I recently joined a CPO roundtable with some of the top procurement leaders in the Netherlands, where Professor Morten Munkgaard Møller revealed an interesting statistic that sparked a lot of discussion: 75% of negotiated savings are never achieved.
Much of this underachievement has to do with the way category management is set up. For category managers, it is a lot easier to report negotiated savings and move on to the next contract without ever looking back.
This is far removed from some of the ambitions procurement has set for itself; building relationships with suppliers, transparency, reducing risk, and creating value.
Aspirations that come with an incredible amount of complexity. Procurement professionals are faced with underused contracts, unread corporate policies, unused preferred suppliers, etc, etc. Oftentimes, there is so much information available that it’s so overwhelming that the business user doesn’t even know where to begin look for it.
Learning from Google
Google uses an approach of creating order out of informational chaos. It gives you only the information you need when you need it. Google Now, for example, tells you when to start driving to make it to your flight on time. A solution that automatically uses and applies information sources such as flight confirmation, traffic information and flight departure times.
SAP Ariba’s Guided Buying applies some of these principles. It starts with having one place to shop for all goods and services.
With smart compliance, separate workflows are triggered only when required without having to carefully read the corporate policy. Inexpensive gifts are automatically approved, but an iPad goes into an approval workflow that includes risk management.
Preferred suppliers are suggested during the requisition process based on the type of material, goods, or service. Any communication between buyer and supplier happens in-context, and is integrated through the tool for easy reference.
For those who want to go more in-depth on Guided Buying, there are key opportunities at SAP Ariba Live in Madrid, 13-15 June, including the Guided Buying Experience and Vision in SAP Ariba Solutions”, Plenary Session by Sudhir Bhojwani.