Technology is playing an increasingly prominent role in the world of vendor/supplier sourcing and procurement management. Recent advances in the world of electronic procurement and supplier management technology span many different industries.
Leveraging buying power is a driving force in the use of procurement technologies. Small to medium-sized organisations may also take advantage of an abundance of software tools and support services which are readily available at competitive prices. Any service or product – from paperclips to lawyers – may now be sourced, procured and managed electronically.
In this article, Charlie Morgan, client relations manager of LSG, outlines the new enhancements to LSG’s Advocator System®, delivering greater value to the general counsel, chief financial officers and procurement professionals of a growing number of organisations.
E-SOURCING: THE BUYING AND PROCUREMENT WORLD
Procurement affects almost all commercial sectors, from insurance to construction, mining, energy, transportation and logistics. Almost anything we consume has been sourced and made available through a complex number of layers within the global supply chain.
The supply chain can begin from the source of raw materials, such as iron ore for steel making, and end with the opening of a new bridge or tunnel in the case of a large-scale construction project. In the centre of these chains is the management of professional services, suppliers and products.
How much of the supply chain has moved onto an electronic platform varies from industry to industry but, in most cases, all products and a growing number of services are being driven by e-sourcing software solutions.
E-sourcing, simply put, is moving from what was once a highly paper-driven process to one or more electronic platforms. How much of the client-supplier/vendor relationship has moved to this procurement model depends on the complexity of the requirements for services and/or products in question and the industry.
The manufacturing industry, for example, is highly engaged and has been a key player in the development and sophistication of e-sourcing solutions. Insurance, mining, pharmaceutical and financial services industries are also key drivers.
E-RFI AND BIDDING
Selecting the best supplier(s) and/or product(s) for the requirement(s) is the first step to satisfying the procurement needs at optimal level.
Procurement professionals, in collaboration with their internal stakeholders, are challenged to identify and select the best supplier for their specific needs. Typically, a request for information (RFI)/request for proposal (RFP) process will be conducted, sometimes with the assistance of outside consultants before selection(s) are made.
How this process is managed can be improved with the support of technology. At LSG, we have built an RFI and bidding platform whereby pre-approved suppliers can provide detailed information, documents and pricing about themselves and their services in response to an RFI/RFP. This bidding process enables the organisation to manage and control the RFI/RFP process and ultimately to select the best supplier.
Following selection, the supply of the service or product can be controlled with approved purchase orders and payment is made at agreed points. This reflects the typical procure-to-pay model adopted by many technology providers.
At LSG, we have enhanced this procure-to-pay model by adding a ‘case/matter/project management’ layer where the delivery of the service requires a more ‘hands-on’ approach. This enables our clients to track tasks, milestones and budgets as appropriate: the classic example being the provision of time and rate-based legal services together with associated expenses.
The procure-manage-pay solution allows our clients to have the ‘best of both worlds’: service and/or product selection based on appropriate supplier valuation and greater control over professional spend which typically cannot be predicted so well, as opposed to, for example, a single order of X widgets.
It also enables our clients to track all category spends giving accurate ‘line of sight’ across the organisation.
TYPICAL PROCURE-MANAGE-PAY WORKFLOW
For an example of the typical procure-manage- pay workflow, please see the box below.
METRICS TO MEASURE OUTCOMES, PERFORMANCE AND FINANCIALS
Never before has there been so much attention placed on data and the importance of leveraging its potential. Those that master the latter are likely to gain insights that will give them significant competitive advantages and opportunities. The first step is to start collecting and measuring this data in a meaningful way. As H James Harrington said:
‘Measurement is the first step that leads to control and eventually to improvement. If you can’t measure something, you can’t understand it. If you can’t understand it, you can’t control it. If you can’t control it, you can’t improve it.’
Likewise, we can learn lessons from Douglas W Hubbard when he said:
‘If a measurement matters at all, it is because it must have some conceivable effect on decisions and behaviour. If we can’t identify a decision that could be affected by a proposed measurement and how it could change those decisions, then the measurement simply has no value.’
For these reasons, our clients are leveraging the value of the data collected by our technology solutions. Metrics to measure total outcomes, performance and financials of your valued suppliers are provided as standard via our reporting solution Advocator System® dashboard. Reports provide line of sight across the organisation as a whole, by geography, by business unit, by supplier and/or by spend (fees, expenses and damages/indemnity), (un)realised fast-pay discounts and many others. Other benefits include harnessing the data to plan and predict costs for similar matters, cases and projects according to defined criteria.
Procurement, legal and financial departments that want to enhance their operations should be considering technology solutions that are designed to do this. These solutions deliver value throughout the procure-manage-pay life-cycle as well as ensuring compliance against your procurement processes, spend control program and billing guidelines. Consider also the power of metrics designed to give total outcomes, best performance and financial reports. These are the real goals here.
By Charlie Morgan, client relations manager, LSG.