Technology has a large part to play in the procurement process, now more so than ever as companies look to improve the day-to-day efficiency of their operations and lower costs. The economic downturn has left many businesses on a tight budget so it is becoming increasingly important to streamline the supply chain and ensure the right investment is made in technology.
With such a range of purchasing tools on offer though, how can companies be sure they are making a worthwhile investment? In today’s marketplace, automated software, like Enterprise Resource Planning (ERP) tools, are becoming a vital part of supply chain management. In fact, Stephen Easton, Principal at global management consultancy A. T. Kearney, believes that the use of simple e-auction and e-tendering tools has become ‘business as usual’: “That is really assisting the sourcing process and procurement process,” adds Easton. “Technology can enhance procurement across all different aspects of procurement; in terms of supporting strategic sourcing, the classic e-auction and e-tendering tools.”
ADAPTING TO CHANGE
The number of variables in the supply chain and throughout the procurement process means that technology has been forced to adapt. During the economic downturn in particular, the procurement needs of businesses changed significantly and that had an effect on sourcing.
“We’re seeing people moving beyond pure, basic e-auction tools for sourcing and moving onto more collaborative optimization approaches for sourcing, which are very much technology enabled,” says Easton.
Antony Bourne, Global Industry Sales Director of IFS, has observed a change in the market. “When people come to the market now, gone are the days when they want to replace everything,” he explains. “It’s certainly, because of the downturn, made people much more focused on a return on their investment and making sure they’re more stringent.”
So it’s no longer simply about transparency and visibility, although procurement software is still required to enhance both of these aspects. Bourne explains that IFS specializes in component-based business software, so it can provide modules for financial, supply chain and HR applications, amongst others. This modular approach means that its software can coexist alongside basic ERP tools. One benefit of this is that its clients do not have to learn how to use a whole new IT system.
BSkyB, one of IFS’s clients, was looking for an inventory management system a few years ago. It needed to meet their functional needs and, importantly, fit into their IT landscape. “You can imagine, they have a huge jigsaw of applications and systems but they’ve got some middleware to control the communication between all these systems,” says Bourne. “By plugging in the IFS module, we could just fit into their environment which, for them, made their lives easier and lower risk.”
Indeed, this low risk strategy is one that both Bourne and Easton believe is the procurement technology of the future.
Easton is seeing more category-specific tools coming onto the market which are supplementing the basic ERP systems. “We’re seeing a more functionalized use of e-auctions and e-procurement tools; rather than people buying a bespoke e-auction tool, these are bolted onto the ERP systems,” he explains.
There are still aspects of procurement that remain under utilized though and this is where we are likely to see the biggest and most significant developments in the future. “One of the gaps I tend to see is that data analytical capability in procurement is not as strong as it could be,” Easton says. “The more data you’re trapping in systems, and the more visibility you get, the more of that you actually need.”
However, he is also quick to warn that technology should not be seen as the answer to everything. “There is also a danger in technology being seen as a panacea for a lot of things,” he explains.
For Bourne, the gap in the market lies elsewhere. “There may be some buying groups or some market groups online that you may need to interact with to accept orders,” he says. “The nature of this openness allows us to interact with other websites to accept orders or to check for quotations, or to make a demand for certain parts.
“That’s certainly being used but I don’t think it’s being used as much as it could be by companies. I think a lot of companies could get a lot more benefit by utilizing some of the e-procurement sites out there now.”
In turn, Bourne adds, these sites will link suppliers and companies, creating a global marketplace.
And his vision of the future of procurement technology? “There will be specific solutions for specific requirements that will have to fit into this IT landscape that the customer has,” replies Bourne. “Everything will have to coexist with other systems.”