There is significant continued innovation in procurement, as evidenced by new technologies, and ongoing refinements in current offerings and product offering restructuring. Several procurement technologies are becoming mainstream solutions, including strategic sourcing applications, spending analysis and e-procurement. These solutions are appealing to a wide audience because of their proven track record to enable and/or deliver significant cost reduction. – Gartner, Hype Cycle for Procurement Applications, 2009, 28 July 2009
Enterprise resource planning systems have been, for some time, the key automation enablers of procurement function. They have, perhaps in many cases, created discipline in transactional process execution and resultant data management. However, the Chief Procurement Officer’s challenge to reduce procurement cost can be further addressed at various stages of sourcing and procurement cycle, through use of specific special purpose automated tools (which may be decision support, process accelerators or collaboration tools).
Special purpose tools are generally used for a niche set of activities such as spend reporting, spend analysis, negotiation management, (master) data cleansing, cost policy compliance and control. No doubt organizations can evaluate, implement and deploy such solutions entirely through internal efforts, but now with evolution of service offerings by Business Process Outsourcing organizations, using their services can create additional advantages – of service knowledge, expertise and cost.
The context - CPO Challenges
CPO Dashboard--Using Ms SQL Servers, SharePoint and Performance point technology, a CPO Dashboard can provide an individual user defined dashboard layout, with instant alerts and mail messaging collaboration
The economic recession has brought forth the need to reduce and control costs. The Chief Procurement Officer’s role has gained importance given the CPOs teams’ influence over managing spends. While proven technologies that enable transactional activities exist, such platforms may not generally always support every facet of sourcing and procurement activities that can help reduce or manage spends better.
For example, from a CPO’s perspective, the reduction of cost & better cash flow can be achieved by sourcing better. For this, summarized & detailed view of all spends must be available through a decision support CPO DASHBOARD, preferably at the finger tips of the CPO and his team. It should enable the management, at various levels, to understand the progress over key procurement performance metrics, which area or category could potentially need deeper investigation for correction, or a relook at strategy.
But then, this is easier said than done, for many a time, the reporting flexibility may be limited – after all each one has his own approach to review the information.
Special purpose tools have been able, to a large extent, address these by using feeds from different application instances and providing the dashboard, which can provide the desired summary, and dig deeper to identify possible area of variance. Similarly, organizations can take advantage of sourcing and procurement point solutions, which provide niche functionalities to address different challenges.
The fundamental difference - ERP and Special Purpose tools
Examples of processes that were primary focus of enterprise resource planning are raising and approval of purchase requisitions, raising of approved purchase orders based on purchase requisitions, recording of goods receipt, recording of invoice and matching them with purchase orders and good receipts, recording of payments to vendors and reporting of payables. For a very large organization, the sheer volume of these organization, the sheer volume of these transactions can be mind-boggling and well served by such applications systems
Growth is an imperative strategy of all organizations. As organizations grow in revenue and size – people, capacity, volume, sites, products and services, the underlying operations need to keep pace. Enterprise resource planning platforms enabled implementation of collaboration between various parts of the organization, through set of well defined and standard processes. In doing so, they enabled a resultant repository of data, or database, consisting of transactional data generated through execution of processes. Many of these, due to the nature of standardized and well defined processes, permitted themselves to be outsourced to captive or third party shared services organizations.
Special purpose tools, on the other hand, address a specific activity or set of activities that may help in providing analytics to supporting decisions, or accelerators to executing processes, or collaborate with suppliers.
For example, with the set of data available through the repository generated from enterprise resource planning systems the procurement leaders would need an analysis of their spend for a period. Special purpose tools can help facilitate the tasks to collate, organize, classify, analyze & summarize spends for each category or commodity, by various dimensions. The base data will be obtained from the enterprise resource planning databases processes & analyzed in the special tools. Generally, you may find the special purpose tools a better option to use, because of their concentrated focus, the tools have built in niche functionalities to address varied issues involved (tactical or transactional). They are often resorted to in areas where general end to end solutions are found to fall short. They generally have ability to interface with, or use data from, varied end to end technology solutions.