Ask yourself; why did you put time and money into improving your Procurement Process and getting some eTools? If your answer is to improve your business efficiency, reduce costs and maximise profits, you can safely assume you are with the majority.
Now ask yourself; why would you invest time and money into improving your Procurement Process and then not utilise it properly? The answer is that there is no good answer. If you are using the process in a way that isn’t as beneficial as it could and should be, the likelihood is you probably don’t know that a problem even exists.
In order to recognise when there’s something wrong in your process, know how to fix it and improve the running of your business, identifying what you need for the future is essential.
Let me tell you a story…
As a general rule, businesses believe technology will improve the running of things. Whether this means the first tentative steps to a contract management system, P2P, or a full-blown transformation, businesses seem to follow the same thought process:
- What challenge is it that my team needs to address?
- What Process do we follow?
- Do we need to sort out our Data?
- Based on these three, selecting an eTool to help
If this is done correctly, the business will get the right eTool to help improve efficiency and productivity. In most cases, it does not go as well as hoped and even if the first three work, there’s still an issue.
Businesses have a procurement process tailored to their business model. It is often the case that unnecessary amounts of time and money are allocated to ensuring the eTool follows the businesses blueprint process, stifling the full potential of the eTool.
Take this as an example – Imagine someone wanted to sell you a steam-powered Tesla. You would probably turn them down. The purpose of a Tesla is to reduce your carbon footprint and the idea of a steam-powered one is not only slightly ridiculous but counterproductive, too.
However, attempting process improvement without being adaptable and open to change is equivalent to buying a steam-powered Tesla. 150 years ago steam trains transformed the flow of goods, services and capital. It was some of the best technology available at the time. However, whatever worked for your business in the past won’t necessarily work now, in the same way that we cannot rationally and sensibly implement steam power to a modern mode environmentally sustainable transport. Taking a new formula or tool that is aimed around improving your business won’t work as it should if you force it into fitting an old mould that once worked. It’s inefficient and ineffective.
An IDC study concluded that 20-30% of revenue is lost annually due to inefficiencies in companies. This reaffirms the need for a system that works for the business and the need for businesses to adapt to an ever-changing industry.
Businesses make these common mistakes with the procurement process…
A food company’s manufacturing had its production in separate countries but was able to maintain a close relationship. Communicating regularly meant that they were able to update each other on the latest ingredient coming through the market that could reduce costs and improve production. Without this relationship, the two parties would not be aware of each other’s crucial industry knowledge.
How can we be sure this is the case? According to an IDC study, over 80% of business leaders, including participants from procurement concur that issues “arise because they have different internal systems/applications that don’t ‘talk’ to each other”. Communication is the key to success, however, it’s important to ensure that discourse between departments is both specific and targeted as well as amiable.
There are various mistakes commonly made by businesses. Firstly, as they grow, an increase in goods and service investments are inevitable. These costs of running the business accumulate quickly during periods of growth and if not managed sufficiently, can become detrimental.
Secondly, businesses are spending too much time on admin duties. This is unnecessary when a tech solution is available. However, using eTools must be done correctly. If you try to adapt your eTool to work within the framework of your business processes, it probably won’t work to its full potential capacity. Business processes therefore need to accommodate for the eTool.
Topline Strategy Group conducted a study that reveals the detrimental impact the lack of or improper use of eTools can have on a business. Their findings concluded that up to £1 billion is wasted annually due to inefficiency which accounts for 32.3 million work hours.
It is also of note that:
- Close to 75% of respondents did not feel their current software made them more productive
- Of the 75%, half attributed this to disorganised, confusing user interfaces
- About 40% of respondents said their systems lack essential features
- Respondents who use at least two applications from a single supplier didn’t see an increase in productivity, with only 16% claiming it to be beneficial
So, what’s the solution?
When there is technology that can remove some of the paperwork burden, there is no excuse not to use it. Using the right eTool to help run your business will create more time to focus on the aspects that will further benefit your business.
Essentially, businesses need to adapt throughout growth. It is unsustainable to run your business with the same processes throughout each stage of its development.
Businesses also need to procure a new idea of what it means to be efficient. It’s often not obvious when time and money in day-to-day inefficiencies, however, the evidence shows it soon adds up and takes away from your company’s potential.
To conclude, it’s clear that a rigid, unevolving approach to your business and procurement process will eventually stunt it. Your processes need to adapt to the changes in the business, not the other way round. You owe it to your business to educate yourself on how to run the various improvable aspects and obtain an understanding of what processes fit your needs and how to implement them successfully.
At Bromley Wood Associates we have considerable experience in helping businesses to assess their current organisation and process and working with them to determine their real requirement for the future to make sure they get the outcome they want. If you would like help to assess your procurement function and to map a way forward, get in touch.