As humanity accelerates its shift toward living in a digital world — with even more powerful and simplified consumer experiences — the pressure increases on enterprises to change their working practices to reflect this consumer-focused environment. And while consumerization has been driving a shift in procurement through more intuitive user interfaces, machine learning and bots, the industry has a very long way to go before it reaches its full potential.
As Kearney points out in their recent ‘The consumerization of procurement’:
“Today’s consumers can buy almost anything at any time with a nearly unlimited number of choices, which of course encourages people to shop and buy more. The entire buying process is quick and easy.
“Now compare that with corporate buying. The experiences could not be any more different. Most corporate purchasing is slow, opaque and downright onerous—fueled by a broader objective to control spending.”
It’s understandable that some corporates might dismiss this while pointing to their investment in the latest business spend management solution. But if said solution has been configured with the primary objective of control, then an opportunity is lost by ignoring the inherent desire of the vast majority of employees to buy efficiently and compliantly, coupled with the power of spend analytics to spot any outliers.
Consumerization can lead to operational efficiencies and the ability to assign scarce resource to higher-value strategic activities like supply chain resilience.
Bolstering supply chain resilience has shifted from lip service to something of a mantra for CPOs over the past few months, and while this may become a tired buzzword as another takes its place, the criticality of the sentiment and the need to act on it isn’t going anywhere for a long time.
Purchase-automation levels can improve supply chain resilience
Procurement’s ability to genuinely act on improving supply chain resilience is determined by the time, talent and tools available. Many CPOs will have seen cuts to their budgets and team size while trying to navigate disruptions caused by lockdowns and unforeseen absences. In this environment it is no longer feasible for procurement to be woven into the purchasing process and for the spend management solution to be used as a procurement Control Tower. Failure to act on this puts the business at risk of stagnation. If the procurement team is struggling to find the time to analyze the supply chain, identify points of risk and act, one place to start would be to audit the number of interventions and approvals they are making in the purchasing activities of business users. Any time saved here can be put to far better use.
It’s also not unreasonable to assume that most of a firm’s suppliers — certainly the ones that have gone through a negotiation with procurement, agreed on a pricing structure and have a contract or MSA in place — will be reliable in providing the agreed goods and services. Anything out of the ordinary will be picked up in spend analytics, assuming the procurement team has the time to review these. Trust and confidence in this should allow you to look to suppliers as partners and subject matter experts in their field — arguably with much more knowledge than the average category manager.
Once you have confidence in this, you can unpick the procurement interventions that have been woven into your purchasing workflows that are ultimately slowing the business down and preventing your procurement team from spending more time on supply chain resilience and strategic sourcing, and in turn, making the purchasing process more consumerized.
I have 25 years’ experience helping large enterprises solve complex procurement challenges through new technology, so I have a good understanding of where a CPO should start …
Do you know your numbers?
Over 53% of corporate expenditure is spent on the purchasing of services. Now it is fair to say that purchasing a service is typically more complicated than buying an item from a catalogue. Services are often dynamic, difficult to catalogue, and ideally require a statement of work (SOW) from a supplier before an order can be placed. This is why most corporations have engineered procurement into the purchasing process for services, and used web forms as a form of control. This is also why the purchasing of services is incredibly inefficient, opaque and prone to abuse.
I can’t help but feel as though it’s a throwback to business in the 1950s. Procurement as a function needs to put the processes in place then step aside — their continuing involvement in purchasing means that true consumerization is not really working.
But why is there still such a roadblock?
The process is more complex for services and often requires the intervention of procurement, despite them having no expertise about the service itself or the supply market. I have noted some of the reasons below why I think services procurement has fallen behind on its journey toward consumerization:
- For end users, knowing the time and resource needed to fulfill a service can often be tricky, meaning that they simply don’t possess the knowledge to raise a detailed requisition or punch out to a supplier catalogue to build a shopping cart. This in itself is a huge barrier to automating the process. Businesses are often reliant on receiving a statement of work from the service provider detailing rate-carded costs and any extras. This is nearly always sent as an email attachment, outside of the P2P system, leaving the business user to key in data manually.
- Although useful for a small subset of services spend, web forms — which route a business user’s requirements to someone in procurement — aren’t always scalable or flexible enough to handle every type of service. This has made the process convoluted with most businesses finding their own work-around solution, which more than likely doesn’t include further automation.
- There is a fear of ‘getting it wrong,’ and often, procurement personnel are in the firing line for poor purchasing decisions. This has led to oversight overkill and a stodgy procurement process.
- Finally, and perhaps one of the more prominent points, is the issue of supplier onboarding. I’m sure every business reading this has experienced some form of resistance from their suppliers, and with the growing need to strengthen relationships and bolster the supply chain resilience, it’s becoming more crucial than ever to make the experience as pain-free and seamless as possible. Many of the organizations that I have come across have expressed specific difficulty in getting their services suppliers onboard, which is made even harder by a process that is convoluted and more difficult than it needs to be.
What is a bridge solution and how can it help speed up the consumerization of services procurement?
In the words of Spend Matters’ Jason Busch, bridge solutions (or stop-gap solutions) are simply “beautiful solutions” that solve specific problems. These are typically problems that have not yet been addressed by a P2P solution due to it being too niche or specific. Bridge solutions can tackle the problem differently and often come alongside laser-focused expertise and knowledge from the providers of these solutions.
Now, although the issue of consumerization certainly isn’t a niche one, there are many individual aspects that need to be addressed and automated to make true consumerization a possibility. For example, the larger more end-to-end P2P solutions (such as Coupa) do a fantastic job at automating the requisition-to-approval process and invoicing, but what they are not doing is providing the tools to automate the piece before the requisition gets raised. Bridge solutions can essentially act as a plug-in to cover any areas that are still being handled offline or by heavy manual data entry.
Here at ProProcure, we provide our very own bridge solution which essentially ‘plugs the gap’ or ‘builds the bridge’ between buying organizations and their services suppliers. G-Quotes enables enterprises to truly automate the purchasing of services and other complex categories where they already have a P2P solution in place but are struggling to automate the quote-to-requisition process.
The past six months have seen an avalanche of webinars, blogs and white papers on the imperative of building supply chain resilience. This has led to defensive corporate strategies designed to mitigate the risk of supply chain failure. It’s a bit like a Tour de France rider exclusively training for the sprint finish rather than working on the fundamentals to put himself/herself in contention for the final effort. Get your fundamentals right — if you want your procurement team to focus on supply chain resilience they must engineer themselves out of day-to-day purchasing decisions — and if you can do this to services expenditure, by using the right tool to bridge that gap, then you’ll be on the way to creating a true consumer-style way of purchasing that allows market dynamics to directly benefit your business. Your objective should be to make procurement invisible to the point that your business users feel like they just use an app to buy the goods and services they need to meet their business objectives.
Frank Treanor is CEO at ProProcure.