Working with different sized organisations at SAP, we often see a procurement technology gulf between large enterprise organisations and their smaller mid-market peers. Large organisations who are often very resilient through large revenue streams – will still possess razor sharp focus on driving cost reduction and ensuring compliance across their spend categories.
These enterprise customers are adopters of innovative technologies that are enablers for new ways to manage spend and drive cost reductions. For the mid-market organisation, this transformation has been not been as consistent.
For many mid-market organisations, the procurement function tends to be a lot less strategic and we often see organisations who are running processes that have had very little change in over a decade or more.
This stagnation comes at a cost through reduced margins, higher inefficiencies, and potentially excessive administrative overhead.
This decade we are also seeing increasing regulatory oversight on areas such as modern slavery, supplier payment times and health and safety – in some regions even exposing management to prison sentences for non-compliance. Couple all this with an increase in challenging trading conditions – the path to improvement is becoming more urgent.
With 2021 firmly underway the aim of this article is to provide a simple measuring stick for mid-market organisations to determine their relative procurement maturity in a number of selected areas. Whilst procurement has different aspects across different industries, many of the themes discussed below are cross-industry and apply in some way to most types of organisations. Forward looking mid-market organisations would be encouraged to assess some of these criteria against their current priorities for 2021 and beyond.
A key theme will be the trend towards digital transformation across core processes which is an enabler to best in class outcomes.
How do your casual users buy?
Casual users are the staff in your organisation that need to buy “stuff” but are not part of a purchasing or supply chain team. Examples of this can be Marketing, Legal, HR, Facilities, IT and other similar areas. Each of these buyers need to procure goods and services for their area of operation in an easy way.
Most organisations will have some element of purchase initiation from staff that are not directly in procurement. The differences between approaches can be stark.
In the above scenario the path from laggard to best in class is underpinned by technology as the key enabler.
What is your catalogue strategy like?
Most of us use popular online web stores at home where there are vast catalogues of items to select from, but for a lot of mid-market organisations when you buy at work, it can still look like the 90s.
Catalogues provide the key connection for contracted items from suppliers with your buyers.
How does your organisation transact with suppliers?
Digital collaboration has been around for over a decade but in the mid-market the process can still be very email driven. If you are sending a Purchase order manually or even just as an attachment or inline text in an email and then receiving a paper or PDF invoice at the end – then the process is not digital. Digital is about engaging the supplier to directly provide transaction data in areas such as confirmations, shipment notices, returns, credits and invoices. All without data entry by your staff.
The path to digital delivers reductions in FTE overhead with better visibility on orders, faster invoicing turnaround and better compliance from suppliers to your purchase orders and contracts.
Government is also coming on board with many jurisdictions looking to encourage digital collaboration in the marketplace.
The way you transact with suppliers will have a direct impact on Accounts Payable efficiency discussed next.
How efficient is your Accounts Payable team?
Poor purchasing practices often place a bigger burden on Accounts Payable teams to wade through non-compliant, incomplete and missing information in the quest to process invoices and approve them for payment. Phones and emails can be bombarded with queries around late payment that follows.
We also seeing more governments introducing tougher rules around paying smaller suppliers which requires Accounts Payable teams to be able to get through invoicing efficiently.
The above scenarios are just some examples of the challenges we see at mid-market organisations.
There are opportunities for hard savings and benefits to those organisations that move towards best in class and it can often be done in a cost-effective way. For many mid-market organisations there is still a large administrative overhead that is behind the efficiency of bigger organisations who achieve more with less.
Interested in learning more? At SAP we work with many mid-market organisations to transform their procurement and can provide advice and guidance around your digital procurement strategy for 2021 and beyond.
This article originally published on Linkedin.