Cost cutting is a huge priority for 2012, and with cutbacks looming, procurement teams will need to make savings wherever possible.

‘Procurement contract Lifecycle: assessing the value of contract automation’, a report conducted by research company Aberdeen Group, highlighted that organisations are missing out on making savings by ignoring the benefits of automated contract management.

The report, based on a survey of 130 organisations, found that many of those questioned are limiting their visibility of spend and contractual commitments by instead relying on old-fashioned, labour-intensive, paper processes.

Missed cost savings, poor compliance and failure to meet legal and business obligations are all implications of a poorly managed contract management system.

Automated contract management systems can deliver control for any type of business agreement by providing the functionality for buyer and supplier collaboration, leading to consistent, easy to reference documents that deliver transparency throughout the entire contract lifecycle, as well as helping in monitoring supplier performance.

Both the public and private sectors have reported benefits including cost savings, improvements in quality of services and achieving better value for money since implementing automated systems.

Aberdeen Group’s report has recommended that companies should adopt more technology to automate contract management and establish a central repository for all procurement contracts, a move which would undoubtedly help organisations in increasing visibility of agreed commitments while providing further opportunities to monitor savings across the business.

Supplier relations have always been important to buyers but it seems that in the present economic climate, it is more crucial than ever to ensure that relationships between businesses and their supply chain remain healthy and free from corruption.

The Supply Management Reader Research Survey 2011 concluded that procurement professionals will be concentrating on cost cutting and supplier relationship management as key priorities throughout 2012.

Some organisations have already started to introduce new measures to help create more transparency in their supply chains.

The notoriously secretive software company, Apple, recently published a list of its suppliers in an effort to tackle criticism over how workers are treated; proving that unsatisfactory supplier relations can certainly generate negative publicity.

The company has also announced that it will be handing over auditing power to independent, non-profit organisation, the Fair Labour Association (FLA) in an attempt to provide unbiased audits across the whole of Apple’s supply chain.

In another example of a company striving to improve supplier relations, builder’s merchants Travis Perkins recently announced that it has invited staff from key vendors to work alongside the head office team. This is a move not too uncommon, with retailers Tesco and Walmart both reporting supply chain improvements since inviting suppliers to work in-house.

With enhanced supplier relations proving to benefit businesses, more may start to look in to increasing communication across their supply-chain.  Where it is not possible to work alongside suppliers, buyers may find eProcurement, eSourcing and contract management software to be beneficial, providing online supplier portals where suppliers and buyers can collaborate and control catalogues, contracts, invoices and other supporting documents.

With cost-cutting a high priority for procurement professionals this year, it seems that improving relationships, communication and trust with suppliers will prove to be a tactical move in helping to meet those savings targets.

As the country prepares to hold its first Olympic Games in over 50 years, procurement teams across the UK are gearing up for the huge challenge that lies ahead.

Accelerating costs have so far been a major source for criticism with the original budget of £3.4 billion almost trebling to reach £9 billion.

Where some industries are worrying about meeting the enormous increase in demand, the food and drink sector is confident that the games will provide a much needed boost to the economy, provided effective planning is put in to place.

Food Manufacture reported that the food and drink supply chain has already started to implement these proposals-by making preparations with logistics companies to ensure the successful transportation of goods during the predicted gridlock of traffic that will impose upon London over the summer.

In a recent interview with Supply Management, John Armitt, chairman of the Olympic Delivery Authority, described the job of the Olympic procurement team as ‘one of the biggest challenges of any project in the UK’. The fact that the project is in the public spotlight and has a large number of stakeholders means that it will be under tight scrutiny which will no doubt increase the pressure upon the procurement teams to ensure that they perform.

Supply chain disruption has also been cited as a major cost implication on the games. The Financial Times reported that 93 per cent of UK businesses are expecting the games to have a negative knock-on effect which includes experiencing problems in their supply chains. 

Purchasing teams will be looking to rely on eProcurement functionality and features such as supplier portals for rapid and effective selection and communication with suppliers and reporting and forecasting tools to help tackle the increase in demand and disruption that the games could cause.

With such an opportunity for all industries to benefit from the surge in demand and substantial increase in revenue, it is important that procurement teams are well prepared for any problems that could arise.

From the start of next year, most public procurement processes are set to be governed by a 120-day deadline. 

Supply Management reported that Cabinet Office minister Francis Maude called for the changes in response to the revelation that the average government procurement currently takes around 200 days to complete. 

The government aims to achieve the target by encouraging closer and earlier engagement with suppliers and markets which should enable more clear and concise invitations to tender, it is hoped that publishing the data will expose failings in the system and encourage greater clarity in government procurements.

eProcurement software is proven to cut costs and shorten the buying cycle by providing transparency through the buying process as well as substantially reducing the processing time. Could eProcurement prove to be the key in helping the government adhere to the strict EU public procurement rules and meet the 120 day deadline?

Over the last twelve months the country has seen huge budget cuts and rising redundancy rates throughout the whole of the public sector, in a bid to make the savings the country so desperately needs to enable deficit repair.

