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Boosting ROI in Procurement Technology Initiatives

It is easy for an ambitious procurement leader to decide that enterprise spending and procurement management is a good thing for a corporation. It is also relatively easy to persuade corporate executives to buy into the idea. After all, which corporate leader would not jump at the chance to save millions of dollars in unnecessary spending? However, the all too common problems of poor adoption and negligible return on investment often emerge once an organization has bought into the idea of implementing procurement technology such as spending analysis, e-sourcing, and supplier management.

Yet these problems are often critical to the success of procurement management programs. Once the technology is implemented, reality sets in, and many are faced with poor adoption levels and negligible ROI. This tends to happen when management fails to require business users to leverage the solution and, worse, neglects to convey the business benefits that can be realized.

For procurement leaders involved in areas such as profit and loss, supplier, and/or budget management, winning genuine adoption and support from purchasing stakeholders is far and away the greatest challenge. A recent study of 600 procurement and supply management professionals representing companies with $370 billion or more of collective spending power found there are specific, and proven, tactics and strategies that are most effective for persuading people in corporate enterprises to adopt and use preferred procurement processes and technologies. According to the study, there are three benchmark indicators for achieving corporate and cultural adoption of procurement technology:

  • Stakeholder compliance with supply contracts and preferred procure-to-pay (P2P) processes
  • Active stakeholder participation in both strategic sourcing and supplier performance management processes
  • Procurement technology adoption and use

In this blog — one of a series on the subject of technology and procurement strategies — we will analyze the importance of enforcing compliance within the organization. Later, we will focus on the need for stakeholder participation and the benefits that can be achieved by driving users to adopt automated procurement processes.

As the procurement function continues to transition from a tactical, cost-saving entity to one that has a major role in organizational strategy, so does the need to standardize and accelerate processes and overcome the human limitations that can occur when operating in a highly complex global economy. But investing in technology alone is not enough. Careful attention needs to be paid to ensuring change management. Let's face it — introducing new technology and processes is never easy, especially when it comes to procurement functions and personnel, both of which are often set in their ways.

Lack of compliance with enterprise contracts and processes, reduced stakeholder participation, and non-adoption of procurement technology can lead to several detrimental effects ranging from missing out on volume discounts and/or rebates from your preferred suppliers to an inability to achieve ROI from procurement technology like contract management and/or e-sourcing tools. This not only leads to manual and tedious methods that deprive procurement of the time it needs to focus on more strategic activities, but it also leads to loss of savings opportunities that can directly affect the organizational bottom line.

In the second part of this blog, we will examine the role of compliance enforcement in driving savings and cost-effective operations.

3 comments on “Boosting ROI in Procurement Technology Initiatives

  1. Jay_Bond
    November 8, 2011

    This is an excellent start to your blog on ROI and I look forward to the follow ups. ROI seems to be a big issue no matter what the size or budget of your company. All too often there is too much fear and not enough planning when thinking about a company’s ROI, and this generally leads to failure. 

  2. Barbara Jorgensen
    November 8, 2011

    Great topic. ROI continues to be difficult to pin down, but really shouldn't be. I look forward to reading more.

  3. saranyatil
    November 10, 2011

    Interesting post. I am keen to read up on these topics.

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