Procurement Automation: How to do it Right

This is an excerpt of the original article. It was written for the May-June 2012 edition of Supply Chain Management Review. The full article is available to current subscribers.

May-June 2012

Supply management can be a powerful competitive weapon—if the strategy driving that activity is closely aligned with the business strategy. Yet new research suggests that the necessary alignment is often lacking. CAPS Research experts offer a process for identifying and implementing the supply management strategies that hold maximum potential for competitive advantage.

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Over the past 15 years, many procurement departments have participated in a broad transformation of their function and gained greater awareness and relevance within the executive quarters. A large number of those procurement departments leveraged supply management technology to enable their transformation. Supply management solutions automate the sourcing, procurement, and accounts payable functions commonly referred to as the Source-to-Settle process. The primary applications that fall under this category are (1) spend analysis, which helps companies aggregate, classify, cleanse, and analyze their supplier spend information; (2) eSourcing, which automates the sourcing or bid process; (3) contract management, which automates the supplier contracting process; (4) eProcurement, which automates the requisition to purchase order process; and (5) ePayables, which automates the accounts payable process.

These solutions can drive efficiencies and savings and help organizations become more effective. (We’ve included two case study sidebars in this article that serve as examples.) In fact, when deployed successfully, these solutions can deliver some of the most compelling and competitive returns on an investment in enterprise technology available in the market. That means that these projects are absolutely worth undertaking.

Unfortunately, as with any IT project, the returns on these investments are far from guaranteed. There are many potential pitfalls and landmines that can pull a supply management automation project off of its course. The good news is that over the past 15 years, many, many groups have been successful. And these successes have helped establish standard industry best practices. In this article we highlight those best practices that can lead to a successful purchasing automation project. Our discussion follows this sequence: laying the groundwork for a successful automation project; managing the RFP process; and deploying the solution selected.

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