Transcript Slide 1

Squeezing More Value from Your
ePurchasing Efforts:
What to Do After eProcurement and eSourcing
Andrew H. Bartels
VP and Research Analyst
Forrester Research
June 25, 2008
Agenda
•
eSourcing and eProcurement are just the
start of successful spend management
•
What to do next:
1. Supplier network services
2. Contract life-cycle management
3. Automated spend analysis
4. EIPP
•
3
Conclusions and Recommendations
Entire contents © 2008 Forrester Research, Inc. All rights reserved.
Enterprises adopting eProcurement, but still lag in
adopting sourcing and supplier integration
Percent of NA and European enterprises buying online
Purchase goods and/or services
using browser-based tools
Uses online sourcing products
Purchase using Web-based
integration with our supplier's
systems
61%
44%
42%
Source: Forrester Business Technographics™ 2005 Enterprise Software and Services Survey
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eSourcing and eProcurement just the start
• eSourcing by itself captures the easy
savings
» Get better deals in obvious large
categories of spending
» Make sourcing process more
efficient
• eProcurement captures some
process savings
Total
spend
management
potential
savings
eSourcing
savings
» Automates the req-to-PO process
» Helps get employee compliance with
sourcing deals
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eProcurement
savings
Spend management is like oil drilling
• Initial efforts like eProcurement and eSourcing only
get the easiest savings
• To get rest of value, you need more sophisticated
techniques
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eSourcing and eProcurement just two steps in eightstage spend management process
2. Supplier
assessment
1. Spend
analysis
3. Supplier
identification
4.
Sourcing
8. Invoicing,
reconciliation, and
payment
5. Contract
lifecycle
management
7. Order
fulfillment
7
6.
Procurement
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Where to turn next to squeeze more savings
1. Supplier network services to streamline
document flow with suppliers and
simplify catalog management
2. Contract lifecycle management (CLM)
tools to tighten linkage from sourcing
deals to procurement/purchasing
3. Spend analysis tools to identify more
granular and subtle sourcing
opportunities, drive more sourcing
4. EIPP to improve PO-to-pay process
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Total savings
EIPP
Spend
analysis
CLM
Supplier
network
eSourcing
savings
eProcurement
savings
Supplier networks help connect buyers with
suppliers for document flow
B2B buyers have many points of interaction with B2B sellers
Spend
Market
analysis
analysis
Company Supplier assessment
A
buy-side
Sourcing
process
Contracting
Procurement
Order receipt
RFx/tender
Bid/proposal
Draft contract
Purchase
order
Prospect qualification Company
Bid/proposal
Contracting
Response, ASN
Order management
Receipt
Order fulfillment
Invoice
Invoice receipt
9
Advance
payment notice
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Invoicing
B
sell-side
process
The logic of supplier networks for document
exchange – for both buyers and suppliers
Buyer #1
Vs.
Buyer #1
Buyer #2
Buyer
#2
Buyer #N
Buyer
#N
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The role of supplier networks in catalog content
management
Supplier networks can perform
key functions in
procurement catalog management
Updated
catalog content
Updated
catalog content
Updated
catalog content
Updated
catalog content
11
• Customize
catalog content
for each buyer
• Check updated
catalog content
against contract
• Format for
import to
procurement
catalog
• Screen out
catalog
changes that
are price
increases
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Buyer #1
Buyer #2
Buyer #N
Contract lifecycle management
• What’s involved
» Contract repository
linked to transaction
systems
» Contract terms and
conditions library to
create new contracts
» Contract creating and
negotiating tools using
MS Word
» Contract compliance
analysis
» Contract renewal
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• Benefits
» Turns sourcing
agreement into actionoriented terms and
conditions
» Supplier prices and
catalogs tied to
contract terms
» Employee purchases
in compliance with
contracts and
company policies
Contract lifecycle management – What’s involved
Contract Optimization
Contract
Drafting
6
1
5
Contract
Negotiation
2
4
3
Contract
Storing and
Repository
13
Contract Renewal
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Contract
Compliance
and
Administration
Four stages of value from CLM
1.All contracts in an
electronic repository
(Cut costs of finding contracts,
tracking renewals)
2.Analysis and reports of contracts
(Identify duplicates, conflicts,
obligations, and rights)
3.Automate contract creation
(More efficient use of legal staff, faster cycle
times, acceleration of revenues or savings)
4.Integrate transaction systems to
contractual terms and conditions
(More complete and effective compliance
with contractual benefits and commitments)
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Most companies are still at the first stage of value
Percentage of CLM clients who have reached each stage
Stage 1: Contract repository
100%
Stage 2: Contract analysis
and reporting
60%
Stage 3: Automate contract
creation
Stage 4: Integration to
transaction systems
33%
10%
Most
companies
want to get to
Stage 4
Source: Forrester Research, interviews with 30 companies who have bought CLM solutions
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CLM — Tied to process or cross-process?
