Contracts are often depicted as the linchpin between Strategic Sourcing, the processes that generate value and competitive advantage for companies, and Operational Procurement, the execution phase where value is realized. Contract compliance is a top Key Performance Indicator (KPI) for best-in-class Procurement organizations because the greater the compliance, the higher the cost savings. Compliance is a best-in-class objective, but is contract compliance too narrowly focused?
Catalogs allow companies to achieve compliance for more spend categories plus offer usability and familiarity that encourage adoption. Accordingly, I am planning a few blog posts on catalog strategies to get the most out of the true center of Procurement.
Catalogs are the center
Strategic Sourcing and contract creation are often multi-month processes that involve many resources. The associated cost is often reserved for important products and services for the company’s supply chain, competitive advantage, and mitigating down time. However, there are other cost-appropriate ways that Procurement will influence spend in other categories and achieve the broad goals of right suppliers and cost savings. The spend influenced by procurement is often controlled systematically using methods like approved supplier lists or source lists, inforecords (PIRs), quote awards, rate cards, supplier-category discounts, pricing for configurable items, and even 3rd party verified items. Often in a Procurement system, these methods need to be maintained in different places and by multiple people. Thus, we have seen in many companies that not all spend is under compliance, or out-of-date information leads to downstream fixes and possibly onerous invoice exception processes. Furthermore, the laborious task for employees to enter information leads to contracts left “in the drawer”. However, the multitudes of pricing arrangements, the fruits of strategic sourcing and managed spend, can be recorded and maintained centrally in the catalog with relative ease.
This central repository for the right price and right supplier (specific to each company) should be accessible from a variety of internal processes and systems to achieve compliance and realize value. Employees throughout the organization are working in a variety of systems in their daily routines: Purchasing, Plant Maintenance, Project, Planning, Bidding, Contract, and Invoicing to name a few, and generating documents that they need to perform their jobs and comply with company rules and policies. Some of those documents include:
- Requisitions
- Purchase Orders
- Projects
- Work Orders
- Blanket/Limit Items
- Service Entry
- Invoices
- Contracts
- RFx/Auction
In Procurement execution, catalog integration with all employee systems ensures that employees throughout the company are driving compliance across all spend categories regardless of the process.
Usability equals adoption
Compliance doesn’t happen if users ignore the systems, or use them inappropriately. Usability is not only a familiar and intuitive experience that looks good, but also puts the process in the user’s critical path. If the user has to stop what they are doing and start a new process, gets stuck, or has to process something at a later time, then the inefficiency will devalue the experience. The process may get delayed, or even worse, may not get done at all. I have seen companies ready to throw out an entire system because a C-level person couldn’t perform an approval. When satisfaction increases, more people will use the system, which leads to an increase in compliance and better visibility on spend.
What is the benchmark? What is familiar? Employees are already using online shopping, email, and internet searches for example in their daily lives. Have you heard, “can’t this be more like Amazon”? Accordingly, a good user experience will draw on the familiar and intuitive, which in turn, will reduce the need for training. Most people who look at online catalogs will likely figure out what to do because the catalog is a familiar tool for product search and online buying.
Mobile applications are also very familiar to users and have the added value of being portable. For Procurement, that means employees can buy products and services when the need arises. Business takes place away from the desk, procurement should too. Nevertheless, many mobile Procurement user interfaces focus on fitting the interface to the screen rather than enabling the mobile use case. Mobile devices provide a context, such as location. Catalogs allow users to match that context to products and services, including the parts that are frequently bought for that location as an example. The catalog then gives the mobile workforce access to a true marketplace to make product and service decisions to meet their requirements on the spot. Furthermore, employees who use the catalog don’t necessarily need to know all the information required to make a requisition (eg: accounting). They can use the catalog to identify the need, and then the power users in requisitioning systems can add the missing information.
Enterprise Underneath, Simple on the face
Usability isn’t just about enabling simple processes, but even making the hard processes seem simple. Catalogs can guide users through a process or Standard Operating Procedure (SOP). Online forms, rate cards, and configurable products in the catalog can guide users through questions or present a series of choices to the user that will determine the right price for a product or service. Many companies also have requirements for information that needs to be on the purchasing documents for a particular category. The catalog forms can prompt the user to enter the required information.
These same forms can also be customized to ask the user the question in a language they understand. We often found that users didn’t know what to enter for “expected value” and “total value” for a limit item. With catalogs, the user can just enter the information as they know it based on familiar prompts. The catalog will then map the responses to the appropriate system fields. Users work in their familiar process and terminology, but the catalog does the work to make the data work for the system.
Catalogs have come a long way to enable companies to run their processes and customize the user experience to the way the company does business. However, for the catalog to be effective, the data has to be there. Like a contract, compliance doesn’t happen if the contract is in the drawer. The tools to get product content, supplier information, and schemas have become easier to administer, and once set up, can often flow through a workflow as an exception process. Data can often be more integrated to the source systems that generate the data, such as contracts. In addition, the catalog can be administered by the supplier who knows their data and wants to promote their products and services to their customers.
Full Circle
As we come full circle, we see now how the catalog sits at the center between strategic sourcing and operational systems to drive compliance to what Procurement has predetermined as the means to cost savings and the best use of funds. Procurement’s reach to generate value covers more than just contracted products and services. Accordingly, the mechanisms at Procurement’s disposal to enforce compliance should also extend beyond contracts and should be managed centrally. Procurement’s job is easier when the organization uses the tools and uses them correctly. The familiarity and the ease-of-use of catalogs is driving that adoption and enabling companies to realize best-in-class.
More to Come
In my experiences I haven’t seen enough companies utilize Procurement catalogs to their fullest potential. For that reason I will publish a series of blogs to help companies understand catalog capabilities and provide some tips and tricks for best practices.
- How to drive contract compliance through catalog usage?
- What's the difference between internal vs. external catalog?
- What is Level 2 Punch out?
- What's the difference between private vs. public marketplace?
- How to manage service procurement via catalog?
- How to organize the category tree?
- How do you handle quotes for suppliers?
You can also suggest additional topics in the comments.