This week's Knowledge Nuggets topic is eCatalog management. This is again another multi-segment post with this, the first post, being about the importance of eCatalog management and how eProcurement systems, catalogs, and networks are linked. Links to the rest of the segments of this post can be found at the bottom of this page. Enjoy!
eCatalog Management Part I
At the heart of every procurement system is a catalog. Even in an environment lacking automation, requisitioners consult a hard copy or customer service reps use a catalog at the other end of a phone line. So it stands to reason that getting everyone to use the correct catalog from a preferred vendor at the contracted price will ensure that negotiated savings from sourcing and contracting activities are actually realized. This paper will explore benefits and best practices around these core elements:
- Process Compliance (Adoption of the catalog and procutrement system)
- Price Compliance
- Supplier Compliance
This includes specifics around unlocking the value of existing eProcurement systems through improved catalog management. At the conclusion, there is a buyer’s checklist to aid you in selecting an catalog vendor should you choose to take this path.
“By facilitating the purchasing of indirect material, catalog-based buying presents an admirable ROI and eliminates manual procurement process.”
- Aberdeen Group
Why is eCatalog Management Important?
The average enterprise has more than 3,000 indirect suppliers, but only 224 catalogs available online through their procurement application. This translates to only 27 percent of their spend being actively managed. Many companies have much less than 224 catalogs online and are not taking full advantage of this powerful tool. By enabling 80 percent or more of your catalog spend, your organization can increase leverage in the following:
1. Compliance – Consolidating purchases to preferred suppliers not only saves money, but increases negotiating power.
2. Increased operating efficiencies – Adds additional cost savings as well as reduces the order cycle time, producing happier users thereby giving purchasing more internal influence. But these benefits will never happen unless you have the catalogs available and casual user-friendly shopping carts to leverage the content and promote adoption.
A casual user is different than someone who is frequently in the system—for instance, an accounts payable clerk using the ERP system. You have to expect that anyone—from the mailroom to the CEO—will be able to walk up to the application for the first time and intuitively navigate the catalog and eProcurement systems. Obviously, most ERP applications do not fall into this category.
So who should consider enabling eCatalogs? Well, as obvious as it sounds, everyone. “By facilitating the purchasing of indirect material, catalog-based buying presents an admirable ROI and eliminates manual procurement process.” If you do not have an eprocurement system with best-in-class eCatalogs, up to 50 percent of your negotiated savings can be leaked through non-compliance, penalties, and missed opportunities around invoice reconciliation (figure one).
How Are eProcurement Systems, Catalogs and Networks Linked?
Catalogs are pretty much useless without the ability to leverage their content in an eProcurement system. Many companies already have eProcurement in place. If it is a best-of-breed solution, the catalog is usually an integral component of the system. If, however, it is Oracle, SAP, or another ERP system that is trying to bolt on eProcurement and then bolt on eCatalogs, you probably have already experienced significant pain around:
- Clunky user interface that is frustrating and time-consuming to use;
- lack of powerful search capabilities to allow successful keyword searches and multi-supplier searches - without requiring the user to know the particulars of suppliers and their content;
- Multiple ERP, purchasing, and other vusiness systems, all with different user interfaces and processes. It's hard to know which system to access for what information, and how to find it once there;
- Ineffective or nonexistent category capture, which allows access to both goods and services, such as in requisitions requiring supplier collaboration (i.e. hiring temporary labor0;
- The slow, resource-intensive process of enabling and maintaining catalogs.
Fear not! Choosing the right catalog to supplement your existing ERP eProcurement can unlock the value of your ERP investment. For those that do not have an eProcurement application, consider a best-of-breed procure-to-pay solution that can be implemented quickly and delivers a positive ROI within six months.
This has been part 1 of eCatalog Management. Please follow the links below to access the other segments.
This has been another Knowledge Nugget post brought to you by Beverly Dunn.
For more information or details please feel free to contact me!