Comments on: Missing Links Take a Chunk Out of a Bottom Line http://www.esourcingforum.com/archives/2008/03/05/missing-links-take-a-chunk-out-of-a-bottom-line/ The source of information and best practices in strategic sourcing. Sun, 06 Jul 2008 01:15:44 +0000 http://wordpress.org/?v=2.3.2 By: Eric Strovink http://www.esourcingforum.com/archives/2008/03/05/missing-links-take-a-chunk-out-of-a-bottom-line/#comment-11185 Eric Strovink Wed, 05 Mar 2008 18:29:21 +0000 http://www.esourcingforum.com/archives/2008/03/05/missing-links-take-a-chunk-out-of-a-bottom-line/#comment-11185 I think this misses the boat by a wide margin. It is not necessary, or often even effective, to implement an e-procurement system in order to bring spend under control -- what actually works is taking a hard look at current spending by category (to ensure that it is in line with benchmarks from comparable companies), combined with compliance reviews at the PxQ level to ensure that contract terms are being met by incumbent vendors. Those two initiatives will identify strategic opportunities (from the spend data) *and* return money to the bottom line in the form of refunds and credits (from the invoice review). Adding a rogue spend (contract) dimension to the spend cube will identify the organizations that are doing a poor job of controlling spend; so will taking a hard look at T&E data. A few pointed telephone calls to the heads of poorly-performing organizations will correct the situation, if the calls are made by senior management. As one practitioner remarked to me, "A key benefit of monitoring spend is the perception that spend is monitored. You can reduce demand at least 10% with just a modest and minimally-publicized monitoring effort, because non-compliant spenders will immediately change their behavior." You can then take your time implementing an e-procurement system, if you decide to -- but e-procurement by itself won't solve your spending problem. I think this misses the boat by a wide margin. It is not necessary, or often even effective, to implement an e-procurement system in order to bring spend under control — what actually works is taking a hard look at current spending by category (to ensure that it is in line with benchmarks from comparable companies), combined with compliance reviews at the PxQ level to ensure that contract terms are being met by incumbent vendors.

Those two initiatives will identify strategic opportunities (from the spend data) *and* return money to the bottom line in the form of refunds and credits (from the invoice review).

Adding a rogue spend (contract) dimension to the spend cube will identify the organizations that are doing a poor job of controlling spend; so will taking a hard look at T&E data. A few pointed telephone calls to the heads of poorly-performing organizations will correct the situation, if the calls are made by senior management.

As one practitioner remarked to me, “A key benefit of monitoring spend is the perception that spend is monitored. You can reduce demand at least 10% with just a modest and minimally-publicized monitoring effort, because non-compliant spenders will immediately change their behavior.”

You can then take your time implementing an e-procurement system, if you decide to — but e-procurement by itself won’t solve your spending problem.

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