How do you achieve effective procurement − by affording all departments the opportunity to purchase directly? What are the risks of such an approach and how can you reduce such?
Most mid-sized and big businesses already have a dedicated department responsible for providing the company with everything from paper to spare parts for production-line repairs. So, why would you offer to involve other employees in the procurement process?
Boris Shiklo, CTO, ScienceSoft, explains how you may benefit from such an approach, what the risks are and how they can be mitigated.
Why involve non-procurement employees?
When you allow non-procurement employees to take a direct part in the ordering process, the following gains could be achieved:
1. Enhanced efficiency of the procurement department
Procurement teams frequently get ‘attacked’ with questions from other departments about order status and delivery dates as well as requests to change orders, etc. The involvement of non-procurement employees can help procurement professionals reduce the time spent on low-value, repetitive tasks. And, even in cases where orders still require approval from procurement staff, this still decreases the time spent on order processing. It spares procurement professionals from multiple clarifications in respect of order contents as well as from duplication of effort as they do not have to re-enter information received from other departments via email or into internal systems in order to fill in order documentation.
2. Smarter purchases
When orders are placed by people who need these products and services directly to use in their work, it is more likely that they will make smart choices. End-users are more likely to know what product model or brand will serve longer and better as well as will not require costly rework.
3. Reduced misinterpretations and errors
Misinterpretations and errors may appear when order information comes through several departments before finally reaching its destination – a vendor. Moreover, procurement professionals often have difficulty understanding the characteristics of specific goods and materials. Allowing non-procurement employees to complete orders on their own, greatly increases the chances of accuracy and that requestors will receive exactly what they expect.
4. Informed vendors
Collaborative procurement allows for direct communication between non-procurement employees and suppliers, thus it becomes much easier for the latter to get constant feedback from end-users and to understand what can be improved upon and how.
Fears about purchasing directly
However appealing, the idea of involving other departments in purchasing activities may provoke rather disturbing thoughts, such as:
1. It can result in maverick buying
The more people that are engaged in the procurement process, the easier it is to lose control, face violation of company guidelines and policies, exceed budgets, etc.
2. It can distract other departments from their job
Employees from other departments may get distracted from their core responsibilities as they spend their time and effort on the extra procurement activities.
Fortunately, the above reasons are not enough to abandon the idea and to forget to acknowledge the benefits of involving non-procurement staff. There are ways to safely mitigate the associated problems with the right software choices.
How you can win with a procurement portal
One of the options worth considering is a procurement portal. A portal provides the possibility of enjoying benefits while mitigating the relevant pain points that you may be facing. It combines the functionality of a vendor portal and internal procurement software to allow for smooth and controlled ‘extended’ procurement.
To prevent maverick spend, an e-Procurement portal uses various mechanisms to ensure a centralised, manageable and efficient purchasing process. It allows procurement departments to configure workflows to specific guidelines and rules of the business, thereby preventing violation by non-procurement staff while placing orders directly. For example:
– The portal allows employees access to only selected/recommended suppliers that have been approved by the purchasing team.
– The portal allows employees to purchase only according to agreed terms.
– The portal introduces access control with different rights for different employees, departments and locations.
– The portal sets up an approval process for either all purchases or for specific situations (e.g. when budgets are exceeded) and departments.
– The portal allows vendors to see only approved orders.
– The portal allows setting up spend limits and sends notifications about budgets being exceeded to the procurement and financial departments, etc.
Intuitive user-centred environment
Easy-to-follow interfaces of modern procurement portals will not require much time, effort or training to get accustomed to.
It may be a good idea to allow employees to take an active part in a company’s purchasing activities in order to achieve more effective procurement and supply chain management.
A procurement portal provides good assistance for such an approach. It allows guided buying to prevent violations of a company’s policies and easy-to-follow workflows that don’t require much time and effort to get used to. Moreover, it helps to keep a clear picture of the needs of each department and avoids confusion with future redistribution.
Yet, in no way do we mean that e-Procurement should replace the procurement department. Procurement employees organise and control the procurement process using the portal as a tool for such and thus have more time to focus on more important activities (for example, strategic sourcing) as well as avoid the mechanical and time-consuming task of gathering multiple orders, combining them, seeing to their relevance and working as a service desk for employees afterwards.
Boris Shiklo, CTO, ScienceSoft, is responsible for the company’s long-term technological vision and innovation strategies. Under his supervision, the company’s development team has successfully fulfilled complex projects of more than 80 000 man-hours in healthcare, banking and finance, retail, telecommunications, the public sector and other domains. Shiklo has a solid background in information technology consulting, software development, project management and strategic planning.