2024
Sharpen Your Competitive Edge with a World-Class Procurement Transformation Strategy
The future of Procurement for businesses at all stages and sizes lies in the digital realm. At Ivalua, our team has responded to the digital Procurement wave by enabling customers to get started quickly on a specific area and expand from there to cover more spend and suppliers. We want to understand customers transformation goals and jointly build a plan to help them achieve that.
Most companies still under invest in the Procurement and spend management. We can help take procurement from the back office to the boardroom.
What is Procurement Transformation?
Procurement transformation is achieved largely when a company is effectively managing all spend and all suppliers. When Procurement and all supplier related processes are digitized and there is complete visibility and insight across all spend and supplier relationships. Transformation is achieved when Procurement is able to focus on strategic objectives versus being overwhelmed by tactical, low value activities. When Procurement is effectively able to align business spend to business objectives.
Procurement transformation takes purchasing tasks and elevates them, making them an integral element embedded into your standard businesses processes, set to affect current and future success. It provides a reliable framework that focuses on shifting your Procurement department from a tactical cost center to a strategic value-added nerve center.
Once a back-office function, Procurement transformation now takes center stage for growing businesses everywhere. Organizational leaders see the value of supporting this critical strategic business endeavor ensuring all essential supplies are available when needed and at the price and quality expected.
If you are a Procurement leader in your organization, you may be searching for the optimal way to transform Procurement. Ivalua offers the solutions to help to get started and achieve a quick win and also help you expand the scope to match your transformation goals to cover all spend and suppliers.
What Elements Are Needed for Your Sourcing and Procurement Transformation Strategy?
There really is no one-size-fits-all strategy for Procurement Transformation since every business is unique. However, there are proven ways to get started rapidly and achieve quick wins to build consensus and support for the longer term vision.
Keeping the full end-to-end process in mind is critical to success, no matter where you choose to begin your journey. A poor decision in one area can impact another. So, it is important to have a perspective on the entire source-to-pay process.
Spend Analysis
As you search for ways to streamline your purchasing process and implement a solid Procurement solution, it is important to take a deeper look at your spend. Exploring this aspect of your business allows you to gain insight into operational ineffectiveness in order to improve your overall sourcing success.
Here are seven steps necessary to conduct a proper spend analysis for your organization.
- Identify all the sources available for your spend data. Look at all departments and other business units, such as accounts payable and general ledger.
- Gather and put all of your spend data into one central database, considering the complexities associated with dealing with data in different formats, languages and currencies. Keep in mind, the right Procurement programs are specifically designed to address such issues head on.
- Cleanse your data, which means finding and correcting any errors and inconsistencies in descriptions, transactions and file names, as well as standardizing spend data for easy viewing.
- Group or link your suppliers together for easier ability to locate specific information at-a-glance and better overall supplier management. Combine purchases made according to company or any other indicator that they are the same supplier.
- Categorize your spend. No matter what category you use—whether UNSPSC, eClass or another company-specific category—it is vital that you can quickly and easily determine where your money is being spent. Categorize office supplies, marketing travel and legal spend predominantly.
- Analyze your spend data to make sure you have negotiated all the best contract deals for each supplier. Ensure that all your buyers are making purchases from preferred suppliers while reducing the overall number of suppliers for each category.
- Repeat the process to keep everything updated on a regular basis, ensuring that contract terms are upheld, buyers are working with preferred suppliers and the best savings opportunities are identified each Procurement round.
At Ivalua, we take you through the spend analysis phase as an organic step in the Procurement transformation process to create spend visibility and to keep your budget on track.
Supply Management
There are certain supplies that are essential to each given business to serve organizational and clients’ needs. The process of finding, obtaining and managing the required products and services according to the business’s budget it essential to short-term and long-term organizational success. Elements involved with supply management include the products and services themselves, information, budgets and employees. The purpose and goals of focusing on supply management procedures is to keep costs reasonable and stable and using resources effectively to increase productivity, efficiency and profits for the business.
Companies find that streamlining their supply-side activities ultimately and clearly serves to maximize customer value and gain a competitive edge in the marketplace.
Category Management
Category management is an approach to managing supply activities with a goal of reducing the cost of buying goods and services, reducing risk in the supply chain and increasing the overall value of the supply base while gaining access to the best suppliers for a given need or set of needs. This strategic approach focuses on the greater majority of organizational spend and, if applied effectively throughout the organization, the results can prove significantly greater than traditional transaction-based purchasing negotiations.
