Whether you’re purchasing for a small business or you’re part of a procurement team in a large organisation, harmonising the various needs of your company can be a challenge.
How do you create efficiencies by centralising procurement, while maintaining staff independence? How can you ensure everyone in the organisation has the items they need without overloading the procurement team with purchase requests?
Online procurement presents an opportunity to balance these requirements. Below are some tips on how to use a digital purchasing system to improve your business function and achieve goals which may initially seem difficult to reconcile.
1. Consolidate tail spend
Tail spend – everyday purchases which aren’t needed for
production, such as office supplies and IT equipment – can rapidly become a
headache for the procurement team. As 20% of tail spend purchases are spread
across 80% of suppliers, this broad base means it can become extremely
difficult for Procurement to keep up with who in the organisation is spending
what, and where these purchases are being made. The procurement team can end up
wasting significant time trying to locate these purchases, which are often not
bought at the most competitive prices.
However, staff want to feel respected and trusted to make purchasing decisions
for their own departments. They want to buy supplies as they need them, rather
than asking Procurement for permission for every small item. An art teacher is
best equipped to know which paintbrushes are right for their class, but equally
the procurement team needs to know employees are achieving best value for the
organisation.
This can be solved by buying all tail spend items online, using a central
transparent and efficient program. Olivia Rowling, founder of the Butterfly
Patch Nursery group, did exactly this. Her business’s previous procurement
model, using multiple suppliers, meant they used to spend around £20,000
kitting out each new facility. Moving to online purchasing meant the cost of
each nursery was driven down by 60%.
This online shift was also instrumental in helping save hours in planning and administration for her team. As the approval purchasing process has been made easier, managers can simply add what they need to an online basket, before their orders are approved and processed by a central decision-maker. Her team saved time, and could focus on other goals. Olivia sees digital procurement as a useful aid to help reach her goal to launch 300 nurseries within the next three years.
2. Compare prices quickly and efficiently
It’s important to get the best possible value when making purchases, and this
is especially relevant in an organisation managed by strict overarching
policies. For Rob Owens, Chief Operating Officer of Stephenson Multi-Academy
Trust, procurement was guided by governmental requirements. Under MAT rules,
the price and quality of each item which the procurement team wants to buy has
to be compared against three different suppliers. Owens recalls that on some
days, the finance team had to place hundreds of orders – from stationery to
software for departments, to furniture – making the process of seeking and
quality-checking three different suppliers very protracted and inefficient.
By moving to online purchasing, Rob’s team could easily and quickly compare
suppliers’ prices and quality, satisfying the Trust’s procurement rules and
saving a huge amount of time and resource. Not only were they able to secure
cheaper prices than they were getting previously, but the time invested in
procurement was massively reduced. It also gave the procurement team freedom to
explore interesting new projects, which they had been unable to do due to time
constraints. Staff felt satisfied and excited by the prospect of reducing
laborious paperwork and using that time to focus on new ways to develop the
MAT’s provision to students.
This also generated substantial time-saving benefits for the teaching staff.
According to Rob, the less time teachers spent procuring, the more they could
focus on their core job. There was an additional cost benefit too: Rob explains
that any savings teaching staff make is more in their budget, so they can buy
more for their departments and consequently, more for the students the schools
serve.
This ability to compare a vast selection of suppliers creates a competitive
market that is a huge advantage to any organisation. In fact, business
customers have reported a 94% competitive selection parity, which can reduce
prices by up to 70%.
3. Decentralise the procurement process
It is often practical for wider parts of an organisation to have purchasing
powers, so they can order individual items, rather than making requests to the
procurement team every time they need to buy a printer ink cartridge or a box
of pens. This has obvious time-saving advantages for the procurement team, but
it can rapidly become complicated and difficult to track.
The University of Leicester employs 4,000 people, over 100 of whom have
purchase cards. The lack of a digitised procurement system, coupled with the
relatively large number of staff with purchasing responsibilities, made it
difficult for the procurement team to track expenditure across the institution
as a whole.
For Anthony Midgley, Category Manager and Procurement Systems Lead at the
university, modernising the procurement process so spend was immediately
visible was extremely useful. Midgley was able to clearly see, in real time,
what was ordered with the system, instead of spending time chasing records at
the end of the month. This allowed him to use time more wisely, enabling him to
ensure the university procurement function ran as smoothly as possible.
Another advantage of decentralised procurement is the
ability for each office and branch in the online shop to have their own name
and billing address, set up by the CPO. If the same invoice number and payment
terms are defined for all orders, expenses can be easily consolidated. This
improves purchasing efficiency, with business customers determining a 13%
average cost saving when procuring online, compared to their manual procurement
processes.
As well as improved accuracy and granularity, this feature helps provide
greater control and visibility, giving CPOs a reliable overview of tail spend
and related expenses, without having to micro-manage every purchase of printer
paper or staples. Moreover, CPOs will have access to a wealth of new data that
allows them to make sound recommendations and demonstrate value to internal
stakeholders. At the same time, employees with purchasing responsibilities have
the freedom to purchase items as they need them, demonstrating trust and
building strong working relationships between Procurement and the organisation
as a whole.
Online procurement helps solve organisational challenges
It can often be a delicate balancing act to manage an organisation’s numerous challenges and goals. It’s important for staff to feel valued and respected, to know they are trusted to buy items for their function without having to seek permission for every last pencil and printer cartridge. But it’s critical to an efficient procurement process that the CPO can track and manage these purchases effectively, ensuring the business stays on track to achieve its key priorities.
There are obvious advantages to digital procurement; as Accenture’s Next Generation Digital Procurement report shows, businesses can dramatically improve speed, agility and efficiency with an online purchasing system. Digitising procurement provides CPOs with a strategic advantage, providing all the information they need to help them future-proof their procurement process while ensuring continued growth and a competitive edge.
So, with the right features that allow the CPO to balance the time and cost savings with the requirements of the wider team, online procurement offers clear benefits. For the Butterfly Patch Nursery, the University of Leicester and Stephenson MAT, a digital purchasing process has been instrumental in helping Procurement to move these organisations forward.
Dave Brittain, Director of Amazon Business UK & Ireland