One year ago Wax Digital, alongside Durham University investigated the opinions and outlooks of public sector procurement and finance professionals towards deficit repair in our report 'Doing battle with the deficit'. We received a surprisingly positive viewpoint from those leading the battle, but is that still the case?

Many public sector organisations are fighting back from the budget cuts and are reporting massive savings through procurement and updated IT systems. Chris Chant, government programme director for the cloud, recently spoke at Teacamp (a government digital networking event) and announced:

 “Government cloud aims to change outrageously expensive public sector IT by slashing system integration costs and reducing the number of back office staff.”

The government has its’ sights set on making savings of £120million per year come 2015. Unrealistic some may say, but with many public sector bodies reporting savings through IT and procurement, these optimistic predictions could well become a reality.

A recently implemented electronic marketplace and purchase to pay system for police forces in England and Wales is expected to help achieve savings of around £30 million over the next six years alone. The ‘national police procurement hub ‘will offer improved contract management through better visibility, a reduction in maverick spend and increased compliance to approved suppliers.

Procurement looks to be leading the way in fighting back from the budget cuts and as a result job losses have not been as prominent as one may have expected them to be in the fight to repair the deficit.

While some organisations seem to be bouncing back from the cuts, there are many that are struggling to implement the most savage spending cuts in a generation.

Councils across Yorkshire are facing huge overspends totalling more than £50million this year. A study of town hall spending since April reveals only four of Yorkshire’s 14 biggest councils are currently on course to meet the stringent savings targets forced upon them by the coalition government.

Stoke-on-Trent City Council is another council facing difficulties in meeting its target savings. Hundreds of jobs have already been cut and a number of key services closed or reduced as the council made savings of £27.8 million. Much-criticised procurement practices at the council could likely be the cause of the £4.5million shortfall in savings. Councillor Sarah Hill, cabinet member for finance, said:

 "We had to make a huge amount of changes at the beginning of the financial year which all came at once, we all recognise that procurement is an area we haven't done well with.”

With so many cost saving success stories in the public sector, procurement could prove to provide a real opportunity for organisations to meet their targets by addressing their current procurement issues and implementing new ways to purchase.

How have you, as procurement professionals found the past year? What have you found challenging? Where could you improve? We welcome your comments.

Supply Management reported this week that state income for some universities will be reduced from 60 percent to 40 percent, which will take many below the 50 percent marker that requires EU public procurement rule compliance.

Could reductions in public funding have an upside for universities and ring the changes in sourcing and procurement?

Minister for universities and science, David Willets thinks so.

While the cuts will hit universities hard, supply chain agility will offer a real opportunity. Establishments, like our client Durham University, will be able to operate more like the dynamic buyers of the private sector rather than the public procurement teams that so often get tangled up in red tape.

Being released from EU public procurement rules will mean that the higher education sector can start a new term of bigger savings and greater local economic support.

Engaging employees during a P2P implementation is clearly an investment into the success and adoption of the solution. Yet is spending time and money on supplier adoption and engagement equally balanced?

Considering that most organisations have more suppliers using their eProcurement solution than internal users it’s unfortunate that suppliers can get left out in the cold whilst an organisation focuses on its employee engagement, especially when this can halve the impact that could be achieved. Balancing the investment across both user and supplier adoption can lead to a genuine return on that investment, evident in the P2P solution success.

In Wax Digital’s new Guide to Supplier Adoption we’ve outlined the best practices drawn from our experiences of working with our clients’ during their P2P transition. While challenges can crop up at every step of the way, benefits can also be realised at the same rate, if you get it right. So what are the critical steps to successful P2P supplier adoption?

Segmentation – dividing your suppliers into tiers based on their criticality to your organisation is an important step in segmenting your approach to communication and on-boarding so that you don’t attempt a one size fits all or risky big bang approach.

Rationalisation – expecting to rationalise your supplier list is part of the natural selection process of migrating to a new platform. It should highlight supplier weaknesses or challenges if it’s doing its job.Communication – once your migration and adoption process has been decided, consistent and continual communication with your supplier community ensures that they stay committed and engaged throughout.

Automation – leveraging the benefits of online supplier communication and control via a web portal helps you to make engagement a natural part of your supplier relationships, whereby the supplier takes control of the management of their own information, gain visibility of transactions and creates an on-going means of communication.

On-boarding – Never underestimate the power or need of an intensive on-boarding campaign to keep suppliers engaged once the P2P system and supplier portal is in use.

Exception handling – There will always be cases where suppliers don’t fit or comply with the requirements of your new process. Treating each case individually and deciding how to manage these exceptions is more effective than a ‘blanket ban’.

If you’re aiming to bring your suppliers in from the cold perhaps our guide can help. Remember that engagement must be on-going and continuous before, during and after the transition.

With less purchasing complexity, fewer suppliers and smaller contracts to manage it would be easy to think that P2P was a luxury rather than a commodity in the mid-market. Following our consultation with leading mid-market experts we believe there is a real business case for mid-market P2P.

