How to Fix Failing Procurement Technology Before it’s Too Late
This article was originally published by Supply & Demand Chain Executive.
Procurement technology can unlock transformative value for the procurement function and the company. But, to realize these benefits, there must be a plan for overcoming human barriers.
Sourcing and procurement technology solutions are sold based upon the promise of enabling purchasing efficiencies throughout an organization and surfacing powerful data and analytics that drive cost savings to the bottom line. With the right technology, procurement leaders can expect one source of truth for all of their sourcing resources and activities, with spend data automatically refreshed and seamlessly integrated from sourcing execution and contracting through final purchase and payment. Capturing all interactions in a closed-loop environment, insightful reporting tools and analytics empower leaders and these leaders in turn expect increased compliance from their teams and stakeholders. Yet, many chief procurement officers (CPOs) find that their procurement technology does not meet these expectations.
We know why these systems fail. The technology doesn’t align with the company’s business needs and doesn’t meet ROI targets. Some are overly complex and struggle with broad organizational adoption. In other cases, the technology’s capabilities are insufficient, providing limited reporting functionalities, lacking a user-friendly interface or offering inadequate data visualization capabilities. Any combination of these issues will drive adoption challenges and workaround solutions that add complexity and overhead to resource-constrained procurement organizations.
Even at its best, procurement technology is only as effective as users make it. Breakdowns are often attributable to a host of human factors — organizational resistance to change, poor implementation and lack of education and enforcement. What’s worse, the technology’s value becomes almost impossible to articulate for the CPO, especially when the CPO and CFO approach procurement and procurement technology with different perspectives, terminology and success benchmarks.
In a data-driven industry, a failure in procurement technology implementation can lead to a failure of procurement as a function. Consider the sheer amount of third-party-related data flowing through an organization. It’s challenging and near impossible to make strategic, data-informed decisions using outdated legacy methods. Today’s CPOs require technology that manages the full source-to-pay lifecycle with intelligence, perspectives and data from beyond their own walls.
To avoid technology failures, couple your procurement technology with support services that can offer outside help. And, then guarantee long-term success by following these implementation best practices:
1. Bring stakeholders along on the journey
Secure buy-in from stakeholders at every level of the organization before implementing your solution. Because procurement platforms are only as good as the data you put into them, organization-wide adoption is critical to the technology’s success. Without comprehensive buy-in, CPOs only get actionable data from the parts of the business that adopt procurement technology and the dream of cohesive organization-wide spend visibility is dead.
In-house procurement resources are already stretched thin. In that case, third-party partners can help sell the overall vision of the procurement solution, quantify its value by calculating potential bottom-line savings and ensure each user is comfortable and proficient with the new solution. Partners can also help support change management strategies and counter market responses.
2. Thoughtfully implement
Although some modern procurement technology solutions can rapidly implement and scale, a thoughtful adoption strategy should always come first. Consider the need to appeal to business units that are already overloaded with work and likely unmotivated to change.
Analyze business needs and colleagues’ receptiveness to new technology. For many companies, piloting the technology in a concentrated business function allows procurement teams to iron out inefficiencies and prove ROI before expanding to other business units. Regardless, procurement partners can customize and deploy technology at a pace that meets organizational priorities and configure procurement dashboards for stakeholders across business units. Procurement partners can also educate stakeholders on the value of procurement technology and help with thoughtful implementation and then adoption.
3. Educate at every step
Many employees are unfamiliar with modern procurement tools and the value they can deliver, and some may even be uncertain about procurement’s role in general. Don’t let this uncertainty become an obstacle to adoption.
Create a thorough onboarding and training plan. Stakeholder education should continue as new tools are introduced, not just on how to use the tool but why it will make stakeholders’ efforts more focused, efficient and valued by leadership. When changing the status quo, ensure employees know that the “juice is worth the squeeze.” And, until procurement technology becomes part of the corporate culture, you may need a plan from business leadership enforcing its use.
4. Internally evangelize
The classic problem with adopting procurement technology is a negative value perception from the CFO and the company at large. Don’t undervalue the power of analytics and KPIs in reporting on project performance or shaping a bulletproof case for the platform’s continued use.
Shore up corporate buy-in by bragging about the better buying decisions, scalable savings and greater efficiencies that your procurement technology enables. Work with your procurement partner to customize inputs that speak directly to the CFO. For example, show how technology helps shore up risk management at the RFI stage and continues through critical risk assessment and onboarding. And, explain how the procurement solution helps identify diverse suppliers via self-identification or syncing up with external data providers. Include information on spend consolidation and get down to the granular impact on P&L statements. Department heads should know how strategic procurement solutions display real-time project and budget tracking, freeing their time and resources for more innovative initiatives. And, for the rest of the workforce, report on metrics showing their contributions to reduced spending across the enterprise.
Procurement technology can unlock transformative value for the procurement function and the company. But, to realize these benefits, there must be a plan for overcoming human barriers. Make sure procurement tools are broadly established and adopted and reinforce use through constant communication. Once the platform is running, create visibility around data and analytics to inspire ongoing investment in and use of the tool. And, don’t be afraid to lean on third-party experts for help along the way.
These proactive measures are critical to a procurement technology’s successful implementation and adoption. In turn, this technology is vital to the procurement department’s success in making better buying decisions. In other words, the stakes are high. At bedrock, the CPO’s job is to ensure the company gets maximum value out of its limited budget. And, that all starts with procurement technology.
LogicSource is purpose-built to drive profit improvement through better buying. LogicSource focuses exclusively on the sourcing and procurement of goods and services not-for-resale, which typically represents 20% of a company’s revenue and the area of greatest spending inefficiency. Tested time and again in the marketplace, their proven engagement model builds profitable partnerships that achieve 4-15x ROI.