Executive Briefings

Stakeholder Compliance Is Cornerstone of Procurement Technology Initiatives

It's no surprise that procurement technology adoption within organizations has often failed to meet expectations.  Consider this customer example.  An $11bn organization had in place an existing e-sourcing solution with 100 user licenses at a total implementation cost of just under $100,000.  Post-implementation, it was observed that there were only five active users of the application while 95 percent remained inactive, indicating a significant lack of adoption.  This is a common tale; once the technology is implemented, reality sets in and many are faced with poor adoption levels and negligible ROI.  This is especially true when management fails to make it a requirement for business users to leverage the solution and worse, neglects to convey the business benefits that can be realized.

The comfort level of the suppliers who were previously expected to be an important end user of the sourcing solution should not be overlooked either.  In the above example, it was determined that suppliers would not use the solution when responding to RFIs, citing it to be too complex.  Consequently, they submitted quotes through Excel documents which only made the evaluation process tedious.

Before we delve into how stakeholder compliance drives savings, let us consider the four essential pillars to procurement technology adoption:

Ease of Use: It is of utmost importance to speak of ease-of-use from the perspective of the end users. Organizations should work on achieving a balance between satisfying all key core requirements and enhancing the user experience.

User Involvement: Users need to be involved in the product demonstration process.  This would help to convey the benefits of the product to the end user right from the start.

Training: Combining periodic, in-person training with regular feature-level training provided online in the form of user sessions, webinars, etc., is an extremely effective way of achieving user adoption goals.

Adoption Metrics & Incentives: Post-implementation, top management needs to sit with the end user to ensure setting fair, consistent and rigid goals which are transparent in every sense.

Clearly, investing in technology alone is not enough as careful attention needs to be made to ensure successful change management.  In a recent webinar poll, 43 percent of respondents believed that the major reason for resistance to change and overall lack of adoption was a result of the end user not being convinced that the technology could help them.

Let's face it, introducing new technology and processes is never easy and this is especially true when it comes to procurement functions and personnel, as both are often set in their ways.  Lack of compliance to enterprise contracts and processes, reduced stakeholder participation, and non-adoption of procurement technology can lead to several detrimental effects ranging from missing out on volume discounts and/or rebates from your preferred suppliers to achieving ROI from existing procurement technology like contract management and/or e-sourcing tools.  This not only leads to manual and tedious methods that deprives procurement of the time it needs to focus on more strategic activities, but it also leads to loss of savings opportunities which can directly affect the organizational bottom-line.

For procurement leaders involved in areas such as profit and loss (P+L), spend decision, supplier and/or budget management, winning genuine adoption and support from spend stakeholders is far and away their greatest challenge.  A recent study of 600 procurement and supply management professionals representing an estimated $370bn or more worth of collective spending power found there are specific, and proven, tactics and strategies that are most effective for persuading people in corporate enterprises to adopt and use preferred procurement processes and technologies.  According to the study, there are three benchmark indicators for achieving both corporate and cultural adoption of procurement technology which include:

Stakeholder compliance to both supply contracts and preferred procure-to-pay (P2P) process,

• Active stakeholder participation in both strategic sourcing and supplier performance management processes, and finally;

• Procurement technology adoption, use and utilization.

Bridging the Gap on Savings - Enforcing Stakeholder Compliance

Stakeholder compliance, compulsory or voluntary, bridges the rather large gap between the cost savings that get encoded into strategic supply contracts and spending processes and the cost savings that actually materialize on a company's profit line.  Compliance -  whether from buying from preferred contacted suppliers or by adopting and using the preferred, lowest-cost buying and payment processes - can result in significant cost savings from procurement activities.  It can also drive streamlined, repeatable processes that free up procurement professionals and allow them to focus on more strategic activities.  According to the recent study, doubling contract compliance may - over time - result in a six-fold increase in percentage cost savings from an organization's spend management activities.  Despite the value compliance can bring to the procurement process, the challenge is to understand what tactics work to enforce it.  Some of the tactics used by the best-in-class companies - i.e., those with compliance rates of 70 percent or above - include:

Monitoring & Reporting: Enables metrics such as off-contract spending, contract utilization, and contract performance related to terms to be tracked easily, consistently, and accurately right down to a specific department and/or an individual.

Create a Business Case and Communicate the Benefits in a Tangible, Verifiable Manner: This requires that the procurement professional is able to successfully market the benefits and value of any change in process or introduction of new technology.

The ability to monitor and report on compliance is heavily tied to technology adoption. The recent study found that for all of the companies that favored the "monitor and report" tactic for driving contract compliance, there was a dramatic 44-point difference in reported contract compliance rates between companies with high adoption and use of contract management technology and those with low adoption and use.  Also, nearly half (49 percent) of the companies with high contract compliance also reported high adoption and use rates for spend analysis technology as well.

Creating a business case and then combining it with high adoption of supporting procurement technology and monitoring can make a powerful formula for obtaining compliance to spend management contracts and preferred processes.  But they are not the end game when it comes to achieving a corporate culture change that truly embraces and buys into enterprise spend management.  Indeed, few procurement leaders will tell you they wish to spend the rest of their careers policing peoples' behavior.  On the contrary, what they really want is to embed best spend management processes and practices into their enterprises and move on to more important, value-adding and corporate performance-enhancing work such as supporting innovation and new product introduction.  The key to getting there is encouraging active stakeholder participation in strategic sourcing and spend management processes and stakeholder ownership of spend management decision making.

