This article first appeared on the Jon Hansen blog
Entering the high-tech industry almost 35-years ago, and the procurement world not too long afterward, it is safe to say that I have seen a great deal.
Before Gartner’s proclamation of a “Postmodern ERP era,” most ERP-centric eProcurement initiatives were failures. While there is uncertainty regarding the rate of failure – some data suggest that it was as high as 85 percent; what is certain is that the impact of said failures had far-reaching consequences.
For example, the Veterans Health Administration (VHA) in the United States spent more than a combined $650 million for not one, but two initiatives that did not deliver the promised efficiencies and expected results. The consequences of these failures came to a very public head with a Congressional hearing regarding the Bay Pines VA Healthcare facility in Florida in which a breakdown in purchasing meant that patient care suffered.
In another instance and citing the growing expense and unrealized benefits of their ERP-centric initiative, a major drug store chain went into receivership. As an aside, the vendor agreed to pay the receiver an undisclosed amount of money in damages.
Now I want to be clear here; this article is not meant to call into question ERP vendor commitment to deliver on the promise of these or for that matter any eProcurement initiative. Nor is it a universal “call-out” regarding technological shortfalls. After all, and even though today’s emerging on-demand digital technology is an improvement on the eProcurement ERP solutions of the past, there are longstanding risks that still exist.
In other words, the failures of the past were not only a technology problem – which is why we must look beyond the technology.
“In what Gartner has called the Postmodern ERP era eProcurement technology, and technology, in general, has become more accessible from both an availability and ease-of-use standpoint than it has been historically. However, does increased technological accessibility ensure success?” – Digital Transformation in Procurement (2018)
As previously indicated, while there were many challenges with ERP technology – especially from an eProcurement standpoint, technology alone was not the problem in the past, nor is it today.
Today’s on-demand or SaaS-based eProcurement solutions are intuitively user-friendly. Instead of months and years, Source-to-Pay (S2P) solutions can be up and operational within weeks and in some cases, days creating an opportunity for an almost immediate ROI.
The problem is that as fast and easy as these new platforms are to use, there are potential challenges regarding implementation planning and the availability of quality data.
Learning from our past experiences, what is needed is not better technology – which we now have, but better collaboration between stakeholders who have expertise and experience with all facets of the end-to-end procurement process.
Who’s at The Table?
Anyone who has spent any time with someone in procurement will have inevitably heard the profession’s greatest lament about not having a seat at the table.
While the word “table” means more than a plank of wood with four legs, the real issue is that until recently, procurement or purchasing was considered little more than an adjunct function of finance. On receipt of a list, the primary responsibility of a buyer was to dutifully obtain the needed product or service at the best possible price – period. There was rarely any involvement in the planning stages.
As a result, and when it came to choosing an eProcurement solution, procurement professionals had minimal involvement and say regarding the ERP-based procurement solution they would be using.
Is there any wonder why initiatives in the past faced an uphill battle with user adoption or maverick spend?
Even with the engagement of third-party consultants to assist with the selection and implementation process, procurement expertise was largely non-existent.
The New Standard
Digital transformation, especially regarding an organization’s S2P process is a hot topic for many executives. While few will dispute the potential benefits of “going digital” with their supply chain, most companies are stuck in a holding pattern regarding moving forward with a tangible action plan.
According to McKinsey’s Jacques Bughin and Tanguy Catlin, even though neglecting to “embrace digital innovations” poses a significant risk to organizations, less than 25% of companies in their survey are on a path of “digital reinvention.” What is even more telling is that only 2% of the organizations that have a strategy involve their supply chain.
To make the transition from a static acknowledgment of digital promise to one in which there is a realization of tangible benefits requires a depth of expertise that is not available through the engagement of a traditional, general practice consultancy.
In place of the old model consultancies, there is a requirement for a new consultancy standard in which procurement is a core versus an adjunct competency. I like to call it the “by procurement professionals, for procurement professionals” approach to strategic digital implementation and management.
The new consultancy model or standard is one in which procurement is the focal point of the practice. I am not suggesting that this means there is a myopic focus on procurement at the expense of understanding its place within and impact on the overall enterprise.
What I am saying is that the new consultancies have a holistic view of an organization and its operations, enabling them to understand the best and most effective way to leverage emerging digital procurement platforms to achieve corporate objectives.
It is through this broader lens perspective with a solid foundation of procurement expertise that the new consultancy model will deliver the digital promise starting with a proven “procurement-centric” implementation methodology.
From Readiness to Going Live
To have a seamless end-to-end digital S2P platform that delivers maximum return and value, requires a seamless implementation methodology, starting with getting an organization to the point of digital “readiness.” A big part of digital readiness includes having clean data.
In the next post, Fluxym’s Managing Director Thierry Jaffry will provide a more detailed overview of his company’s integration methodology, including why data cleansing is important and what his company’s process for getting to clean data involves.