wisdom is involved if any. These activities do not add value but are
run to demonstrate compliance with policy. The antidote? Early engagement of
procurement in the concept definition stage, so that a meaningful and valuable
sourcing process can be defined and run.
2014 Enrich LLC. All rights reserved.

Whether procurement is simple or more complex will ultimately determine how

the process will be defined and managed. Once the process is underway, the
teams and egos (on all sides) must be closely managed to ensure that the process
is not damaged by individual agendas. Careful, up-front planning of the process is
paramount, especially if you are using sourcing software. It is also critical to
clearly define each stage for the suppliers who are engaged in your process.
It is useful to have the business stakeholders define the Heads of Terms at an
early stage to ensure that these goals are achievable. These should be
incorporated into the process and ultimately appear in the contract. This
approach prevents internal departments from coming up with unrealistic
demands at the eleventh hour that could derail the process.
Skilled procurement professionals will understand how to carefully manage
preferred bidder status and award of business subject to contract scenarios. If
you do not pay extra attention to these areas, the benefits your program can
achieve will evaporate in the period between award and contract.
Large national and multi-national corporations notoriously march backwards from
the buyer as the implementation date approaches. This leads the buyer to accept
anything in order to get a contract in place before implementation of supply. The
period between award and contract is a minefield that must be well managed. If it
is not, buyers can see their excellent results evaporate and the contract will not
actually achieve the anticipated results (that may have already been declared to
Finance). Have you seen this happen in your organisation?
Depending on the complexity of the products or services being procured, a signed
contract might not mark the end of the process. A Business Process Outsourcing
(BPO) scenario involves an HR process, transition and transformation with trigger
points. But in a simple services agreement, there is not always a formal process to
gain visibility of a new contract. In some cases, contracts are agreed to but never
drawn on, because the business was unaware of it.
Oracles Sourcing software provides a structured platform where buyers and
others can build events that align with your defined process. The application can
manage a process from RFI through eAuction and on to contract at the click of a
button. This speed to contract is a critical component of the process, as it
neutralises the minefield in the period between award and contract. It also helps
expand the bandwidth of the procurement team so that they can source more
spend more quickly. When integrated with iProcurement, Sourcing provides your
team with the ability to rapidly source from requisitions. Many organisations
dont take full advantage of this functionality and Enrich can help you master
the process.

2014 Enrich LLC. All rights reserved.

Stage 3: Keep the Money

In order to retain anticipated cost savings, your organisation must be sure that
contracts and their renewals are presented in a timely fashion. How do you do this
effectively?
Many organisations find that this process regularly breaks down if a formal
process exists at all. Consequently, Finance departments are left bewildered as to
where the declared benefit has gone. Procurement departments that fail to
cement this process will be short lived in their existence.
iProcurement sometimes struggles to find an owner among the finance,
procurement and IT departments. A lack of ownership, combined with a lack of
understanding of system administration and a vague or incomplete taxonomy,
leaves many organisations with poor or meaningless reporting on the back end.
In some companies, strategic buyers even disclaim ownership of the very system
they should be using to present their contracts to the business.
In some companies, strategic buyers even disclaim ownership of the very system
they should be using to present their contracts to the business.
As time goes by and personnel on both sides of
the buyer/supplier relationship come and go, the
essence of a contract is often lost. New players
will bring fresh interpretations that favour one
side or the other and were not originally
intended. Unless the contract is well written and
well recorded in a system of truth, it will be open
season for the suppliers.

Unless the contract is

well written and well
recorded in a system of
truth, it will be open
season for the suppliers.

iProcurement enables the fusion of people, process and system. There are some
simple success factors that must be delivered: good taxonomy, appropriate
support/help desk, adequate training and timely and good content. iProcurement
helps generate these key results by providing access to contracts and applying
controls (approvals) and rigour (process) in the Requisition-to-Pay process. The
application also provides a definitive record of transactions for reporting
purposes. When integrated with Oracle Sourcing, iProcurement enables the rapid
sourcing of requisitioned requirements.

