SECTION FOUR Buying Management 4 HIGHLIGHTS SECTION SUMMARY
Buying products and services on behalf of an organisation’s business users is the reason why procurement professionals exist. But sourcing management is not a back-office process, limited to order taking, price negotiations and goods delivery. Sourcing can be more strategic depending on how it is applied and what added-value it brings to the users. We do not think procurement should independently negotiate deals with suppliers and then throw the contract ‘over the fence’ to the business users to manage; neither should users select a supplier, agree the delivery of products or services and then come to procurement to sort out the price and write a contract. The role of procurement is facilitation all the way from the customer’s needs through to the suppliers. Procurement should bring together multiple stakeholders with, in many cases, conflicting interests. This is where procurement adds extra value in a sourcing process and we encourage the two-thirds of the organisations in the survey that do not seem to facilitate these cross-functional teams to take on this co- ordinating role. Of particular interest was the relatively low adoption of eSourcing; half of the organisations in our sample have not used eSourcing in the past. Furthermore, more than half of the respondents either believe that eSourcing is not an appropriate tool for their organisations or they are not clear on whether it is. From our experiences, the adoption of eSourcing requires a change management effort, directed both internally and to the suppliers. Organisations have reported low awareness and knowledge of eSourcing processes and benefits and we would encourage them to get up to speed with eSourcing and explore its potential. Finally, low levels of automation and audited compliance is noted in the management of supplier contracts. Off-contract and ‘maverick’ spend (spend outside of existing contracts), as well as long contracting cycles, are reported as the main challenges with managing supplier contracts.
• All organisations have standard sourcing processes for procuring products and services. • Only a third of the organisations set up cross-functional teams during a typical sourcing project.
• Adoption of eSourcing is low; only one in four organisations considers
the use of eSourcing during a standard sourcing process.
• More than half of the organisations have not previously used eSourcing. The main reasons for low adoption of eSourcing are: perception about the suitability of eSourcing, reluctance of suppliers to participate in eSourcing projects, and lack of knowledge about eSourcing. • One in five respondents does not know whether eSourcing is a suitable approach for sourcing products and services in their organisation. • Half of the organisations have not set spend thresholds above which a written contract is required. • One in four organisations does not monitor the expiry / renewal dates of their contracts, and more than half track these dates manually. • The main challenges in contract management include high levels of off-contract and ‘maverick’ spend and long contracting cycles. • Eight in 10 organisations have automated their procurement-to-pay processes.
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