Buying process
Selling process
CPO
CMO
Spend
analysis
IP, other
contracts
Opportunity
analysis
Pricing,
configuring
and quoting
Contract
management
Contract
management
Sourcing
CFO
CIO
GC
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Contract
management
Procurement
Sales
Invoice and
payment
Billing and
collection
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Spend analysis: Three approaches
1. Reports of transaction systems (ERP, procurement, etc.)
– Pros: Cheap, leverages existing systems
– Cons: Data quality generally poor and incomplete
2. Manual analysis of POs, invoices, receipts, etc.
» Consultants help sort and categorize POs and invoices
– Pros: Cost-effective one-time snapshot of spending
– Cons: Expensive to repeat
3. Automated spend analysis
» Specialist software vendors provide automated tools
– Pros: Fast, repeatable, complete
– Cons: Training system to cut errors; cost
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Who needs automated spend analysis?
Enterprises in multiple markets and multiple industries with
multiple ERPs benefit the most
Multiple
markets,
multiple
industries
Business
complexity
Single
market,
single
industry
Definitely yes!
Probably yes!
Probably no
Single ERP
A few ERPs
Technology complexity
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Multiple ERPs
Automated spend analysis —
What’s involved and benefits
• What’s involved
» Defining a product
taxomony, generally
starting with UNSPSC
» Importing file of
PO/invoice/receipt data
» System cleanses,
normalizes, categorizes
and enriches data
» Detailed reports and
analytical tools
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• Benefits
» Identifying
opportunities to
consolidate spending
and get volume
discounts
» Sarbanes-Oxley
compliance
» Assessing compliance
with and results of past
sourcing activities
Other sources of value
• Improved employee and supplier compliance with
sourcing policies
• Improved employee satisfaction and work
performance through simplified purchasing of
needed services
• Improved regulatory compliance (e.g., SarbanesOxley)
• Better services providers, with better quality service
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What to look for in a spend analysis solution
• Ability to cleanse, normalize, and categorize spend data from
a variety of sources
• Efficiency of analysis engine – how much data can it handle,
how quickly can it generate results, what level of accuracy?
• Structure of analysis engine:
» Rules-based engines work best on direct and indirect materials
» Artificial intelligence engines are best for services
• In-house software or outsource service?
• Experience in analyzing spend in your industry
• Integration with sourcing tools
• Portfolio of analytical reports and data views
• If you’re a multi-national, language and currency support
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EIPP – What’s involved and benefits
• What’s involved
» Electronic invoice
presentment and
payment (EIPP)
» Faster invoicing and
payment processes
» Often handled by
separate EIPP system
» Capturing early
payment discounts,
avoiding late payment
fees
» Integration point with
eProcurement system
and financial
management system
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• Benefits
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» Easier reconciliation
» More creative
financing and payment
options
AP EIPP has four elements
1. Receive electronic invoices
2. Automate invoice validation
3. Get creative with payment
and funding options
4. Convert suppliers to
electronic interactions
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The four stages of value from accounts payable
electronic invoice presentment and processing
The four stages of value from AP-EIPP
Convert
paper
invoices
into
electronic
Validate
invoices
with
automated
rules &
workflow
Value-added
services of
discount
management,
cash
forecasting,
financing
Full
electronic
invoicerelated
buyersupplier
interaction
Benefits
Benefits
Benefits
Benefits
• Reduce cost
of processing
paper invoices
• Reduce cost
and time to
validate
invoices
• Maximize
discounts,
minimize
cash,
streamline
financing
• Improve
visibility,
transparency,
auditability
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Organizing for successful Spend Management
• What to centralize:
» Contract management – to facilitate Sarbanes-Oxley
compliance, optimize contract value
» Spend analysis – to identify enterprise-wide savings
» EIPP – to streamline process of invoice capture,
reconciliation and payment and improve payment
and financing options
» Supplier network services
• What to both centralize and decentralize:
» Services procurement -- deploy department by
department, using global platform
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Recommendations
• eSourcing and eProcurement a good start to spend
management – but don’t stop there
• Supplier network services help streamline and
improve needed connections with suppliers
• Contract management and spend analysis are good
next steps to improve impact of eSourcing and
eProcurement
• EIPP delivers real transactional savings, but needs
eProcurement and contracts for most value
• Centralize some, decentralize others
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Entire contents © 2008 Forrester Research, Inc. All rights reserved.
Thank you
Andrew Bartels
(516) 869-0128
[email protected]
www.forrester.com
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Entire contents © 2008 Forrester Research, Inc. All rights reserved.