Stage 4: Manage Risk

There are many definitions of risk enough to generate an industry in itself. Here,
we are focused on the management of risk as a value component of Procurement
software. Once youve implemented a successful programme and are starting to
see results, you can hold on to your success by wisely managing the risk
associated with the procurement process.

2014 Enrich LLC. All rights reserved.

When Procurement has

When Procurement has in-depth knowledge of
in-depth knowledge of
how the business works and has clear visibility
how the business works
of spend, the team can easily spot peculiar
and has clear visibility
activity and trends. When a process is followed
of spend, the team can
properly, purchase orders can thwart fraudulent
easily spot peculiar
activity. Credit limits on supplier accounts will
activity and trends.
prevent circumvention of control without
reference/approval. These are just some of the
ways your software solution can help manage risk. Keep in mind: where
maverick spend is endemic, this control is non- existent. There is nothing
worse than having to stand by while forensic accountants attempt to unravel
how a fraud was perpetrated so make sure that you are taking advantage of
the full capabilities of your software.
Are You Achieving Value?

To achieve maximum
value from your
procurement software, you
must first achieve complete
fusion of people, process
and technology.

When you are considering whether your

organisation is getting the most return on its
investment in procurement software, think in
terms of a procurement system landscape. Your
technology should deliver the necessary capabilities
of spend visibility, sourcing, retention To achieve maximum value from your
procurement software, you must first achieve complete fusion of people, process
technology. Using un-integrated, standalone solutions will fracture the
management of an end-to-end process and severely hinder your results.
Consider this scenario: when an organisation acquires a major asset such as an
aircraft, an ERP system, or production plant with machinery, the company
reviews the necessary maintenance and operational programmes with their
attendant costs to ensure operational efficiency and other gains. When you
consider the external spend of your business as an asset, think about the
amount of internal spend leveraged to manage and maintain it. Is this process
efficient and effective? If not, enlist the experts at Enrich to help you improve
your processes.
Enrich can help you achieve maximum value with a Health Check. After weve
gained a complete understanding of your business goals and key initiatives, our
team will work with your internal resources to identify areas where your
software is being underutilised, optimise your configuration to ensure accurate
and efficient data transfer, and train staff on essential functionality. We will
determine where you are, identify quick easy wins and provide a detailed
roadmap to build your procurement system landscape.

2014 Enrich LLC. All rights reserved.

Author: Padraic Phelan, Consulting Director, Enrich

Padraic Phelan, Consulting Director at Enrich, has held a series
of high profile purchasing and commercial directorships,
including the Director of Purchasing at TUI AG, one of the
worlds largest travel organisations, and Director of Purchasing
(and subsequently Commercial Director) of The City University
in London. During these tenures, Padraic was responsible for
global procurement systems and the processes behind the
technology, including the management of P2P processes for
over six years. Padraic offers a unique perspective on the
challenges facing both private and public sector organisations
in an increasingly global environment, and helps these
businesses add value to their bottom line.
To discuss any of the issues or schedule your health check, contact your local Enrich:
office:
Americas Office
EMEA Office
3655 Brookside Parkway, Suite 265
One Euston Square
Alpharetta, GA 30022, USA
40 Melton Street
Phone: (770) 667-0510
London, NW1 2FD
Email: hello@enrich.com
Phone: +44 (0) 203-574-4720
Email: hello@enrich.com
Hyderabad Office
Block-3, 8th Floor
DLF Cyber City
Plot No 129-132, APHB Colony
Gachibowli Village
Hyderabad 500019, India
Phone: +91 40 4418 0000
Email: hello@enrich.com

Chennai Office
STPI Building 2nd Floor
NO.5 Rajiv Gandhi Salai
Taramani
Chennai 600113, India.
Phone: +91 44 3910 3536
Email: hello@enrich.com

Enrich offers an entire suite of Procurement Solutions and Procurement

Concierge Services to help our clients succeed; from spend analytics,
opportunity assessments and sourcing, to contract management, catalogue
management, iProcurement, tail spend management and working capital initiatives.
We offer a range of deployment options to suit our clients specific needs including;
Cloud, On Premise or Hybrid and provide a one-stop shop for implementation and/or
managed services to help clients squeeze the maximum value from their Oracle Solution.

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