Just by browsing the front pages of newspapers and reading the headlines, it would appear the pace of business volatility continues to increase and the bar continues to be raised for procurement practitioners who are required to keep pace and walk in stride with the volatile changes. They are expected to create more value out of supply chains with very limited resources at their disposal.
BY Charles Lovemore Nyika
As the world economic order continues to sway back and forth from bullish to bearish and vice versa, it is an unspoken truth that cost-reduction initiatives shall continue to dominate boardroom discussions. In order to make corporate relevance, the procurement professionals will need to step out of their shadows to think hard and wide on how best to craft strategies that will not only reduce costs but add value to their business organisations. The scale of opportunities to generate significant bottom line savings while at the same time creating competitive value drivers through e-procurement are often untold stories.
The deployment of e-procurement platforms will form the basis of creating “a supply chain analytical framework that is able to integrate internal and external business data sources which happen to be critical for understanding the ever-changing business trends”. The integration of data sources will allow supply chain experts “to detect potential red flags such as credit risk, deteriorating quality of materials, potential fraud signals, potential contractual disputes, bankruptcy and regulatory challenges.”
It would, however, appear that many procurement departments remain stuck with the file cabinet approach almost always full of manual documents. Such kind of approach will make such organisations continue to struggle to keep pace with business realities in a business world that is progressively real-time driven.
The procurement departments with manual procurement processes will obviously continue to falter due to the continued use and reliance on antiquated, old-aged manual procurement processes and procedures which in most cases are not flexible enough to respond to the needs of the ever-changing business landscape.
The good thing with the adoption of a well-integrated end-to-end e-procurement system is that the entire process forms the bases of a best-in-class workflow system which efficiently drives each step to flow into the next, making sure that supply chain departments are in sync with daily happenings in the supply chain ecosystem.
Supplier collaboration strategies can be easily achieved by using one shared technology platform which supports a seamless supply chain process from sourcing all the way through to payment. Such a shared technology platform will enable procurement staff to place purchase orders on line, with suppliers acknowledging and reviewing placed orders electronically.
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E-procurement can also create competitive advantages through greater data accuracy, which minimises ordering mistakes and provides the essential building blocks for better supply chain management through transparent processes. In addition, e-procurement creates more effective use of time which can be translated into financial benefit if properly managed and measured.
The wide adoption of e-procurement will also significantly reduce the probability of rework and delays associated with manual orders, thus lowering the supplier’s and customer’s order processing costs and cycle times.
E-procurement has often been credited for reducing inventory levels within organisations, especially in cases where extranets link the systems of the procurement department and suppliers over the internet, thereby facilitating the real-time exchange of information between the supplier and the procurement department. This system has been used to good effect in the retail sector.
Reduction in inventory levels will therefore translate into a significant reduction in the amount of working capital required. As such, the retained earnings gained could be shifted to other important growth strategies such as the acquisition of capital equipment to grow the business.
The e-procurement platform will enable the organisation to have a holistic macro and micro visibility in the supply chain ecosystem, thereby creating procurement usage trail which makes it easier to understand spending patterns while maximising the buying power of the organisation. There is probably no other surer way of pre-emptively detecting misappropriation and or misuse of material resources than through the adoption of a robust e-procurement system.
The other often celebrated benefit of e-procurement is that it is always useful in the creation of a central hub for information dissemination which will enable the maintenance of spending visibility in the whole supply chain. Spending visibility is very important since “it will help in ensuring compliance with existing and established contracts while centralised tracking of transactions enables full reporting on requisitions, items purchased, orders processed and payments made.”
The clarion call for the prudent use of budgets continues to echo in the corridors of stakeholders for many business organisations and e-procurement could easily be the closest answer to the demands for greater budget transparency and accountability required in the procurement field.
The implementation of an e-procurement system can also facilitate the automation of contracts which will allow the legal team and procurement to work closely together to customise and or standardise contracts in their quest to minimise or eliminate risks and potential liabilities that can arise in the supply chain. The use of electronic procurement systems can therefore provide proactive contract reviews, renewals and contract compliance.
E-procurement has also made it feasible for supply chain professionals to make use of standardised supply agreements, which makes it possible to re-use existing standard documents and templates that have been used before as a way of minimising errors and managing supply chain risks.
E-procurement has often been associated with the added benefit of reducing the procurement cycle time which has got a positive impact on the revenue generation potential of the organisation because raw materials are made available faster to the production department and for those products that are bought for onward trading, they also get to the market faster.
The need for e-procurement has become a strategic imperative due to the recent emergence of digitally-savvy suppliers and service providers. Similarly, user departments and end consumer’s appetite for instantaneous results has been heightened by the social media “here prevalent” in today’s world. The proliferation and the swelling use of social media by everyone from anywhere and everywhere has prompted organisational employees to clamour for the adoption of same e-capabilities at the workplace to make their working life easier.
While it is an unspoken truth to say that e-procurement is here to stay, it is still anybody’s guess whether the full technology capabilities of e-procurement available have been harnessed to their optimum potential to achieve maximum benefits for the supply chain ecosystem. This often neglected question will remain available for debate and discussion, but for now it is a question best left unanswered.
Charles Lovemore Nyika is a supply chain practitioner based in Harare. For views and comments, he can be contacted at [email protected]