Source: Zycus

It's no surprise that procurement technology adoption within organizations has often failed to meet expectations.  Consider this customer example.  An $11bn organization had in place an existing e-sourcing solution with 100 user licenses at a total implementation cost of just under $100,000.  Post-implementation, it was observed that there were only five active users of the application while 95 percent remained inactive, indicating a significant lack of adoption.  This is a common tale; once the technology is implemented, reality sets in and many are faced with poor adoption levels and negligible ROI.  This is especially true when management fails to make it a requirement for business users to leverage the solution and worse, neglects to convey the business benefits that can be realized.

The comfort level of the suppliers who were previously expected to be an important end user of the sourcing solution should not be overlooked either.  In the above example, it was determined that suppliers would not use the solution when responding to RFIs, citing it to be too complex.  Consequently, they submitted quotes through Excel documents which only made the evaluation process tedious.

Before we delve into how stakeholder compliance drives savings, let us consider the four essential pillars to procurement technology adoption:

Ease of Use: It is of utmost importance to speak of ease-of-use from the perspective of the end users. Organizations should work on achieving a balance between satisfying all key core requirements and enhancing the user experience.

User Involvement: Users need to be involved in the product demonstration process.  This would help to convey the benefits of the product to the end user right from the start.

Training: Combining periodic, in-person training with regular feature-level training provided online in the form of user sessions, webinars, etc., is an extremely effective way of achieving user adoption goals.

Adoption Metrics & Incentives: Post-implementation, top management needs to sit with the end user to ensure setting fair, consistent and rigid goals which are transparent in every sense.

Clearly, investing in technology alone is not enough as careful attention needs to be made to ensure successful change management.  In a recent webinar poll, 43 percent of respondents believed that the major reason for resistance to change and overall lack of adoption was a result of the end user not being convinced that the technology could help them.

Let's face it, introducing new technology and processes is never easy and this is especially true when it comes to procurement functions and personnel, as both are often set in their ways.  Lack of compliance to enterprise contracts and processes, reduced stakeholder participation, and non-adoption of procurement technology can lead to several detrimental effects ranging from missing out on volume discounts and/or rebates from your preferred suppliers to achieving ROI from existing procurement technology like contract management and/or e-sourcing tools.  This not only leads to manual and tedious methods that deprives procurement of the time it needs to focus on more strategic activities, but it also leads to loss of savings opportunities which can directly affect the organizational bottom-line.

For procurement leaders involved in areas such as profit and loss (P+L), spend decision, supplier and/or budget management, winning genuine adoption and support from spend stakeholders is far and away their greatest challenge.  A recent study of 600 procurement and supply management professionals representing an estimated $370bn or more worth of collective spending power found there are specific, and proven, tactics and strategies that are most effective for persuading people in corporate enterprises to adopt and use preferred procurement processes and technologies.  According to the study, there are three benchmark indicators for achieving both corporate and cultural adoption of procurement technology which include:

Stakeholder compliance to both supply contracts and preferred procure-to-pay (P2P) process,

• Active stakeholder participation in both strategic sourcing and supplier performance management processes, and finally;

• Procurement technology adoption, use and utilization.

Bridging the Gap on Savings - Enforcing Stakeholder Compliance

Stakeholder compliance, compulsory or voluntary, bridges the rather large gap between the cost savings that get encoded into strategic supply contracts and spending processes and the cost savings that actually materialize on a company's profit line.  Compliance -  whether from buying from preferred contacted suppliers or by adopting and using the preferred, lowest-cost buying and payment processes - can result in significant cost savings from procurement activities.  It can also drive streamlined, repeatable processes that free up procurement professionals and allow them to focus on more strategic activities.  According to the recent study, doubling contract compliance may - over time - result in a six-fold increase in percentage cost savings from an organization's spend management activities.  Despite the value compliance can bring to the procurement process, the challenge is to understand what tactics work to enforce it.  Some of the tactics used by the best-in-class companies - i.e., those with compliance rates of 70 percent or above - include:

Monitoring & Reporting: Enables metrics such as off-contract spending, contract utilization, and contract performance related to terms to be tracked easily, consistently, and accurately right down to a specific department and/or an individual.

Create a Business Case and Communicate the Benefits in a Tangible, Verifiable Manner: This requires that the procurement professional is able to successfully market the benefits and value of any change in process or introduction of new technology.

The ability to monitor and report on compliance is heavily tied to technology adoption. The recent study found that for all of the companies that favored the "monitor and report" tactic for driving contract compliance, there was a dramatic 44-point difference in reported contract compliance rates between companies with high adoption and use of contract management technology and those with low adoption and use.  Also, nearly half (49 percent) of the companies with high contract compliance also reported high adoption and use rates for spend analysis technology as well.

Creating a business case and then combining it with high adoption of supporting procurement technology and monitoring can make a powerful formula for obtaining compliance to spend management contracts and preferred processes.  But they are not the end game when it comes to achieving a corporate culture change that truly embraces and buys into enterprise spend management.  Indeed, few procurement leaders will tell you they wish to spend the rest of their careers policing peoples' behavior.  On the contrary, what they really want is to embed best spend management processes and practices into their enterprises and move on to more important, value-adding and corporate performance-enhancing work such as supporting innovation and new product introduction.  The key to getting there is encouraging active stakeholder participation in strategic sourcing and spend management processes and stakeholder ownership of spend management decision making.

Source: Zycus