The financial pressures that medium sized companies are currently facing includes rising supplier costs coupled with downward customer price pressure, creating a vice that’s squeezing margins; so much so that three quarters of medium-sized UK organisations have halted their growth plans recently. These organisations must do anything possible to ensure they are buying at best value from their suppliers and without having historically invested in spend management the likelihood is that there’s much room for improvement.

Whilst we tend to think of market sectors in isolation existing as SMEs, mid-sized or large enterprises, in reality the boundaries between these divisions are quite blurred. Rather like the football leagues where the spectre of relegation and dreams of promotion linger all season, the top half of the mid-sized league share as much with large enterprises as they do with those at the other end of their own division.

Yet the biggest reason why mid-sized organisations need P2P is because they have a completely separate challenge too. Whilst their purchasing and supply complexity might not quite equal that of a giant enterprise, medium-sized companies still have a high financial processing burden with many supplier orders, invoices and payments being processed largely manually.

Finance systems in the mid-market offer cold comfort for organisations wanting to implement best-practice processes for spend control and we see thousands of man hours annually wasted in many organisations thanks to inefficient manual invoice processing with approvals after the fact.

That’s why Wax Digital has launched web3 Professional, its SaaS eProcurement platform that offers mid-sized organisations rapidly deployable, highly intuitive spend control that can automate practically all of the resource intensive accounts payable processes.

To do so we’ve distilled our decade of experience working with some of the world’s leading purchasing teams. Orders are delivered electronically to suppliers, whatever their size or technical capabilities, and electronic invoicing rates – with a guaranteed 3-way match in most cases – can be driven in excess of 90% by volume.

With web3 Professional we’re looking to make spend control and process automation accessible right across the mid market, with a return on investment case that speaks for itself.

 We recently talked with Peter Smith of Procurement Excellence, the Spend Matters UK/Europe blogger. It’s always reassuring when fellow procurement experts understand the power of putting the people rather than the process of procurement first and that systems used to manage those processes must be intuitive.

Speaking of Wax, Peter commented that “their marketing background perhaps explains a core belief; that “intuitiveness is fundamental”. For example, they look to replicate the ‘Amazon type’ user experience in the B2B environment rather than the traditional ERP approach.  And that rubs off into other user-friendly features; being able to approve requisitions via email without having to go into the system for instance.” His full analysis can be found here. Subsequently we were able to introduce Peter to Malcolm Preston, Associate Director of Procurement at County Durham & Darlington Foundation Trust. It’s a procurement organisation relatively close to his heart, both as a fellow North-Easterner and as he put it, the place “where all four of my grandparents breathed their last”!

As with most who hear what the team at this Trust has achieved, Peter commented [http://spendmatters.co.uk/nhs-procurement-success-story-durham-part-1/] on the level of adoption and compliance to procurement approaches that “very few private sector firms have managed”, including a working no payment without PO system, 100% electronic procurement transactions, online catalogues with user friendly requisitioning and ordering and a catalogue choice that drives standardisation and demand management. It’s something special to see what they have achieved as a team and with considered technology choices. 

A third post by Peter delved deeper into Malcolm Preston’s ongoing belief in the value of data as the crux of bringing procurement in line with organizational goals. This will be absolutely critical in the health service but in any industry in reality. Preston commented [http://spendmatters.co.uk/nhs-procurement-success-story-durham-part-2/] that “if we do move to a more competitive environment in health provision, hospitals are going to need to understand better and then manage how much it really costs for all the different elements of a patient’s treatment; the total pathway cost.  Few hospitals can do this now with any accuracy. And a large part of that cost comes from bought-in goods and services. To achieve that understanding, data is king – it enables us to do that costing properly, as well as comparing prices across sites and Trusts, leverage our spend and rationalise suppliers”.

This is all further reinforcement that procurement is fundamentally about people, before prices and process. Technology will only enable the process and the right prices if it embrace the people, whose knowledge and strategy should be represented at the highest level of any organisation.

Following on from our last post on The Procurement Pandemic, the NHS finds itself at the centre of a storm again this morning with the publication of a National Audit Office (NAO) report that concludes more efficient purchasing could save hospitals £500m on basic supplies.

The NAO report is confirmation of what many of us have long known; if hospitals worked together on purchasing, millions could be saved without making any changes to front line health provision. The disjointed nature of purchasing and lack of visibility into spending patterns however is holding back this most obvious route to deficit repair.

The report highlights the huge variation in what hospitals buy and what they spend on operational purchases. It’s clear that the current system offers far too much choice and quite frankly, choice is a luxury we can no longer afford − the financial impact of contract overlap isvastly underestimated.

In the case of the NHS, too much choice has resulted in the existence of hundreds of individual non critical purchase contracts. Each contract dilutes the service’s collective ability to save money and forces it down a route which, instead of leading to best value, leads to a dead end.

The only answer to the complex, but by no means insurmountable problem of wasteful health sector procurement lies in joining up purchasing power and procurement excellence across the NHS through simplifying contracts and implementing the right technology. It’s an approach that’s already yielding the right results for forward-thinking trusts, like County Durham and Darlington and it offers a model which is ripe for replication on a national scale.