Organizations that fold category management into their Procurement strategy have a median supplier lead time of a mere six days compared to the 14 days for organizations without category management programs, according to the APQC (American Productivity & Quality Center). Additionally, organizations that have initiated category management programs also feature a faster turnaround time for purchase order processing, which comes in at eight hours versus a median of 15 hours for organizations without such programs.
Defined as a strategic approach to Procurement, category management allows organizations to segment its spending on bought-in products and services. The partitioning allows for the goods and services to be placed in discrete groups that identify their unique functions and roles within the organization, according to daily and project use.
Following are a few of the categories on which organizations typically focus spend:
- Office management
- Human resources
- Security
- IT
- Transport
- Travel and entertainment
- Medical
- Industrial products/services
With our procure-to-pay program, we help you improve your category management strategies in the following ways:
- Define the categories and sub-categories relevant to your organization.
- Perform spend analysis to determine the amount of spending allotted to each category and sub-category.
- Complete market analysis to determine how the supply market looks for each category and whether those potential goods and services fit customer needs.
- Commit to supply improvement by applying the market intelligence obtained through market analysis, which has the power to lead to a change in the specifications, the scope of work or finding a new supply base and new vendors.
- Employ continuous application of acquired knowledge for strategic sourcing and transactional purchasing.
Category management provides top businesses with multiple benefits, including the following:
- Centralizing Spend Data. Here, you can consolidate and centralize spend to facilitate easier tracking, logging and reporting. There are also possibilities for businesses to outsource if the indirect spend analysis shows that it would be less expensive than procuring those goods and services.
- Chances for Cost Savings. Category offers opportunities to leverage expertise and experience of category managers to gain insight into a category and its own sub-categories with goal of generating value for each purchase. It offers insights into whether it is better to buy or lease hardware, software and other expensive yet crucial supplies.
Streamlining Business Strategy. In the performance of strategic business planning, category management makes it easier to ty specific strategic goals to strategic purposes.
Indirect Spend and Indirect Procurement Sourcing Strategy
Indirect Procurement and indirect spend focus on sourcing all the necessary goods and services that a business needs to maintain and develop its core and overarching operations. There are several key goods and services that fall under the umbrella of indirect spend and Procurement. These products and services are commonly purchased for consumption by internal stakeholders that include business units or functions, rather than for external clients and customers.
Indirect Procurement categories may include, but are not limited to:
- IT related services, such as hardware and software
- Marketing-related services like media buying and agencies
- Professional services that include consultants and advisers
- Travel management services
- HR-related services that include recruitment agencies and training
- Facilities management and office services, such as Telecoms, furniture, cleaning, catering, printers
- Utilities like gas, electricity, water
- Consumables, such as grease and oil
- MRO (maintenance, repair, and operations)
- Capital goods like plant facilities and machinery
- Fleet management
How Does Ivalua Help You with Your Sourcing and Procurement Transformation Solutions?
Our Procurement team at Ivalua is here to help you with tasks that involve purchase requisitions, purchase orders, receiving, budget tracking, advanced sales Procurement function and planned collaboration for a better buying experience.
- Purchase requisitions that help you find what you need quickly via searches for products and services needed, based on created kits and saved favorites.
- Procurement assistance route requests by way of the Procurement team or others as needed. At times, employees may do spot bidding from a requisition form.
- Continuous workflow processes to meet your needs offer configurable requisition types that feature workflows, alerts and default settings that streamline the request and approval process.
- Accurate accounting by generating accounting entries for different ledgers and for managing taxes appropriately.
We Are Here to Help You Build Your Own World-Class Organization
Our goal is to offer you a solid Procurement strategy via a full menu of digital Procurement transformation solutions that will streamline and ultimately revolutionize the way your Procurement team acquires goods and services for your operations. Explore all the digital strategies and solutions we have developed to help you access and purchase the supplies you need to guarantee success as a world-class organization in your industry.
Related Resources
Analyst Report
Ivalua Recognized as a Leader In the Forrester Wave™: eProcurement Platforms, Q4 2019
Customer Story
Complete Digital Transformation of Procurement with High ROI. Read Why Crédit Agricole chose Ivalua
Analyst Report
Ivalua recognized as a Leader in Gartner’s 2019 Procure-to-Pay Magic Quadrant