Preparing for an E-Procurement Initiative

Comprehensive preparation maximizes chances for success by establishing clear goals and identifying risks.

1. Supplier Analysis
   Conversations with existing suppliers who would participate in the program will reveal their readiness and intent to participate in electronic procurement processing. Such conversations should also address pricing, billing and cataloging options. It is not essential to discuss electronic interfacing in preliminary discussions.
   
   
2. Authorization Policy Analysis
   Determine the extent to which the finance function is willing and able to support changes that will enable automated approval and authorization of commitments. Discussions should also address audit support and exception handling requirements.
   
   
3. Product Catalog Analysis
   Create an inventory of products that have been purchased in the recent past and establish the inventory of those that will be included in the catalog. Identify who consumes what.
   
   
4. Contract Procurement Analysis
   Create an inventory of Procurement Contracts and identify numbers and types of contracts that are currently managed within the organization. An e-procurement initiative is a good opportunity to bring order to this kind of work. Procurement Cards, Travel Agencies, Legal Services, Marketing Collateral Suppliers, Service Contracts and other 'Open PO' arrangements fall into this category.
   
   
5. Multi-Bid Procurement Analysis
   Create an inventory of Request for Information, Request for Proposal, Request for Quotation and other bidding instruments. E-procurement systems can automate many aspects of this function. Standardization before design is worthwhile.
   
   
6. Exception Handling Analysis
   Estimate the number of transactions at each point in the total procurement system process (see E-Procurement Architecture in Part II of this note) that will require human intervention. This includes 'one-off' products, 'one-off suppliers' and individuals or projects that often require 'special handling.'
   
   
7. Document the Current Procurement Process
   Map out the process and document volumes including exception handling and waste.
   
   
8. Design the Future Process
   (not an information technology design step) Design without consideration of available products but with the assistance of someone who is familiar with e-procurement systems. The new process should have the following characteristics:
   
   
   • 'one-off' product requisitions are minimized
     
     
   • inherent delays are minimized
     
     
   • human intervention is minimized
     
     
   • automation opportunities are maximized
     
     
   • parallel paths for data are utilized wherever possible
     
     
   • required approval & authorization limits are clear
     
     
   • roles and responsibilities are clear.
     
     
9. Build the Business Case
   Identify the potential time and cost savings of the future model. Include anticipated transaction changes and be aware that by reducing transaction counts these systems sometimes reduce direct cost savings but increase indirect savings. Focus on measurable costs and delays to make the Investment Analysis more meaningful. E-procurement systems do not reduce head count other than in exceptional situations. Rather, they allow people to be re-assigned to value-adding tasks. E-procurement systems must reduce cycle-time to be cost-effective.
   
   
10. Create a Call to Action
    Build a coalition of lead users and executives around the new process. Lead users include the 'mavericks' mentioned above and those who will benefit most from the new process directly.
    
    
11. Design the Future System
    In conjunction with the information technology department, create a detailed design of the future system. Again, do not allow the existence of an ideal product to impact the design. At this stage, the design must be idealized so that essential criteria for solution selection will be revealed. This design effort serves two purposes: first, to identify internal requirements for interfaces and technology capabilities; and second, to incorporate information technology management into the process.
    
    
12. Identify and Select Suppliers
    Using the Business Case and Future System Design to establish selection criteria and a model for the ideal product, map contending solutions to the model and select a product configuration and supplier(s). Include Application Service Providers as well as product vendors and systems integrators to maximize the leverage of resources and to minimize project risk.
    
    
13. Scope the Project and Risk The gap between the idealized system and the one that will result from the selection process will impact investment return. The gap between existing technology capabilities and those required to deliver the solution contribute to project risk. E-procurement programs acquire much of their risk from the degree of required change to policies, procedures, organization, skills, jobs and behaviors. When all of these are factored into the scope / risk equation, a final check of return on investment can be made and a decision to move forward and on what can be made.