Fire Your Procurement Department!

Probably the most important part of a business is the way that it spends and manages money. Without money, a business can not operate…if it can not operate, it can not exist as a revenue-generating entity because there will be no money. Even though an SAP Ariba consultant has a ton of answers for the questioning business if the company is spending more than its making and does not plan to fix the issue… it’s a lost cause.

Although firing the procurement department may sound like an unorthodox solution to a simple problem, it may be the only way the company can regain or establish success. Think it’s crazy? Keep reading and see why it makes sense.

Source-to-Pay Strategy

When it comes to the procure-to-pay way of life, there is an already set agenda that does not need to be planned out or facilitated any differently than the way it has already been established. The difference between source-to-pay and procure-to-pay is that the procure-to-pay strategy is one that has already been established and has sources to purchase from. A source-to-pay process, on the other hand, has yet to be sourced and needs to have vendors established.

The best, and most modern, way to handle any procurement operation is to get the help of specially designed software that uses artificial intelligence to help manage and regulate the entire process from start to finish.

Understand that you do not need an entire procurement department to handle the buying and paying for company necessities if you have the help of a smart system that can do it better.

Source Management

In order to get the very most out of every penny that the company spends it is important to invest in sources that are going to be reliable and provide quality products and services. How does the procurement department find the right sources?

• Google?
• Bing?
• Craig’s List?
• Freind?

Maybe there are professionals in the department that have solid connections that are always available. Maybe not. In any event, no human being can compete with the speed of the artificial intelligence that is behind many of the powerful procurement software applications available on the market today.

Source-to-pay technology can quickly scour databases located around the world for sources that match the needs of the company and even have the highest potential to be a high return on investment.

The software can find sources that are:

• Highly reliable
• Priced efficiently
• Available
• Ready to go

When a company has the right sources there is no stopping its success. It is not a secret that any business is only as strong as its spending strategies.

Spend Management

The best way to make sure that every penny that is spent comes back to the company bigger and better than before is to implement a spend management strategy that not only looks at spending trends but can predict the best places to spend, and calculates the highest return rates for the money spent.

For example, if the company is currently paying $3.50 apiece for pairs of gloves to resell at $7.00, the software can calculate where the same gloves or gloves of higher quality can be found at a price rate that is at $2.50 for a certain amount of gloves bought within a specified timeframe.

Spending money in ways that is both beneficial and rewarding to the company is a powerful way to increase revenue and hold on to more money at the end of the day.

Software that is designed specifically for procurement purposes has the ability to find the best sources with the best prices at any given time.

Managing the money spent, and ensuring that the money is being spent in the best way possible is a great plan for the health and continued success of any business.

A procurement department would have to go way out of the way and spend many work hours finding the top sources that have the best prices and the greatest value. Instead of paying every employee in the department to find and take care of spending practices, you could implement a software solution for thousands less per year and allow a qualified employee to administer the program.

Buying and Paying for Goods and Services

One thing that you’ll probably never have to worry about software doing is stealing from you, or losing any financial data. When it comes to an effective buying procedure for goods and services from various sources and vendors, things can get a little hectic at times. Procurement software is designed to take advantage of situations such as this and provide some powerful help so that everything runs as smoothly as it possibly can.

High-quality procurement software has the capability to go beyond the sourcing phase and get right into the ordering of the goods and services that are necessary for the business to run.

Sometimes when the sources are negotiated the people that agreed upon the stipulations inside of the contract forget about informing the rest of the crew about the deal. For example, if the source agrees that a discount of 80% can be applied if the order is a certain size or has a certain number of items the checkout of the source may not know that the deal is in effect and charge the company for the regular price without the discount. If the purchasing company does not know the deal, and the checkout does not know the deal, the price will be paid and the company may never know the difference.

Source-to-pay software is designed to catch issues like this and correct them before they even get a chance to take place. Where the procurement department could fail to detect issues that will leak money aimlessly away from the company, a powerful software platform will stop it before it happens and address the situation in a successful manner.

Administration and Impmementation

The honest truth about implementing a software solution that is so complex and has so many features is that it is a lot of work. However, once the application is dialed in and going in the right direction there is not much to do other than log in and keep track of what’s going on.

Although there may be a need for a consultant in the beginning stages of the implementation, the reward that will come with the software will far outweigh the work that it takes to get everything in place.

Some of the functions that can be integrated into the application are:

• Source management
• Vendor management
• Contract management

In addition to the management capabilities, the artificial intelligence that is engrained in the system is smart enough to keep track of all of the procurement activity and make predictions for wiser spending in the future based on the calculations that come from the activity of the business spend system.

Conclusion

If you already have a full procurement department in place, but you don’t want to fire your people, don’t worry…you don’t have to. The software is sophisticated enough that it can manage and maintain every aspect of the department, but it is not human and is limited by its own limitations. However, you can train the people you have to do a much better job with the application in place which will, in turn, bring in better money for the company and help to lessen spending amounts dramatically.