This week's eSourcing Wiki-Wednesday topic is The Quest for Purchasing Fire. An excerpt of the article is below, but you can also read the full article on the eSourcing Wiki by clicking here. Have something to add? The eSourcing Wiki is an open content community and you are invited to register and contribute to this resource, which benefits our whole professional community.
If you are interested in reading more about procurement compensation plans as a specific barrier to success, read today's blog post on "The Point": Internal Sales for Purchasing Solutions.
In today's globalized economy, business-as-usual is no longer good enough to ensure continuous, fast-paced, or steady growth. In fact, with rampant inflation, dwindling supply, and increasing competition becoming the norm regardless of the industry or geography a company is located in, it's no longer good enough to even ensure that a business can maintain the status quo! That's why an organization needs leading e-Sourcing and e-Procurement solutions and why you, dear reader, recognize the urgent need. But how to best convey that need to senior management?
The goal of this wiki is to give the reader a starting point on her quest to implement best-practice eSourcing and eProcurment processes and solutions in her organization and join the best-in-class companies that are saving an average of 10% to 12% on their managed external spend, 70% to 90% on their invoice processing, and 50% to 66% on their average sourcing cycle time. It is the authors' goal that the reader finds it useful and that, after the successful sale and implementation of an eSourcing or eProcurement project, the reader returns to share her insight by adding to the wiki.
The Twelve Steps
Unless an individual is one of the chosen few lucky enough to belong to an organization where the CEO or CFO has seen the light and mandated eSourcing or eProcurement, chances are the individual has a tough sell ahead of her. In most organizations, there are a large number of voices asking for a chunk of an ever-dwindling budget, and an executive team looking for any excuse to say no to any request for dollars. It can be hard to be heard above the din.
This section is designed to guide a professional down the path she needs to follow to get noticed, sell the solution, and get the go-ahead. It's not an easy road, and there will be many hazards to avoid along the way, but with patience and suitable precautions, one can complete the journey.
Define The Value Proposition
The first step is to clearly define and understand the value proposition, inside and out. This will require a lot of research on current processes and solutions and the state of the organization's current processes and solutions in order to qualify and quantify the expected benefits and the amount of work that will be required to get there.
The benefits of eSourcing and eProcurement often include, among others:
- Lower Costs and Higher Value
- Supply Security
- Improved Risk Control
- Buying Leverage
- Quality Improvements
- Process Efficiency
- Continuous Improvement
However, the major benefits to the organization, as well as the quantifiable value to the bottom line, will depend upon the current state of affairs, the solution(s) under consideration, and the manpower available to implement the project.
Start by understanding the organization's spend. How much? On what? To which suppliers?
Then move on to understanding the sourcing and contracting process. What is it? How long does it normally take? Where are the bottlenecks?
Look at the procurement cycle. What's involved? How long does an order typically take? What's the on-time delivery percentage? What are the quality metrics?
Conclude by looking at the payment cycle. How long does it take to process an invoice? Is three-way match being used? What percentage of invoices are not in compliance with quantities received or contracted rates?
At this point one should have a good understanding of where the opportunities for improvement are, the advances that could be made, and the quantifiable benefits the organization could receive. Then one can move on to the next step.
In order to sell a business plan to upper management, one will need lots of credentials, not only on paper, but in real-world experience. If no one on the team has successfully implemented a similar project before, it will be important to line up a top consultant, or two, for the project. It will also be important to propose a vendor with some name recognition and a lot of industry successes. Most importantly, whomever is chosen as the project sponsor or champion will need to be someone who carriers a lot of weight with, and preferably on, the senior management team.
Perfect the Elevator Pitch
It's hard to predict when someone on the team is going to get a short, impromptu chance to pitch the project to a senior executive or stakeholder who garners a lot of respect from the management team. It's important to nail down a kick-ass elevator pitch early and that everyone on the core team be prepared to pitch it at any time - in the elevator, in the lunch room, and standing in line at the theatre if that's where a key decision maker asks about how work is going.
Identify the Stakeholders
Identify all of the affected parties before building the business case - not after. The stakeholders are the indidivuals who ultimately determine the success of the project - not the implementation team, the vendor, or even management. One can implement the best solution possible, but if everyone refuses to use it, it will all be for naught.
It will be critical that the team identifies all of their needs and addresses them at a high level in the business case and in detail in the part of the project plan that affects them. Otherwise, there could be severe push-back.
Identify the Big NO!(s)
After the individuals whose blessing is needed for project approval and the key stakeholders whose lack of cooperation could bring the project to a grinding halt, it is critical to determine what their pain points are, what their sticking points are, and, most importantly, what could cause them to say "No".
If the CFO will not pay more than 500K for any piece of software, regardless of what it is, it's important to know that up front and find a vendor who can meet that target. If the CIO refuses to work with any software that doesn't work on the current XP - Oracle platform, then the team will need to find a solution that runs on this platform or go with an On-Demand solution. If the head of accounts payable really wants three-way matching, then, considering it's a good idea anyway, make sure that point is addressed.
Find the Big NO!s by starting with a critical issues analysis. Note all of the possible objectors and their objections and come up with a plan to address the issues. Then evaluate past behavior of the management team in their consideration of similar projects. Do they have any known "hot button" issues that will need to be avoided? Finally, casually ask key players about what their concerns about such a project might be before even indicating that there is intent to make a formal request or present a formal business case. Consider referencing a recent article or case study as a foundation for this casual conversation. After all, a proposal is sold on value and value is in the eye of the beholder.
eSourcingWiki is an open content community of strategic sourcing and procurement best practices. This wiki is intended to be a dynamic document that constantly adjusts and transforms to current trends and thought leadership in supply management. Iasta welcomes global contributors to assist in the ongoing documentation and knowledge building that is essential to creating useful information for supply management professionals.