Why eSourcing must play technological catch-up
Procurement leaders need an eSourcing tool that provides the flexibility and analytics to secure best value and cost on an ongoing basis
A week may be a long time in politics but, in eSourcing, it is merely the blink of an eye. Mainstream technology providers are catching up to where they should be. This means full cloud and module integration, capability that extends all the way from source to payment, and full analytical and visualisation compatibility.
However, the world is continuing to move on and it has become apparent that existing eSourcing solutions are not always capable of improving the way procurement needs to work. There are three major reasons for this.
- The types of analytics required today are so complex and multidimensional that existing solutions built on far simpler metrics just cannot replicate them.
- A fact-based negotiation approach, with its focus on clarification and feedback, requires many iterations and scenario testing to find the best solutions and this functionality is not always available.
- It is necessary to operate a very structured process with tailored rules and approaches that can seldom be configured fully within off-the-shelf software packages
Our vision is for a solution that embeds analytical, process and technical knowhow, delivered through a consistently replicable, scalable technology platform.
This vision is focused around six key deliverables:
1. One flexible application
A single application that covers the entire procurement life cycle, but is also flexible enough to pick up a process mid-way – because not all activity begins at A and runs to Z. For example, not all procurement processes start with an Opportunity Assessment or Spend Analytics. Many key activities can instead be kicked off at the Supplier Relationship Management (SRM) or contract management phase, so it’s vital that a system would support this kind of flexibility.
2. Support for multidimensional RFx structures
Getting the underlying data structure right is key, which means supporting multidimensional RFx structures. Common themes can be identified:
- First is what might be called ‘Excel-itis’ – the flexibility to customise the format, which makes life easy for the user but complex from a system perspective.
- Second, taking into account direct spend – often, a great deal of time is spent on direct, commodity-based categories and outsourcing.
- Third, many categories have already been efficiently sourced, so new approaches are required to unlock further (and sustainable) value
3. Full OJEU integration
New, more restrictive rules have been put in place, making procurement even more important. This affects not only the public sector, but also those companies covered by the Utilities Directive. Being able to publish Official Journal of the European Union (OJEU) notices enables suppliers to express interest in a streamlined way and to quickly complete a type of pre-qualification questionnaire (PQQ) document to assess whether or not they are suitably qualified. The major differences between OJEU and non-OJEU events are:
- Weighting transparency
- Lotting structures
- Supplier registration and ongoing updates
- Scoring methodology
Weighting transparency deserves closer attention. Developing a solution with clearer weighting transparencies not only improves the relationship between suppliers and clients during the bidding process, but also into the future.
4. Advanced, automated self-service analytics
Analytics is an area long overdue for revolution – Procurement can now do so much better than Microsoft Excel. Technology can revolutionise eSourcing analysis where it is not uncommon to re-analyse supplier responses three or four times across multiple suppliers, which adds up to a vast amount of time spent crunching numbers.
So far, the major reason conventional non-eSourcing approaches have been preferred is that the extra effort required upfront seldom pays dividends on the back end. Some 80% of the analysis is standard across categories, but since this data is captured in non-standard Excel files it is impossible to automate the analytics. By capturing the data in a unified format, the data can then be processed comprehensively – fundamentally changing the whole RFx, negotiation and supplier selection process
Creating a solution that can automate much of the process, leveraging pre-existing tools, will be a real game changer.
5. Accelerated supplier feedback
Advances in analytical processing technology also make the supplier feedback process much more automated. More data, analysed at greater speed, allows the acceleration of this process so, instead of weeks or months between response cycles, this can be reduced to days
6. Data store and reuse
Historically, some intellectual capital from projects has been centrally collected but only at a high or surface level. Now it is possible to capture item-level data from every supplier and every category. Big data has truly arrived in procurement, and will unlock new benchmarking and knowledge management opportunities, breaking out of the data silos that used to define individual projects.
The vision for eSourcing technology harnesses the power of big data to fundamentally recast how procurement is understood, delivered and valued. Best of all, it can be applied in a consistent, widely adaptable and client-friendly deployment. With this, eSourcing can be used properly to do the job it should be doing.