In the new world economy driven by digital revolution, the consumer is crowned the unchallenged king. It is a world where mass advertising no longer is the main influencer of purchase decisions, instead, product comparisons and peer reviews drive these decisions. Given the new trend, companies have no choice but to embrace digital technology, as existing business models – even in sourcing and procurement – are constantly being disrupted.
Today, business end-users accustomed to online purchases seek the same ease for procurement needs at workplace. For them, it is simpler to find suppliers that provide exactly what they want as they can browse through detailed product specifications and compare brands and prices at the click of a button – all on easy-to-use websites with transparent pricing and delivery commitments.
The corporate end-users are not willing to be constrained by cumbersome procurement processes and would rather, if given the opportunity, purchase directly to meet their specific needs. In fact, a research report from a leading management consultancy indicated that more than half of all B2B purchases will be made on digital platforms by 2016, and expenditures for B2B digital advertising may double by 2018.
End users of procurement services continue to complain that the purchases negotiated by the company was over-priced compared to those available on popular e-commerce websites. Since the emergence of e-commerce over the past decade and ease of access driven through mass personalization and adoption of digital technologies, the end user has become smarter and better connected with the marketplace.
In stark contrast, the main priorities in procurement organisation continue to be dominated by cost savings, supplier rationalisation, better quality, better payment term, and the most important, compliance!
Historically, corporate procurement’s mandate has been to streamline processes and source the best products at the best price for which the procurement function has controls and policies aimed to curtail lavish expenditures within the organisation. In recent years, procurement groups have tightened their policies even further in an attempt to curb individual purchases on online buying options. These include an approval authorisation procedure, reimbursement policies, and also, pre-approved supplier lists that buyers can leverage. However, in the digital age, such measures may prove cumbersome for employees’ legitimate attempts to procure in the best interests of their companies.
In the early days of adopting legacy e-procurement applications and first generation punch-outs, the technology to tightly integrate with marketplaces was lacking and further constrained by the limitation of payment options. At that juncture, there was no option but to identify outliers by random audit or through requestor inputs and browbeat the vendors to meet the competitive pricing.
However, with the advancement of technologies, it is now feasible to think innovatively in enabling the end user within the organisation purchase from the e-commerce marketplace through an interface.
Taking procurement to e-commerce marketplace
There is no denying that the digital economy is here to stay and has changed not only business models but also user behavior. Perhaps, the most logical thing for a procurement function would be to go with the flow and empower end users with an online procurement tool that allows them to purchase from e-commerce marketplace based on company’s procurement policies.
The new generation of cloud-native e-procurement applications permit organisations to leverage the vast business network of e-commerce marketplace providers, wherein you can configure and find items from pins to signboards to computer accessories.
Adopting this will not only alleviate the procurement function, it will also inspire confidence in end users. The adoption process is fairly simple once the right e-procurement engine is in place.
• Identify products that are non-mission critical and not price-sensitive and can be allowed for purchase through the e-commerce marketplace
• Create an internal benchmark (price, delivery applicability) for such product categories and make them available to the end user through unique content filtering, allowing buyers to decide what content is visible to their end users
• Set-up an easy approval process according to the accounting principles laid down by the organisation
• Streamline payments by leveraging virtual cards and new generation payment gateways to further reduce cost of transactions
• Ensure that the purchases are in line with company policies and procedures through use of real-time reporting and monitoring
With these simple steps, organisations can ensure that end users can purchase what they want from either an internal source or an external source and yet fall within the ambit of corporate governance. It allows procurement professionals to focus on more strategic initiatives and drive value for the procurement function.
Benefits of e-procurement plugging into e-commerce
The inherent advantage of integrating e-procurement with e-commerce marketplace allows for a digital evolution by:
Enabling better decision-making - A simpler, more user-friendly way to ensure that the best products are bought at the right price. This is done through price comparisons, peer reviews, and good online experience. This also puts the onus on the supplier to provide the right information.
Offering a wider variety to choose from - The ease of browsing and comparing products empowers users to make purchases according to their specific needs. Often, end users do not like to be tied down to a generalised product list prepared by procurement teams.
Being more convenient than traditional procurement - End users find online purchasing significantly more efficient than traditional catalog-based procurement processes as they can buy products customised to their business needs. This is especially true in the case of urgent requirements where the busy end users have little patience for lengthy approval processes and the wait for procurement to find the right products.
Streamlining vendor development and supply chain management - Allows businesses to identify trends and spot opportunities to increase efficiency while reducing costs. It also allows tracking of spend and vendor feedback to streamline the SCM process.
Creating transparency in buying process - As all vendors are listed on the online tool and users are empowered to make their own decisions, it allows for greater transparency in the procurement process.
The main challenges in implementing an online procurement tool for end user buyers will mostly be around two main factors – corporate buy-in and collecting correct information on buying needs from end users. To address these challenges, organisations can begin by consistently educating end users and staff on the best practices to leverage benefits of the tool. Here, it is important to communicate the benefits and convenience derived from using the tool. This will also help gain buy-in at the executive level. Procurement can divert all queries to the tool to ensure faster adoption and acceptance by end users. Above all, procurement must ensure that the tool is absolutely user-friendly as this will directly impact adoption of the tool.
By Kalpesh Swali, associate vice president at Wipro
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